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[on-hold music] We have a branded content studio and an account management team that delivers incredible customer service, which I think is something unique for smaller local businesses, and, uh, incredible analytics reporting afterwards.

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So these brands are really able to see, uh, how their content performed, which is what drives all the renewals. So, like, as an engineer, we can talk about scaling, right?

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The challenge really comes in the scaling, right?

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Because newsletters themselves are very handcrafted, and the reason that newsletter ads, I think, have performed well, similarly to why podcast ads perform well, is because they're handcrafted, and that's really difficult to scale.

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[on-hold music] Welcome to the Rebooting show. I'm Brian Morrissey.

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You know, often when I'm talking about promising sustainable publishing models, I go into niche areas, particularly ones that tend to serve powerful people or focus on business topics.

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Media, of course, is far larger, and I think the biggest challenge in an already challenging publishing landscape is on the local level. I mean, large local newspapers have been gutted for generations.

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This has been like a slow-moving disaster. And it's not a coincidence that the fraying of our democratic institutions has coincided with this decline most likely.

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But local is many different things, and I think the solutions, uh, to the local problem will come in many forms with many different business models.

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And some are gonna be completely entrepreneurial, some are gonna be nonprofit and philanthropic. There's a lot of different ways to solve problems. So I wanna talk about that today with Ryan Heaphy.

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Ryan is, uh, co-founder of 6:00 AM City.

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If you don't know 6:00 AM City, it has a suite of local news publications, newsletters for the most part, in twenty-five local markets from its original market in Greenville, South Carolina, um, to many other mid-sized cities.

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It seems like you guys focus on mid-sized cities, but I wanna talk about that. Places like Indianapolis and Sacramento. So Ryan, welcome to the podcast.

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I have to say before we get started, I think you left one of the original and nicest reviews of my former podcast, so I thank you for that. [laughs] I remember that actually.

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Um, I think that's when I was trying to get your attention when we were starting as a company. I was like, "Hey, we need a little love here."

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Um- Well, let me just tell you this, uh, I'm not a PR professional, but, but flattery absolutely goes on long ways. Oh, we appreciate it and, uh, excited to be here. [laughs] All right, so let's get into it.

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So, um, and, 'cause your review actually was like it was something like was very helpful for, like, an engineer new, new to the, the news business. I believe it was... that was what the, the general comment was.

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Um, so you didn't come from it, and I th- and the reason I want to, um, you and your co-founder we're, were not, like I was creeping around your LinkedIns, like news people, I guess, and I think that informs the product, uh, that you end up building.

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So explain to me how you got into the incredibly lucrative, uh, space of the local news business. For me, entirely- You just saw the money.

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You s- you just saw the money and you were like, "Oh my God, I gotta g- I gotta get at this. This is a gusher." [laughs] I think for me it was entirely, uh, coincidental in timing and by accident.

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I mean, Ryan John- so we got Ryan Heaphy and Ryan Johnson. Ryan Johnson's our- Yeah... co-founder and CEO, really brought the vision to life. You guys need a podcast, the Ryans. Uh, we're, we're ready for it.

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[laughs] There's been a lot of lessons learned and I-- we're, I'm sure we'll be excited to get that out there once we finish building here.

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But, uh, I mean, Ryan Johnson's family owned a legacy print media company in Greenville, South Carolina, a weekly newspaper, free to the community, ad-supported, and had been kinda scaling that over time locally in Greenville for about the past twenty-five years or so.

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And Ryan went off, started Southern Tie and Clothing Company, got into commercial real estate, uh, much different, uh, more of a marketing and entrepreneurial background.

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And then I came from a typical Fortune five hundred engineering background, scaling the Black Hawk helicopter platform, traveling all over the world.

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And so I was process operations side, and Ryan was really this marketing, very in tune to brand design, and we were consuming the Charlotte Agenda at the time, and The Skimm, which was just starting, and his family owns this print media company, and they're looking to get into digital.

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And so Ryan and I, over a few beverages, uh, sat down and he said, "Hey, can you come on and help us figure this out?" I had exited the aerospace industry at that time.

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We're both, uh, passionate about our communities, really involved in economic development, and there just wasn't a vehicle to communicate on a local level what people really needed to know.

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So we designed from the beginning, from a consumer perspective, what people actually care about, not what maybe a journalist thinks the market needs to know, um, and really focused a different approach in how we went about content, which structured a lot of how the bu- the brand was built.

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But by bringing two folks together that are non-traditional media, we built it differently as a startup, um, that is designed to scale, to be efficient in its operation, um, and truly find a sustainable path to profitability, uh, that we could take to lots of markets.

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Which was always their plan with the print media company, just doesn't, uh, you know, it doesn't really work the same way 'cause the expense is so high in that business and why we're seeing a lot of challenges in the industry now.

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So you, you-- Coming out from outside of the n- the news industry, though, when you started to, like, you know, you had a couple beers and you're like, "Oh, this sounds pretty good," and then you start to do your homework.

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Explain to me why y- you thought that this actually could be a business, 'cause, I mean, this is, like, an area that's in, has been in, um, really decline since the late nineties.

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I think one of the biggest things for us in the beginning that made this appealing is both Ryan and I had helped build and create other businesses previously, and when we were doing so, we never had ownership, uh, and we weren't building our own personal wealth.

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In this opportunity, we were able to come in and establish an equity position, but we were also able to build this on the back of his family's legacy businessSo going out the gate, we were able to book over half a million dollars in ad sales pre-launch.

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We built the product in four months and came to market, and the fact that we were able to see the transition for, for advertisers from o- other legacy, uh, products into the newsletter space that quickly let us know that this could be rapidly scaled to more markets.

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And so we designed it from scale day one, figured out we could do it in two markets. We all come on full time, spin it out of the parent company, uh, and then it was go time.

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Um, but there was a clear traction and opportunity. It was filling a void in the market, um, as everything was-- else was getting gutted out of the local paper.

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I mean, there was just a clear thing that also aligned with our personal mission of driving economic impact and supporting these growing communities.

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So, uh, between aligning our passions and having a profitable model, I mean, it was a slam dunk for both of us. So I think the key to these models is, is sucking out as, as much of the costs as possible, right?

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Like the, the local newspapers, I can remember-- I always go back to like growing up, I remember the Philadelphia Inquirer.

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They had a bigger market, uh, than many that you're in, but like they had like a Jerusalem bureau and stuff. Like, I mean it was like these were really big, and they became very bloated businesses.

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And we see that with private equity taking over a lot of these local newspaper chains. It's all about like them gutting it and, and finding efficiencies. And the products, I think, reflect that at that point.

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So I think starting over [chuckles] makes a lot of sense. But I think when you're starting over, that, not, not having those cost bases has, has to be top of mind, right? That was key.

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Um, and then also making sure we did invest in the right things, though. Um, one of the ideas behind this in the beginning was to have a centralized hub-and-spoke management model.

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So if we could centralize all the costs and support resources, then we could have boots on the ground in all the markets.

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So if you look at like this creator environment we have today, a lot of people are solo content creators in individual markets.

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They build great products, but they don't have the sustainable support of sales, graphic design, account management, et cetera. So they're playing and wearing all those hats.

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We saw the opportunity- I don't know what you're talking about, Ryan. [laughs] Right. Uh, I mean it's-- but it's true.

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I mean, everyone- I have Jay, and, uh, I have Canva, and [laughs] But it's hard, and it-- uh, and to standardize it is just tough. And to actually hit a sustainable, profitable model that you can scale is tough.

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So by, by repositioning that and centralizing everything, it's allowed us to bring on and empower the editorial staff, which are awesome.

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They're like full stack content creators in all these markets, but they don't have to worry about the back office stuff that helps it to, to operate. And, and that's been, that's been key.

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I mean, we have two editors in each market. Um, and then for every six to eight cities or so, there's a managing editor and a, a floating supporting editor, uh, for all those different markets.

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And, and that has allowed us to let them be really good at their job in the market, focus on the content, uh, content curation and narration locally, and then we give them all the other tools that help make them be successful and sustainable.

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Yeah. I'm gonna change my LinkedIn to like full stack content creator. [laughs] I think I can like call myself that now. [laughs] Um- I would think so. So [laughs]

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so let, let's talk a little bit about like how you pick the, the markets. Mm-hmm. 'Cause I mean, you started out of Greenville, so I think that ended up being like the type, right?

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Cl- I have not been to Greenville, but it's one of those places I imagine that I would like a lot 'cause I like like outdoorsy type stuff, even though I live in Manhattan, which is weird.

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Because I, I think a lot of times with these local plays, like people either go to like places where the problem isn't that acute. I mean, it's big cities and stuff like this that still have like news sources.

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I don't think when we talk about news deserts, that's really big cities', uh, problem. I mean, it-- you know, there are not a lot of choices, but... Or they go to like, I don't know how to put it.

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Like, I think Greenville could be like hipster enclaves, you know, [chuckles] like, uh, Marfa, Texas, and stuff.

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Uh, and you know, uh, i- if this thing is gonna-- you know, if you're to really solve the local problem, you, you gotta be in Cincinnati and stuff.

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So explain to me like how you look-- I mean, is this-- is there like a formula to the market, or it's more, is this more art than science? In the beginning, it was opportunistic.

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Uh, over time, it's grown to be very formulaic, uh, in our calculation on what markets we go to. We have a VP of expansion who handles specifically some of that evaluation on what markets.

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Um, when we first started, we were in South Carolina. The idea was if we go from Greenville to Columbia to Charleston, you then start to get regional ad buys.

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What we did at the same time is operate in markets that were lower cost of doing business than some of the bigger cities, and where we would stand out amongst the other media properties.

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They were also driving distance, easy for us to set up.

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Um, at that time we were, you know, personally driving in, Ryan and myself, and building desks and stuff in co-working spaces that we were leasing, which don't-- we don't do anymore from a unit economics perspective.

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We look at inflows and outflows of people, charitable giving per capita, uh, s- retail spend. I mean, there's a lot of different things that help us identify that our likelihood of success in a market will be high.

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And so we're in twenty-five cities today. There's probably another hundred or so that we could-- that we know we could be successful in.

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[gentle music] To be clear on like, uh, I don't think we're trying to go to like a thousand or a million cities. We're trying [chuckles] to kinda focus on a core niche.

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Um, but we're also not necessarily trying to get to a hundred right away. I mean, it needs to be right and smart and make sense, uh, for us.Yeah. I, it's interesting to have like like you wanna be ambitious and be...

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And in particularly as you get like regional buys, you have to have you have to have a lot of reach, like beyond like a few cities. But at the same time...

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And I think we've seen this in, in previous efforts, you know, being stretched too thin is also bad. You've been at this like for six years, so while you're in 25 cities, you know- Yeah... yeah.

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The first two years or so we were under the original parent company, um- Yeah... and a lot of that was kind of proving out that this was a thing we could scale.

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Once we separated in 2018 was where we, we started raising capital and figuring out how to grow. So we've been truly in the identifying the growth mode for the last four years. COVID comes in in the middle of that.

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I mean, we still grew incredibly year over year, uh, but we actually pumped the brakes on market launches during COVID, redefined and, and perfected kind of the operating process of the business internally to position to come out of COVID and rapidly expedite growth.

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So we kind of intentionally slowed down in 2020, beginning of 2021, and then rocket-shipped the company, uh, forward, tripling the footprint at the end of 2021 into 2022, uh, which is where we are today.

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And we went to 16 at the same time. It's a big lift for the business, tripled the number of folks on the staff.

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The processes all held firm, but you start to identify where operational efficiency, this is the engineer brain, comes in and goes, "Hey- Yeah... how do we streamline out those things?"

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And so technology was a big piece of that for us this year. So what is the typical setup? Because the knock on a lot of these new models is it's like two, three people, like you can't cover a lot of ground exactly.

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I mean, you have to start somewhere, but the general knock is like they're minimally viable products that stay minimally viable.

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And I don't think anyone is, is looking for a return to like hundreds of people in a mid-sized city metro newsroom, if you will.

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It's just that those days are, are probably over un- uh, unfortunately or fortunately, I have no idea. It's just, it's just how it is. But what is the model for like a profitable city operation for you guys?

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I think part of it is understanding with folks, [laughs] investors, and people that it takes a little bit of time. Um, for us to really hit maturity takes about

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two to three years, where the company is operating north of 50% profit margin in the individual city. So while we have- Mm-hmm...

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legacy markets that we grew, you know, those markets are throwing off cash, but they're now funding the next ones for us.

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I think with us, we look at two editorial staff in each market, and then with all the overhead built in, we're operating maybe about 4.2 FTEs per market, um, which is great.

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Um, and each market is, has the ability to do north of a million dollars easily. Uh, now it's about ramping up the revenue and catching that.

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Then you can start to add other things back into maybe what you might see in a typical newsroom, uh, with a- additional resources to pursue certain, uh, content angles or a little bit deeper dive on some things or more ex- experiential journalism in a market.

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The approach to the content is already created. The data sets is what's swapping.

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So we are actually creating scalable content that we can use across all of our markets, which reduces the number of total editorial staff we need.

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So if you can create a more scalable approach to how you cover content, you don't need as many people. But as you become profitable, you can start- Mm-hmm...

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to invest in additional staff, uh, or invest more in the actual staff you have to make it, uh, more sustainable, um, for those folks that are on your team as well.

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So really for us, scalable approach to content is what's a big driver in how we're able to keep the cost down, yet go to more markets.

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So I think a lot of other publications are so focused on hard news investigative journalism, which there is a huge need for.

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That's not necessarily our business model, as other folks do that better than us and have folks that are focused on a specific niche. Um, that's just not where we play.

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Let's talk about that, 'cause I wanna talk about like no politics, no crime, which are sort of the backbone of a, a lot of local news, right? Like, I mean, I went to...

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They were, they were training us still to, you know, newspaper newsrooms and so it was like courts, fire, you gotta go down and hang around the police station and stuff like this, go to school board meetings, uncover government corruption and, and whatnot.

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When people think about local news and when they talk about the local news problem, it usually intertwines with accountability journalism, if you will, uncovering the corrupt city councilman and stuff like this.

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You decided not to play in this area. Explain that decision. That was a decision fro- literally from day one was that we were not gonna touch that.

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Other folks were doing it, and what we were observing and still to this day is

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while other news outlets are really trying to focus on accountability, what was really happening was a focus on clickbait content around car accidents, homicides, sexual assaults, and things that were not necessarily accountability, but just drove eyeballs to, to drive traffic to boost advertising.

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That was not where we want- a lane we wanted to play in. We also knew that we were starting our business in the South, and we have a much...

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We have a diverse political climate here in the cities that we were starting in, and we wanted to s- find a way to separate ourselves and potentially have a larger total addressable market size.

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What we've learned is that by staying out of politics, not, we're not alienating a portion of the population in these smaller cities.

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We're able to pull in everybody to focus on how we can educate them about how to participate in their community and how to start spending dollars locally, and that has been wonderful, not just for the reader.

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Most commonly, e- every single day, we get feedback that's like, "Thank you so much for being a reprieve from all the other stuff that's out there. I'm so excited to learn about my city.

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I went out and participated in X, Y, Z activities locally. I joined a board, a committee, a commission," or whatever, because they learned about it through the product.

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So we're really more like-How it works Greenville, South Carolina, how it works Indianapolis, and, and getting people to participate in their community effective way. But that's also breaking barriers.

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So a lot of folks who don't see the other side of the spectrum- Yeah... they only watch Fox News or CNN.

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Now we're, we're not doing personalization intentionally, opening up people's eyes to a broader spectrum of ability to participate in the community.

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And s- someone who might go to the high-end food and wine festival never sees the Hispanic Alliance's food and wine festival, but now they're going because we're able to show it to them- Mm-hmm...

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in the way that we curate. So we leverage technology to curate a broader spectrum of content across the market and expose people to other things in the community that they wouldn't otherwise never even know about.

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Um, and that's been one of the most actually rewarding pieces of it as well. Okay. So like the VCs would say you're taking an orthogonal approach to like, if it bleeds, it leads, basically. [laughs] Yeah.

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That was the old, that was the old expression- Yeah... about local, you know, 'cause at the end of the day, like I...

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And it's interesting you say like that a lot of that becomes like, you know, sensationalized, the click bait to get eyeballs that you can monetize, but it works the other way around.

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Advertisers typically do not wanna be around, like, you know, coverage of like rapes and fires and all the bad stuff. They typically like to be around things about food festivals and things of that sort.

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So i- it does feed the business model though, right? 100%. I mean, it's like the easiest slam dunk with any advertiser. "Hey, we can guarantee you're not gonna be between a sexual assault, a homicide, and a car accident.

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You're gonna be here around other content. You're gonna be natively built into the content in a manner that adds value to our consumer about your business, and that drives conversion." So people look to us.

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We've, we've built a level of credit built-- So local news has lost credibility and trust in a lot of ways with the local consumer, and we've rebuilt the company as a brand.

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We're kinda like a super influencer in the market in a sense. We kind of merge the marketing and journalism pieces together, and we've built this credibility and trust with the reader that now advertisers love that.

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Yeah. And it's very easy for us to fit them in and around all that content in a way that other brands can't, and you can click- Yeah... on our content. [laughs] Yeah.

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It's interesting, like, how politicized everything has become, like, in the country, right? Maybe I'm, like, misinterpreting. My interpretation of it is

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the quote, unquote, "accountability journalism" that people talk about a lot is perceived as political at the end of the day, as serving an ag- a progressive agenda against conservatives.

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That like, I mean, I would think everyone wants good government [laughs] but maybe not. Is that sort of a fair interpretation? I mean, 'cause you don't wanna be caught up- I, yeah...

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in the political culture wars, it seems pr- pretty clear, 'cause that, that cuts your total addressable market by more than half in a lot of Southern cities.

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[laughs] Yeah, and I think what we're seeing is that we can cover some topics that, uh, might typically be lab- labeled as liberal in a sense, but by talking about them as events that are happening in the community versus editorializing a- around the topic, um, helps us to more inform about what's going on locally versus, uh- Yeah...

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trying to shape someone's opinion about something.

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And I think staying out of the divisive nature of things and really leading with more of a, a political fact-based approach allows us to keep the readers from both sides.

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And, you know, we always say if, if we're touching a topic that is maybe slightly controversial, if we get [laughs] get a piece of hate mail from both sides of the aisle, [laughs] we know that we hit it.

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That's- We know that we hit it down the middle. That's what I said.

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[gentle music] I just moved back to New York from Miami, a far more politically diverse place, and there is a difference in a place like Miami i- uh, in that some of, like, the Herald's coverage, for instance, is very traditional.

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They've got a long investigative history and, you know, obviously the editorial page is different from... All editorial pages should go away.

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There is definitely, like, a feeling that they're out of step necessarily with it bec- with their coverage. There's, uh, many different constituencies in Miami, so I, I can totally get that.

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Talk to me about the model itself. I mean, it's mostly an advertising model. There are some memberships, but how are you thinking about that? We've seen people try to make memberships work. Yeah.

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I remember Billy Penn was really leaning in on memberships. That didn't totally fly. How did you think about the model? Because local advertising is really difficult to pull off at scale. Yes. [laughs] Certainly is.

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Um, [clears throat] I think we are probably one of the few organizations that's approaching local at scale that's figured it out.

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[clears throat] We've done a really good job identifying different tiers of advertising participation that allow local, regional, and national advertisers to participate.

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Um, our ad sales make up about 85% of our total revenue, uh, in your typical content display related advertising. But of that now we're about 25% national, so we're able to get enough.

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We basically, we had to grow ourselves to get to that kind of million subscriber milestone, uh, and push that up to, to be able to have the national opportunities, but the idea in clustering markets initially allowed us to sus- to expand to more regional sustainable brands, and now we're able to go after national brands that still resonate with our audience.

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The challenge in a local media brand is that most local folks want, and the way that we've built the product, they want local content. They don't want national brands as much.

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They'll click on it all day long, but they would love to-- they wanna see a good balance.

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So we've kind of found the right balance on how we take in advertising from local, regional, and national that really jives with our audience a- and continues to be a huge opportunity for us going forward.

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Outside of the typical ad sales piece, we are getting into more and more, uh, other opportunities.

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We have some ad network opportunities that we're working on right now.We have an e-commerce business that we're extremely passionate about that's all about local, um, to be... Yeah.

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To use an example I don't like to use is like a local version of Amazon. It's more of a we are carrying- Hey, use it. That's better. I know. [laughs] I thought you were gonna say Groupon. No. No, everyone's tried that.

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I would be like, yeah, I wanna be the newsletter version of Amazon. We really have figured out how to pull local brands and local creatives into our Shopify marketplace.

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So we have technology, uh, behind the scenes that allows us to carry any brand, any primary well-respected local brand in our commerce store, and then give them local and national distribution.

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Uh, something that a lot of these brands don't have that marketing arm, and we take a-- It's all transactional revenue for us.

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And we also are licensing creative works from local graphic designers in all of our markets that are representative of community, and then we're, we're paying them royalty fees off of, uh, merchandise sold after licensing it.

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So we're able to build this ecosystem of truly local merchandise, um, and that just rolled out recently called Shop Six & Maine.

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It's a subproduct of the 6AM City brand, but we now have a distribution and marketing channel as well that's owned by ourselves through the newsletter product. Okay. So how do you reach the local advertiser, right?

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Like, because, um, you know, local, the problem is it's like, it's so fragmented, and local businesses historically, you know, they're running businesses.

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They're-- The, the marketing stuff is, is the reason the, the Yellow Pages always won was because it was easy, right? I mean, it wasn't like...

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[laughs] Uh, and I've seen just over the years, so many people try to tackle the local advertising problems.

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When we talk about the, the local, um, publishing issue, it's like the other half is the local advertising issue in that the local pizza parlor, it, you know, before, like, the local pizza parlor didn't have a website.

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Now they have a, a website and stuff like this. But they're not, they're not spending their time... They're spending their time making pizzas, not like, um, dealing with ROAS and stuff.

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I think for us, one of the biggest things is that we're looking at larger local brands that are a little bit more established, healthcare, travel and tourism, financial institutions, uh, larger nonprofits, events, um, that make up a larger core, uh, bigger average order value o-on an annual basis in our local markets.

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We've also created, um, appropriately priced opportunities for other local businesses. So we have kinda like a, a DIY classifieds platform for home listings- Okay.

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-job listings, event listings, um, deal of the day, things that fit into the newsle- fit into our website, but also- Yeah...

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can guarantee inclusion into the news-newsletter, where it's a more of a five hundred dollar, three hundred to five hundred dollar price point that allows for a self-serve environment for smaller local brands.

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With folks focusing on conversion now, the newsletter space for local is really becoming a dominant opportunity for folks that are repositioning advertising challenges, uh, educating them on what that looks like, uh, and starting to work with these companies, uh, more closely so that they can start to pivot their ad dollars- Yeah...

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into the newsletter products. One of the issues, particularly on the local level, is that a lot of people have been taught that, like, newsletters are a value add. [laughs] Just like freebie.

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It's like, okay, you bought the newspaper or whatever, and we'll throw in the newsletter. Have you run into that at all or no? That's what they do in typical legacy...

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Well, I, I think, I know in a lot of legacy media- Yeah... like newspaper, newspaper companies specifically are like- Yeah... "Yeah, we'll throw you in the newsletter," 'cause they got fifty newsletters.

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[laughs] But it, but it like it conditions the market. It conditions the market, right? Yeah.

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Like, I mean, if, if the market is conditioned to the newsletter being like value add, then they're, they're not gonna value it. Yeah. It's non...

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They're pushing ads into non-curated, uh, automatedly fed newsletters that have the top four business articles, the top four crime articles. Yeah. Yeah.

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It's, it's just they're shoving stuff into newsletters that people aren't reading, and there's not really a conversion there.

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Someone almost asked, asked us, like, "Where were the fake i- like, where's the fake impressions that are gonna drive up your total, like, the total reach here?"

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We were like, "I need to make this buy, and I need to hit a number." I'm like, "We don't... What? We don't do that." [laughs] Like, you're hitting a very, very niche, high quality audience with our product.

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Like, we're not throwing in extra freebie stuff. That's just not how it works.

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The newsletter is the vehicle, and the newsletter does convert, and it's a lot different than what people have been trained historically, uh, especially at local level from these other, other print- Yeah...

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and, and broadcast publications. Yeah. So, I mean, so are most of the ads, like, performance-based? Um, on a... Yes and no.

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Uh, more on a national level because that's a little bit, uh, the national buy is a little bit more of a sophisticated buy in a lot of ways. Um, the local is more a flat rate buy on most local and regional.

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Um, they're buying a set amount of inventory over a period of time, but we're very hands-on in the content production.

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We have a branded content studio and an account management team that delivers incredible customer service, which I think is something unique, uh, too, for smaller local businesses and, uh, incredible analytics reporting afterwards.

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So these brands are really able to see, uh, how their content performed, which is what drives all the renewals. So, like, as an engineer, we can talk about scaling, right?

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The challenge really comes in the scaling, right?

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Because newsletters themselves are very handcrafted, and the reason that newsletter ads, I think, have performed well, similarly to why podcast ads perform well, is because they're handcrafted, and that's really difficult to scale.

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And so what generally happens is, is engineers, but more than engineers, they come in and they say, "Shit, no. We gotta scale this stuff. We gotta automate things and stuff." And then guess what?

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The performance goes down because an email newsletter with, you know, a lot of ad network ads generally is gonna perform less than ones with a lot of native placements.Are, are you running entirely native placements or are you mixing in like, um, display and native?

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Like how do you view the format question and, and how you scale it?

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So we do, uh, display and native within the newsletter, um, limited number of placements so that there's content balance between, uh, the local news of the day and the advertising mix, and then that advertising mix is broken between local, regional, national.

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Um, but we, I mean, for us, the opportunity in both things are very much handcrafted. I mean, we, we don't really run... Like we don't run the repeat ad- we don't run the same ad every day all week or all month.

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We're really like swapping out brand-new stuff with our advertisers constantly. We've learned- Mm-hmm... what works on a local level in different markets.

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So one of the things that's been really interesting for us, uh, rather than just running continual

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crap ads that people don't really want, we're, we're starting to run, identify how healthcare content works in one market. We'll run the same approach in another market.

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So for us, it's all about the approach being scalable, not necessarily that we're just shoving the same thing through the pipe across the board. We're customizing it in each market, but the- Mm-hmm...

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way that we go about it is s- is similar market to market. We've already learned on subject line, A/B testing, click, uh, call to action, and what works best.

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So we now know we have a suite of 40 pieces of healthcare content that are gonna crush it.

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So if you wanna come as an advertiser and buy this healthcare, travel and tourism, or real estate, whatever, I know based off of past performance how it's gonna work.

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We know exactly who's going into our product, that, for example, we don't take political advertising, we don't take other things that are gonna be divisive or not fit the brand.

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We turn down stuff and, and actually step away from revenue, um, that's probably or that is very easy to obtain, where it doesn't align with our brand values.

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And that's been pretty cool and rewarding in a lot of ways too.

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Uh, but it makes sure that our product resonates with the reader, which reduces churn, it improves click-through, improves, improves credibility and trust, and that's what matters. Okay, so let's talk about growth.

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I mean, you're now at like, I think a million total subs. Are those like de-duped? Are those unique subscribers? Our subscribers get knocked out of the list within 30 days of inactivity.

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We've gone through a massive cleanup effort over the years. We have almost a 50% open rate against that right now, so we feel pretty strong about the list.

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What we've learned over time is that, uh, the number of people that are in your audience isn't necessarily as import- as important as the performance.

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Um, so we've been really working on higher quality audience retention, uh, building a more loyal follower or subscriber, um, versus just shoving stuff in the pipe.

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And we honestly don't s- we don't spend to the level that others do on growth. We are trying to find more organic ways to build the audience.

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Um, although we are gonna continue to drive that audience up significantly over the coming years, um, we're trying to do it in a manner that, uh, directly converts to a subscriber that's gonna wanna hang around. Yeah.

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So e- explain what is the playbook for that? Because, you know, a lot of, a lot of email is, i- is, you know, become...

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Look, a lot of email newsletters grew at a time when Facebook ads were cheaper, and there was an element of arbitrage that, that was going on.

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And I know some people are open about it, some people, um, sort of forget that part of their story.

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[laughs] But you know, most people with giant like email lists, they ran a lot of ads, they spent a lot of money on ads, like a lot, and that's more expensive these days, and it's harder to do. So explain like how...

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What is the playbook? 'Cause I, I, I don't-- I guess I don't totally understand how you have like an unfair advantage if you've got like a bunch of publications in different cities when you go into a new city.

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I d- like, 'cause it's just totally different, like right? So someone who is a 6:00 AM Sacramento reader has, you know, if you're opening 6:00 AM Boston, that there's, there's no overlap. Yeah. We have. Yeah.

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Which is great. Like, it's kinda cool because we don't. So like if I was, um, a national newsletter brand and I was launching into local markets, I'm just pushing the same people into the, those markets.

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We don't have that. We don't have a national brand, so we literally have to organically build each market. Um, I really do wish that we spent a ton of money [laughs] building the audience about five years ago.

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Um, but we didn't. We also didn't have that. We really bootstrapped that beginning time of our growth, and so we had to learn other ways. Now, we've gone through, uh, co-reg, opt-in things with partner.

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Like we basically, because we're in all these different cities, we're partnering with local venues, brands, whatever we can to get, uh... We, we did contests.

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Contests are awful because they just churn in a bunch of emails that you don't want. So but we tried, we've tried it all. I mean, anyone that tells you that they haven't tried it all is full of crap.

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I mean, there, you have to go out and see what works. We have ch- we've tried every single possible way. Uh, candidly, uh, Facebook is still an amazing tool, um, to grow.

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But what you do is you skew your audience older 'cause the demographic in Facebook is older. So while people are picking that up, they're not necessarily getting the younger demo.

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Um, going back and doing like college ambassador programs and stuff like that, will those work? Do they work? Not necessarily for newsletters. Um, newsletter is not necessarily what a college student's looking for.

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So we also work heavily on the social side, and then trying to figure out how to convert someone from a social platform to a newsletter subscriber is something we've worked on a lot.

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And I think we've gotten some pretty good success, uh, in figuring out how to take someone from an Insta follower- But it sounds like you're saying it's like still pretty like hand-to-hand combat to getting these...

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Like, what scale do you need in order to make like a city profitable?Depends on the size of the market.

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Some of our smaller legacy markets, I mean, we're, you know, fifty, sixty, seventy thousand subscribers you can do eight hundred to a million in revenue on pretty,

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uh, easily within, you know, a little bit of maturity time. But, uh, we're shooting to get all of our markets to hit, uh, north of a million in revenue against a hundred thousand subscribers.

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Um, so like a ten dollar ARPU, um, in each of the markets is a strong, sustainable, profitable model for us, and I think that that's, that... You know, we can continue to replicate that market to market.

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We're not gonna be able to infinitely grow our audience in twenty-five cities, but you could grow to two point five million people across those twenty-five cities.

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Um, and so we're trying to make sure that we're, uh, thoughtfully considering how we expand and really right now very focused on the unit economic side, um, of the business to make sure that we can prove that our assumptions to get to those numbers are, are true.

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The good news is we have eight markets that are already kind of there, so we kinda know pretty well what the unit economics of the business look like.

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[instrumental music] So explain your differentiation, uh, with Axios and their approach. I mean, they're the, like, you know, they got, they got bought by Cox, whole bunch of money. You know, local is a big initiative.

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They're-- I think they're taking a different approach from, from 6:00 AM City, but like, you know, they're pretty close competitor I would say.

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They're close in the fact that they followed our lead into local, um, and, uh, we knew they were doing that.

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Um, it was actually highly beneficial to us to have them enter the local market, um, because the market adoption of newsletters in general, and the more people playing in newsletters, the better for everybody right now as agencies and advertisers are starting to be more comfortable and understand, uh, newsletter marketing.

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The differentiation I think is, I mean, Axios really follows a lot of its political roots, um, and takes a much more, uh, political, investigative, uh, hard news angle in how it covers local news, which is awesome and a good product.

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You know, it fits the market. It, it fills a void. Um, but also that's the same stuff a lot of folks are reading in the national news anyways. Um, it's branded locally.

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Um, so I think that we differentiate significantly in going more of the politically neutral route. We don't cover crime. We're not covering politics.

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We're really focused more on, uh, connecting with our reader, building a loyal, trusted consumer that looks to us for how to participate in their community.

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As we kinda look at the COVID shuffle and how everyone moved around, people are saying, "How do I experience my city?" Um, Axios isn't telling you that. We are.

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And so we're building this relationship with, um, folks who are moving and tr- and moving from city to city and going, "Hey, um, this is what you need to know.

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This is how you can participate locally, and this is where you can spend your dollars," which is what makes the advertisers happy. So you're seeing...

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I mean, if you look at and compare us to some of the other folks who are trying to do newsletters and local, I think you'll find a much, uh, deeper, uh, breadth of advertisers across platforms that are seeing the direct conversion with a loyal audience.

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Yeah. I, uh, Dmitry Shishkin, uh, he used to be digital development director at BBC. He came up with this framework around user needs and, like, news.

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I don't know if you've ever seen it, but he basically divides up content, I think, and products really around these user needs.

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Like, one is like update me, one is keep me on trend, one is give me perspective, then educate me, inspire me, divert me.

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But basically is what he found was, was most news organizations completely over index on update me, and, like, they don't think about the other user needs as much, and they're just as valid, I feel like.

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And I, I think this is like a sort of disease of capital J journalism. I understand why it is, but there's other user needs out there beyond, beyond politics and crime, so there's...

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I mean, I think about the, The Athletic. I think what The Athletic got right was, like, they took a part of local, which is sports- Yep... and they, and they made it a, a great product around it.

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Um, doesn't mean that the other stuff isn't important, so. I think another thing that separates us from Axios and others is just s- the sole content creator reliance.

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Because of the way that we structured the business, we've really perfected the, uh, quality and consistency at scale regardless of who's writing problem that a lot of folks have.

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So if I was, um, many other newsletters, um, if I redirected my attention because I was moving on in my career, that newsletter's now gone, or they're entirely replacing it and now you have to rebuild with someone else's entirely different tone and approach.

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And I think a lot of other newsletters have, a-are trying to scale and are either too lean that they're gonna run into challenges, or they are floating alone, uh, and there's a, just a challenge in that on its own.

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So, um, uh, we've really kind of solved for that, um, in a manner that, you know, can,

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we can handle turnover or maternity leave or whatever without having to, uh, shut down or lose business, uh, which I think is pretty unique as well for us. Yeah, you gotta build in redundancies.

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That's a, it's a flaw of my model, I'll be honest with you, Ryan. [laughs] Um, so- You need, you need a- On that note, uh- You need another Brian.

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[laughing] Yeah, it'll be like, uh, the old, like, General Hospital, and they just, like, would swap in a new character 'cause, like, some guy got in a contract dispute. They wouldn't even say anything.

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They would just drop in a totally different person. They did that on Bewitched. Remember they swapped in, like, a Darren? Mm-hmm.

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It was, like, a new Darren, like, all of a sudden showed up, and, like, nobody talked about it, and we just all accepted it because we didn't have Twitter. Um, oh, final thing. When are you gonna be profitable?

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Q2 '23.Okay. We're pretty- Is there a specific day? I mean, I mean, like, ongoing profitability. [laughs] Yeah. No. We, uh- BuzzFeed used to just fool me with that.

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Jonah would tell me, "Oh, well, we've been profitable for..." And I was like, "Which day, Jonah?" Like, "Which day?" [laughs] If you look at our business model, the... So I really would say it takes--

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We can launch any new city in, like, less than 60 days, cradle to grave. Like, we can say, "Hey, tomorrow we're going to New York," and we'll have it up and running in 60 days.

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Profitability typically comes in the eighteen to twenty-four month range b- per city. As a business, because we just launched 16 markets, we got a little bit of time here. We launched them at the beginning. Yeah.

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But how many are profitable? How many are profitable- Si-... o-on your own basis? Six. Six of the 25. Um, and those six are at that right maturity level.

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Uh, two of those other ones, one is a smaller market, uh, and the other one is, um, f- not old enough yet. Um, so we're seeing them all kind of move into the maturity phase.

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So the older ones are now covering some of the, the losses of the new markets, but they all are trending right now, um, towards profitability in Q2 of '23, uh, as a whole, as, as a business, and we've intentionally kinda slowed down the market launch phase right now so we can ride into profitability, control our destiny a little bit better.

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Um, you know, you look at all these other brands and while they've been fueled by massive, uh, injections of debt and capital, um, we are working towards a path that'd get ourselves debt-free, um, and be profitable and be able to self-fund our growth going forward.

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The business, uh, in '24 is, will be extremely profitable if we don't add additional markets, but we're trying to s- figure out how we can sit on a, a fair amount of cash, um, and, and use profits above that to self-fund growth going forward.

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So trying to be a little, uh, smarter in the build and be more sustainable than some other folks are that, that are playing with fire sometimes, stepping into too many different lanes, uh, to try to expedite growth of the business.

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Well, I mean, your expansion has slowed. I mean, like, COVID happened, right? Like, but, like, um, it slowed. I mean, I would guess, like, you need to...

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I think businesses always go through these periods where they're in, like, complete expansion mode, and then they move into, like, consolidation and, like, you know, maturity and, and getting what you have already running better and, and more profitable then.

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And then you go through an expansion phase and then consolidation phase. Yeah. And it... 100%. I mean, we did. After we... So we went through COVID, we slowed down in COVID.

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Coming out of COVID, we tripled the size of the business. Now you're digesting that and now working on operational efficiency. We deployed all new tech.

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Next, over the next year is exploring some other different innovations, what things do we wanna get into, um, or not, and I think you'll see that we're gonna stay pretty close to our reins on what we're good at, um, and look maybe for strategic partners that might be, uh, aligned, where we're not having to deploy massive amounts of capital ourselves, um, but being more strategically intentional in who we work with, uh, in the next chapters of the business.

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[gentle music] Yeah. And it's funny because, like, just for reporters covering this kind of thing, it's, it's always, it's... People always wanna cover the sort of growth phase. Like, everyone loves a launch. I don't...

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Uh, it's a launch. It's a launch, isn't it, right? And then, like, after the launch, guess what? Like, that's the, the hard work happens.

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[laughs] Like, the real stuff is, like, after these things get launched because it's the work of making them work. And so th- that, that phase is, like, incredibly... And that's where the magic happens.

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But I wanna thank you, uh, Ryan. Thank you for taking the time. I hope to get to Greenville eventually, 'cause I know I'll love it. Greenville is amazing. We would love to have you.

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We'll roll out the red carpet when you come, Brad. [laughs] All right. Thank you so much. Thank you. Thank you to Jay Sparks, our producer on this podcast.

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If you're ever looking to do a podcast, I highly recommend Jay, and not just because he's on this riverside looking at me right now. Go to Podhelp Us. That is podhelp.us, and Jay will get you hooked up.

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[upbeat music]