Cost per mille

Last week at beehiiv we launched one of the most impactful updates in company history. It puts us one step closer to building what I believe is a multi-billion dollar opportunity, and I’ll explain why.

But so you understand why I believe this, I’ll start with a story from my Morning Brew days. For those less familiar, Morning Brew is a newsletter-first media company best known for their daily business email. It’s sent to over 4M readers.

Newsletter-first media companies are becoming the norm: Axios, Puck, The Information, Industry Dive, The Skimm, etc.

Back when I joined Morning Brew in 2017, we had a single daily newsletter that we sent to about 100,000 readers.

• The business model: we sold premium advertising placements.

• The pitch: 100,000 highly-engaged and well-educated readers, aged 18-34, with disposable income, mostly living in coastal cities.

If you were a brand who wanted to get in front of that audience, of which there were many, for the reasonable price of $10,000 you could have your logo at the top of our newsletter along with 150 words of custom copy.

For a while, there were just five of us. Two writers (shoutout Neal and Mike), Alex Lieberman mostly slinging ads, Austin Rief doing a little bit of everything, and me building the infrastructure and growth levers to help scale this thing. And each morning in that tiny WeWork office off Wall Street (back when they had free beer on tap) we would print $10,000 each time we hit send.

The simplicity and scalability of it all blew my mind. The input remained constant (i.e. curate the top business stories and masterfully rehash them into a fun and digestible email). But the output (i.e. dollars) would scale with the audience.

Before long the audience was 250k readers. Then 500k. Then 1M.

Speaking of 1M readers — we threw a banger of a party in New York to celebrate the milestone… way before HR was a thing at the company.

The product was more or less the same, but the output was now $25,000 per sponsorship.

At a certain size, we began to price out a lot of advertisers. Sure, Visa and Apple could spend $25,000 on a sponsorship, but a lot of the popular DTC brands and startups of the time were a bit more performance-based and couldn’t. So we introduced a secondary ad slot in the newsletter, which was a bit shorter and further down… but was only a fraction of the cost.

At this point, we were generating anywhere between $25,000 and $40,000 per newsletter… all from sponsorships.

The flywheel was in full effect. We’d take that revenue and put it right back into our growth budget. I was personally spending $500,000 per month on paid acquisition via Facebook, Instagram, Snapchat, and nearly any other channel you could imagine.

I’ll take a quick victory lap for this text message concept I came up with for Instagram story ads. For a few weeks, we acquired quality subscribers for just $0.30. The golden days indeed.

I also built something to send us an email each night to recap how many subscribers we grew that day, along with a full breakdown of where they each came from. If you’re a beehiiv user, you’re accustomed to this (this is the origin of that feature). Back in those days we were growing between 2,000 and 4,000 subscribers per day. Waking up to see anything less than 2,000 new subscribers caused a full panic in the office.

At this stage, the sales function had grown up a bit:

• Our brand partnerships team was about a dozen people. They were responsible for building relationships with advertisers and closing deals.

• We had an in-house copywriting team of three. They would intake messaging points and assets from advertisers and turn them into witty and performative ad copy.

• We ran regular audience surveys to collect first party data, create media kits, and showcase the value of our offerings.

• Ben (one of my cofounders) and I spent nearly a year building a bespoke ad management platform that coordinated the inventory, copywriting process, and brand approvals… then seamlessly integrated the placement into the newsletter itself.

In summary: we had nearly 20 sales-adjacent employees and custom-built software to appropriately monetize the newsletter.

It was around that time when newsletters began to have a real moment (still are tbh). More publishers began to prioritize their newsletter strategies, and more journalists were opting to go independent. And while Substack introduced the ability to more easily monetize via subscriptions, paid newsletters aren’t for everyone.

But there was already a tried and true way to monetize newsletters at scale: ads. And Morning Brew wasn’t alone: The Hustle, Axios, The Skimm, 1440, and dozens of others were printing millions of dollars per year in advertising revenue.

But ads are hard and resource-intensive to do well (see above: 20 employees and custom-built software).

Enter: beehiiv.

The beehiiv Ad Network was a part of our core thesis from day one. To prove it, you can view our seed deck here, or seed extension deck here.

But ad networks require scale, and scale doesn’t happen on day one. So you sort of need to reverse engineer how to get to that final destination.

• In order to build a healthy ecosystem where publishers can seamlessly monetize their content, you need to have thousands of brands willing to spend and acquire customers.

• In order to be the destination for thousands of brands, you need to have quality content and billions of impressions.

• To scale to billions of impressions, you need to first build software that is powerful, robust, and affordable to attract the top content creators in the world.

Where are we today? beehiiv is home to tens of thousands of the top newsletters in the world and are sending roughly 2B emails per month. It’s not Facebook-level scale (yet) but it’s large enough to attract top brands like Netflix, Hubspot, Roku, Deel, Hims, and hundreds of others.

Each month the beehiiv Ad Network directly pays publishers nearly a half million dollars… and we’re just getting started. As with any two-sided marketplace, we are constantly balancing supply (newsletters) and demand (advertisers). One of the largest blockers for newsletters to date has been their unwillingness to do CPC deals (I’ll explain in a moment).

Last week we launched CPM Deals, and it’s a game changer. If you’re unfamiliar with ad lingo, I’ll break it down for you. Here are the most common ad models:

• CPA (cost per acquisition): Publishers earn when a conversion happens.

• CPC (cost per click): Publishers earn each time someone clicks.

• CPM (cost per mille): Publishers earn for every 1,000 impressions.

Advertisers and brands prefer CPA because they only ever pay when a conversion happens. Let’s say Eight Sleep sells a $2,000 mattress and pays a $250 CPA. That means when a conversion happens (i.e. someone buys a mattress) they’ll pay $250 and net $1,750. It’s a can’t lose situation for them.

Publishers typically don’t like the CPA model because despite the higher payout per conversion, there’s too much outside of their control. What if Eight Sleep’s website isn’t optimized? What if there’s an error with checkout? It feels unfair for publishers to do their part (raise awareness and drive traffic) yet not get compensated if the advertiser can’t do their part effectively.

Most publishers prefer a CPM because as long as the ad placement exists in the newsletter, and there are confirmed opens and impressions, they get paid. If Big Desk Energy is presented with a $20 CPM and regularly gets 50,000 unique opens, I can basically count on a $1,000 payment each time I press send.

CPC is typically the happy medium between the two. The beehiiv Ad Network up until last week operated entirely on a CPC model.

By launching the ability to offer competitive CPM deals and CPC deals to publishers on beehiiv, we are taking one massive leap forward in providing sustainable and favorable monetization opportunities for them at scale.

We have a handful of Machine Learning Engineers making use of audience data, content, advertiser copy, conversions, and everything in between to build models that allow us to confidently provide our users a favorable and guaranteed CPM payout.

As I mentioned above, we have been building beehiiv from day one under the premise of building the largest ad network in the email industry (360B emails are sent each day, by the way). The way we have been building the infrastructure and utilizing first-party data uniquely positions us to solve this problem better than anyone else.

Other platforms will certainly attempt to copy us (as they always do) but we have been laying the pipes for this for years. Clear vision, robust roadmap, no tech debt or bloat.

And it’s truthfully just the beginning. In the next few months we have two additional tentpole ad network projects launching, that I’d argue are just as impactful (if not more) than our recent CPM launch.

In the meantime, we’ll be crunching numbers and optimizing our models to prioritize paying our users as much as we possibly can. Power to the people publishers.

If you enjoyed this post or know someone who may find it useful, please share it with them and encourage them to subscribe: mail.bigdeskenergy.com/p/cost-per-mille

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Turn on, tune in, drop out. Click on any of the tracks below to get in a groove — each selected from the full Big Desk Energy playlist.

Some of my favorite content I found on the internet this week…

• Casey and Calley Means, co-authors of Good Energy, join Joe Rogan to talk about health and politics in America (Spotify)

• I loved Ben Thompson’s writeup on Elon’s big SpaceX bet, and how it may shake out for Tesla and the future of self-driving (Stratechery)

• If you missed our CPM Deal launch, the drop video was 🔥👇️ 

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