The Nathan Barry Show
The Nathan Barry Show
040: Alex Lieberman - Building a 3M Subscriber Media Empire

Alex Lieberman is the co-founder and chairman of Morning Brew. Morning Brew is a media company bringing informative and digestible business news to your inbox every morning. They educate nearly 3,000,000 daily readers on the latest news from Wall Street to Silicon Valley.

Alex also hosts The Founder’s Journal Podcast where he gives listeners a “backstage pass” into building Morning Brew, and in turn, helps them build a better business or career.

Morning Brew is considered to be the largest email newsletter on the web. Business Insider recently acquired a major stake in Morning Brew at a rumored valuation of over 75 million dollars.

In this episode, you’ll learn:

  • The foundations for building a great media brand
  • What methods and metrics work best for rapid subscriber growth
  • How to optimize a referral program to gain explosive growth
  • How to be the leader your employees need as you scale

Links & Resources

Guest’s Links

Episode Transcript

Alex: [00:00:00]
That’s the beautiful thing about just business in general, this diversity of what brings people joy. People who love building process and planning who have a foundation and building on top of that foundation. You have people who have zero foundation. They want to prove to the world and prove to themselves that the crazy thing that’s been in their head that they think is valuable, there’s no proof of yet, that the actually people will love it.

Nathan: [00:00:30]
In today’s episode, I talked to Alex Lieberman, who is the co-founder, and now chairman—formerly CEO—and now chairman of Morning Brew. They grew the newsletter to over 3 million subscribers, which is insane. Making it the largest email newsletter on the web. So if we’re talking about newsletters on this podcast who better to talk to than Alex.

We get into why he transitioned from CEO to chairman. We talk about the exit: they sold a majority of the company to Business Insider rumored at over a $75 million valuation, which is really, really impressive. One of the things we talk about the channels that drove growth, their affiliate program, the referral program that so many people talk about and reference, what works, what doesn’t.

We get his take on sponsorships versus paid content, details on the type of ads that they used in their paid acquisition when they were growing Morning Brew, so much.

Anyway, there’s a lot of good stuff. I’ll get out of the way. Let’s dive in.

Alex, thanks for joining me.

Alex: [00:01:32]
Thanks so much for having me, pumped to do this.

Nathan: [00:01:34]
All right. So I want to start with, your role has shifted. You just moved from CEO of Morning Brew to chairman. And tell me a little bit about that.

What, what instigated it. What made it time for that move? I know a lot of people who have run companies for years consider a move like that.

Alex: [00:01:52]
There’s many months in the making. and I think in a lot of ways, the last year has kind of been like a unspoken transition, based on just the things that I was spending my time on and the things my co-founder Austin was spending his time on. You know, I think the, the way that I think about it is I loved—I’ve loved every part of Morning Brew, but like the things that have really given me energy is when I am building things from scratch, I love building things from scratch.

And that’s what I was able to do in, in the early days of the Brew, you know, our original newsletter, our B2B newsletters, our podcasts, like really creating the foundation for something that could obviously become a large media brand. As we’ve scaled, obviously like, you know, you’ve, I’m sure experienced this in your role, the roles of a CEO change 50 different times.

And so the way, you know, the way I think about it is the first role that I had at Morning Brew was every role Austin. And I had every role. I always tended to lean more towards sales, marketing, and content, like more the creative and people facing side of the business. Austin always, spend more time on growth product, and like the finance, the finances of the business.

And so I wore many different hats and I loved doing those things. And then as we started to grow, as we got the flywheel going of creating great newsletter content, attracting audience and monetizing our audience through advertising. My role shifted. And I went from a hundred percent doing to what I would say is like 50% doing, and 50% managing.

And I really enjoyed managing, like I loved, I loved coaching people, supporting people, but what I also learned pretty early on in Morning Brew is that managing there, there were aspects of managing that I loved, and there are many aspects of managing that I didn’t love. The way I think about managing is I think there’s two aspects to managing there’s call it like leadership and there’s operational management, operational management, really being about.

Like goal setting, metric checking, and making sure that you’re holding someone accountable to continuing to do the job they’re supposed to do really important job for a manager. Then on the flip side, I would say the leadership side of managing is kind of the empathetic management part, which is how do you support someone in their career growth?

How do you talk to someone about the things that are impacting them in their job performance, whether it’s things within their career or things in their personal life that are coming into their career, because that inevitably obviously happens as well. And what I realized is I really loved the second thing.

I didn’t necessarily really loved the first thing. The reason I bring that up is because as we’ve scaled as Morning Brew, let’s say got to 50 people and. And at 50 people, we really, that was the point in time when we had to go from being reactive to proactive, where we no longer had one product we had at that point in time, we had two or three products.

We were truly talking about this transition from newsletter company to media brand. And that was the point in time where it became very clear that proactive scaling process, senior leadership, what was, what was needed to build a brand, to transition from newsletter company to brand. And the reason I bring up what I was saying before about like operational management is because.

In many ways. That is what Austin, my co-founder has always loved. And it, and as COO of the business, that is what he, oh, he did always did. And I think as we made that transition to needing more process going from let’s call it a one to two layer business to a two or three layer business. as we needed to set one-year three-year five-year plans, as we needed to hire senior leaders, I think it, it was that operational management muscle that became far more of the time necessary to run the business.

And so over the last year, what I found myself gravitating towards is this stuff that I always gravitated towards, which is like, Building new stuff. it was more of like the culture and leadership side of management and it was being like a creator myself. Right. And, and so for example, like building new stuff, what does that look like?

Well, most recently Morning Brew launched our paid product. It’s a, it’s called MBA. It’s an accelerator for business professionals. Like that is something that I spent a lot of my time on. And so all of that to say, like, this was a transition that was really difficult for me from, I think, an ego perspective.

And I think this speaks to how even now, like a lot of the work I’m doing is reframing why I love building and really reframing it of like, you know, we talk about how it’s really important to build for the sake of like loving what you’re doing, like loving the building you’re doing and loving that you’re helping to serve people.

But I think there’s always an aspect of people that’s. Ego-driven that’s driven by like what the outside, how the outside world responds to the things that you’re doing. And I think in a lot of ways, what, what this transition has allowed me to realize is that for the longest time I was spending time building for other people, and I’m making this transition to really getting to a place where I’m grounded and whatever.

However, I spend my time moving forward, it’s doing it for myself, for what gives me energy. It gives me purpose and what gives me fulfillment. And so most recently with this transition, It was really hard because my ego was still latching on to, the role because the role had been my identity for the last six years.

Morning Brew’s been a hundred percent of my identity since I graduated from college. And so to me, it was a really anxiety provoking thing to think about once you strip me of that title, once you strip me of as close of connectivity with the company who am I, and I think it’s a, it’s a really valuable thing for me to realize the really valuable thing for me to work through.

But from a practical standpoint, I think it made all the sense in the world for this transition to happen. Because today, at this point in time, maybe I’ll like the things I’m talking about, like operational management, planning, process, all these things, maybe I’ll like that later in life or in a few years more.

But at this point in time, I don’t love those things. if I don’t love those things, I’m not going to be the best at those things. Those are the things that my co-founder Austin does love, and he’s really good at. And I want to see the company succeed. I’m incentivized to see the company succeed. So why wouldn’t I put the person who is, who loves and is best at those things in the position to do those things.

Nathan: [00:09:19]
Yeah, that, that makes a lot of sense. There’s things that you said in there that really resonated with me. One is focusing on the early days of like, are you likely to start things? I like to start things. I don’t like to start things from scratch, you know? And so the idea of now starting something new and having an audience and having like the leverage that you have now, like, it’s like, oh, that’s compelling, you know, doing ConvertKit over again from scratch and doing Morning Brew over again.

Like that. To me, there’s nothing compelling about it. Cause I’m like, oh God, so hard and painful, but I totally understand it. We were like, wait, if I, as who I am today with the networking connections and audience, everything that I have, oh, we want to spin up a new paid product. Yes. I’ll dive all the way in and great that.

Alex: [00:10:03]
Yeah, totally. And I think that’s like, that’s kind of the beautiful thing about just business in general is you do have like this diversity of what brings people joy, right? Like you have, you have people who loves, who love building process and planning. You love having people who, who have a foundation and building on top of that foundation. You, you, you have people who have zero foundation. They want to just prove to the world and prove to themselves that the crazy thing that’s been in their head that they think is valuable, but they there’s no proof of yet that there’s actually like people will love it. And so the fact that there’s all these different brains is an amazing thing.

Nathan: [00:10:44]
What do you spend your time on now? You know, you’re talking about we’re before we hit record, you’re talking about like open space and like, try not to make too many commitments for all the things.

Alex: [00:10:55]
The, the stuff that I’m spending my time on now, so how I describe it as for Morning Brew,

I’m spending my time on basically three things. It is helping to ensure that the culture of the business scales as the company scales, you know, Morning Brew by the end of this year will be probably around 140 people.

By the end of next year, let’s call it 200. Plus what’s been really special about this business is our culture. having people who are. Hardworking purposeful empathetic, who have a little bit of a chip on their shoulder to build something great. And the question is, is as you scale, how do you maintain that?

Right? It’s like every scaling companies challenge, I get excited by that challenge. So, that’s one of the ways that I’m helping, the business still is to work with, Austin and with our head of people to think about ways that we scale this. This second is, is it’s interesting. Right? I was telling you before how I went from being super in the weeds or in the mud to being out of the mud in the clouds.

And it’s like, I’m in a lot of ways back in the mud now, because now, like one of the things I spend a lot of my time on is as a creator myself. So building my brand on social building, my podcast founders journal, which I love doing. and the reason I love doing it is. I know that I would be doing it if I was involved in Morning Brew or not.

And like, that’s a great mental model. My mind is like, if I would do something on my own time, not within the walls of Morning Brew and I just have the opportunity to do it within it. It’s a re it’s a good sign. So spending time creating content. So hosting founders, journal, creating content at the intersection of like, it’s almost like the, the w who I think about my audience being is like the mindful business leader.

So like the person who’s looking to elevate themselves as a business thinker, as a manager, as a leader, but also just like, as a person, because they understand it’s all very intertwined. How you think in your life. Impacts the way you work as a professional, but also understanding business is really important to understand, to, to be a successful professional.

So being a creator is a lot of my time. and then the third is honestly just acting as a top of funnel for opportunity by being a creator. It gives me leverage to have relationships by having those relationships. I can act as a top of funnel to funnel into the business in my kind of two major ways.

One is on the advertising side. So as we scale Mortimer’s business, both with advertising and non-advertising having relationships with big brands and agencies is really important. That’s one side. The other side is actually on the creator side as morning, Bruce scales as a brand. And we start actually bringing in creators to Morning Brew’s platform to, to launch shows and products within the Morning Brew, ecosystem in kind of like our music amusement park, the, the, the house of Brew, Getting B building relationships with creators will be, I think, a really big asset to bring in people to the Brew in a way they get really excited about our brand, but also we can launch great shows with them.

Nathan: [00:14:10]
Yeah. That makes sense. There’s a lot of different directions I want to go. maybe before we dive into this, the scale and everything that you’re going into now, maybe just give us like the high-level timelines of founding one in Brew, and then through a couple of those key stages with like subscriber counts and, and some of those things.

Alex: [00:14:32]
Newsletter, not called Morning Brew called market corner was a PDF attached to an email newsletter was sent out in, December, December 6th of 2014. It’s when I was a senior at the university of Michigan. Austin was a sophomore, I didn’t know, Austin at this time. First Morning Brew went out March of 2015.

So my second semester, senior year, this was after I saw some traction with market corner. I wanted to bring on someone to help me. Austin raised his hand. He joined me as a co-founder of this non not really business, but project first Morning Brew in email form launch in March of 2015,

Nathan: [00:15:13]
What made you pick a newsletter as the thing to launch? Were there people also doing it? You know, you’re in the finance space and all of that.

Alex: [00:15:22]
Yeah. It actually had nothing to do with other people doing it. It was really a function of, we asked ourselves two questions, one, what is inexpensive? Cause we didn’t have a lot of money to spend on whatever content we created, that there was no, you know, there weren’t easy, low cost ways to create content at the time.

And then the second was. What is a medium that the college business student is already consuming, that we don’t have to reprogram their behavior. So, like for example, an app app was interesting, cost a shit ton of money. We didn’t want to, or have the money to spend on it. Website, website, not costly, but like how many websites are there that a person actually types in the URL, obviously, very few.

And so the question was like, how are people going to find us then? Especially if we know nothing about like SEO or anything. So that’s what led us to newsletters cheap and doesn’t require behavioral change from the college of business student. So that was that, I ended up graduating from Michigan, worked in finance for about a year until there was a, to me just like a clear fork in the road had to do finance full-time or had to do a Morning Brew full-time.

But doing both of them, wasn’t a viable option. I quit my job September of 2016, right. Austin graduated from Michigan in June of 2017 and joined me full-time. So we’re both full-time by middle of 2017. And I would say, yeah. So when I, when I quit, we were at, I think 70,000 subscribers,

Nathan: [00:17:04]
Okay. So it’s a lot.

Alex: [00:17:05]
We’re at 77,000 subscribers.

We hadn’t made a dollar yet. we, so other other important dates, we from 2018 to 2019, we went from a hundred thousand subscribers. So just to give you context, it took from September of 2016 to 2018, it took that long to gain another 30,000 subscribers. And then from 2018 to the beginning of 2019, we went from a hundred thousand subscribers to a million subscribers.

So that was like a big inflection point for the business. What caused that? That was honestly getting the flywheel going of paid acquisition. it was the way we always come conceptualized. Our business was when we had our first newsletter. If our newsletter was the business.

It was step one, create great content to get that great content in front of a great audience.

And step three, get that great audience in front of the right advertisers. Once we had that process going, we were getting money from advertisers. Then we could say that cashflow from advertisers, we can either invest in people to assign to one of these three steps to get the flywheel spinning faster, or assign it to paid marketing, which we had never done before.

And so by ramping up, paid mark marketing and doing it in a smart way where we were trying to acquire high quality subscribers, which at the time we defined as someone who opens at least five of their first 10 newsletters, that’s really what got us to grow quickly between 2018 and 2019. And then 2019, starting in 2019 is really when we tried to go from newsletter, like, a newsletter as the company.

To a newsletter company where it was a portfolio of newsletters, not just one newsletter. And then it was call it like 2020 when it was really thinking about newsletter company to true media brand outside of just newsletter as the medium. And those were kind of like the key dates in the company’s history.

Nathan: [00:19:08]
Yeah, that, that makes sense. and then when just verbose context was the, the sale to the SunSetter. It doesn’t require a majority stake

Alex: [00:19:17]
Yeah. Yeah. So we closed on the insider deal in October of 2020. so however many months ago that was, you know, seven, eight months ago.

Nathan: [00:19:28]
I want to talk about the data acquisition side of it, because so many people are building newsletters through free content. you know, any of the original blogging crew, right? It’s been running, newsletters are transitioned. That would say like search is one of their biggest channels, you know, organic search for driving newsletter subscribers.

But I think a lot of newsletters, especially like single author newsletters,really aren’t focusing on paid marketing nearly as much. So I’m curious, what are some of the things that worked? why did it work for you? When a lot of people get into paid marketing and, and they really struggle,

Alex: [00:20:02]
Yeah. So on the paid acquisition side, basically the idea is we wanted to accelerate growth. and we couldn’t try like newsletters aren’t inherently viral. Our referral program was doing well. And our referral program is what gave us the confidence to do paid marketing because every subscriber would be worth a little bit more than one subscriber since we could count on many of our subscribers to get referrals, but that wasn’t what was going to be like truly create hockey, stick growth in our business.

And, and so in a lot of ways, that’s why, like, I think it’s so important to emphasize if Morning Brew did not spend on PA like people talk about the downfalls of paid acquisition and you obviously have to be careful in your relationship with paid acquisition. But if we never did paid marketing, like Morning Brew has 3 million subscribers today, we would maybe be sniffing a million right now, like maybe.

And so it just was so important for our growth and it was important to do it in a, in a way where we were at least trying to be smart about acquiring the right subscribers and understanding what channels, did well for us. And so, for example, like. Email newsletters was one of the best other email newsletters was one of the best channels for acquiring other subscribers.

And so, but if you looked at it just on a acquisition cost basis, and that was the only way you looked at it, you would have never kept, advertising on email newsletters because it was very costly because let’s just use the example that the average subscriber that we got from advertising and other emails was like eight bucks.

And the average subscriber from Facebook was let’s just say like two bucks. If you only looked at, in that way, you’d only keep pouring money in Facebook, but the quality of subscriber, the, the number of opens of an email newsletter driven subscriber versus a Facebook subscriber was completely different.

And so that’s why looking at acquisition cost of a high quality subscriber in the early days was like the number one metric we looked at for paid marketing.

Nathan: [00:22:00]
Yeah, so you have to have that longer term view. And that’s interesting that you’re saying of, you know, five open five out of the first 10 emails get opened because you have to have some kind of quality metric. Otherwise it’s just, if quality is defined as a record in the database, then, then you’re right.

Like some random channel like Facebook or something else is going to be the cheapest, but not the best in the long term.

Alex: [00:22:21]
Yeah. And then again, like you’re just running the R the arbitrage that so many websites have been built on is if you just acquire cheap subscribers, but they’re not actually quality. At some point what’s going to happen is like the cost of you acquiring those subscribers and how much a brand is willing to pay you to get in front of them.

Once they realize they’re not quality subscribers, it’s going to invert and your business model is going to be broken.

Nathan: [00:22:44]
Yeah, that makes sense. Were there other things so beyond sponsoring other newsletters, were there other paid channels that worked really well?

Alex: [00:22:51]
There was, there was, an Instagram creative that did very well for us for a while, which was basically, a fake, a fake text conversation between two people where it was like one person was like, did you see an X so-and-so or something? And something happened in the news. The person responds no.

How to hear about that, that the person responds, oh, it was in Morning Brew. and then like, whatever, it was a fake conversation, but it was one of the first, I would say examples of fake conversations as ad creative that did extremely well, because I think it felt, even though it wasn’t authentic, truly, it felt way more native than a lot of different forms of ad creative.

It wasn’t overproduced. It was just an experience that a lot of people felt like they could share because everyone texts. So that did very well. YouTube advertising has continued to do really well for us. So buying a direct. Ads from YouTube influencers where they do like their own reads of them reading and re video, recording them, scrolling through the Brew while drinking a coffee at their, at their table that has done very well for us as well.

Nathan: [00:24:03]
Is that a lot of, well, so the first thing that I liked about that is that the money is going from wanting through to the creator, you know, rather than like, that’s something that we run into that I can work at is like, do you really want to hand over all this money to Facebook and Google and everybody else when we could just give it straight to the creator?

And so, I liked that approach.

Alex: [00:24:23]
It’s true. And, and to that point, yeah, to that point, it’s like, ideally yes. The, the, the biggest question just become scalability. Right? How do you scale that? Like, that was the biggest thing we saw with email newsletters is. How do you scale it for two reasons? fragmentation and, audience size. Like there are a lot of email newsletters that we burned through their audiences because we advertised in them so many times.

So you just burn through audiences faster when you’re working with let’s just call like any form of micro influence or smaller influence than a platform that has multiple billion people on it. And the second is fragmentation, right? When you’re advertising on Facebook, Facebook is the one place. and then obviously, like they can decide whether to put it on mobile, in what format on Instagram, et cetera, with like email newsletters or YouTube creators.

You like you, it’s a massive job. It’s a super time consuming job in itself. If you want to scale a channel to say spending. $250,000 a month in email newsletter ad spend, like you end up having to either have someone in your company that spends all of their time on it, or you’re hiring like an agency to be effectively the glue that takes the fragmentation of the email newsletter space and brings it together.

Same thing for YouTube influence.

Nathan: [00:25:43]
Did you end up hiring someone in-house to do all that? Or did you first do it with an agency?

Alex: [00:25:49]
So we first did it with an agency. it was actually, one of the bruise investors in our, friends and family round. and then. So for newsletters, we were using agency for YouTube. We were, we were it’s interesting. So it went from agency to person in the business that was managing the agency because like, it was a job in itself.

It, it sounds crazy, but it’s like a job in itself to manage the agency to make sure like they are optimizing the creators the right way. Or maybe some of these agencies, like don’t have all of the creator relationships. And if we come across a creator that we think is a good fit, like that is a job in itself to recommend it to the agency, the agency to vet to then decide if they want to allocate part of the budget to it.

So we have generally gone where we use agencies, but there was a person on the marketing team tagged to working with the agency partner.

Nathan: [00:26:48]
Yeah, I was smiling then. Cause we can work. I have done the same thing. We’re like, oh yeah, there’s an that with a person on the internal team, running the agency, you know?

Alex: [00:26:58]
Exactly and an agency. I think the assumption should be much to say you have T you have 10 hours of work on something for a person in the company. If you go use an agency it’s not 10 to zero. It’s like 10 to four.

Nathan: [00:27:12]
Yeah, that makes sense. I like the idea of, or everything you’re saying makes sense about, managing the ads and the relationships. Cause then you’re like, yeah, let’s sponsor this. And it’s easy to fork over five, 10, $25,000 for the sponsorship, but then there’s like, what’s the copy? What’s the ad read winch, this all be timed.

How did you handle tracking? That’s probably the biggest thing that I could have run into of like, you know, Facebook rolls up your ad buckets and all you’re tracking and you’re like, there’s your cost per lead? And in this case, right, someone doing their anger, you know, a pre-roll on their YouTube channel, it kind of sucks.

Alex: [00:27:50]
Yeah, they said that is, that is a, that is part of the four hours that, that like someone internally still spends on it. you know, it is literally managing a sheet of all of our growth partnerships. You know, it is working with our tech and product team to make sure we’re generating unique links for every new influencer or marketing channel we’re working with.

Or we’re AB testing copy. We’re creating two links that have unique tracking and it’s literally our marketing team is, managing a full effectively like database of all of these unique tracking links. And over a period of time, I don’t know the exact period right now. They’re going in and looking at what the performance is.

And for YouTube specifically, like YouTube is different than like email newsletters, right? Because for, for email newsletters, you can assume, I don’t know. In the first two days you’re getting. 90% of the subscribers you’ll drive from that advertisement, for the life of it. And then you’ll get 10%.

That’s like the long tail for something like YouTube. My guess is it’s closer to like, you know, 70, 30 or 60 40, because YouTube is effectively just, you know, a Google video. It you’re going to con view like view count is going to constantly grow for the creator. Not just as more people are searching, but also if you’re kind of taking a bet on the, the growth of the creator, if say a creator we work with today who has a million subscribers has 3 million next year, you’re going to find a ton of growth on that video that you had this native promotion on, simply from them just growing as a creator.

You don’t experience that same thing with email newsletters because obviously it’s scent and it’s kind of in the past, irrespective of the growth of the email newsletter,

Nathan: [00:29:35]
So, yeah, that’s true because the email has the upside of it’s clickable. There was a UTM parameter on that link, all of that. But it’s a moment in time promotion. Whereas the YouTube video is it’s tied to that video or that series of videos and it lives there forever, which is the same thing that podcasts

Alex: [00:29:54]

Nathan: [00:29:54]
The same ups and downs.

Alex: [00:29:56]
I think I’ll also say that I know was a really successful strategy for a few newsletters back in the day. I don’t know if anyone’s still does. This is, is like advertorials. so I remember, I think it was the hustle did an advertorial with hint water, where they wrote up like a, basically what felt like an editorialized piece on just the story of hint water, the story of their founder and CEO, Kara golden, and kind of like how they’ve revolutionized the flavored water business.

And then what ended up happening was it lived on the hustles site. It had links out to hint, hint. Basically, they did all type shit ton of paid promotion to that piece on the hustle site. And they just kept putting money in it. As long as the return on ad spend made sense from however much money they were putting into Facebook and all these other social platforms versus how much people were actually buying hint water on the back of this article.

And just from them spending so much money because they continue to see strong Roaz. I I’m pretty sure like hundreds of thousands of email subscribers came through that one advertorial,

Nathan: [00:31:09]
Email subscribers for the hustle.

Alex: [00:31:10]

Nathan: [00:31:12]
So it’s even more,

Alex: [00:31:13]
The advertorial piece lived on the website and pop up for the newsletter, came up as you’re reading that advertorial.

Nathan: [00:31:19]
Oh, interesting. Right. Cause it makes sense. Like there’s a version of that, that we did in the early days of ConvertKit. And honestly, there are these things that I don’t know why we didn’t do more of when you think that word. Why, why did we only do that once?

Alex: [00:31:30]

Nathan: [00:31:31]
But there’s like pat Flynn, who is Joe blogger podcast or he wrote this article titled why I switched from a Weber to Infusionsoft, to convert kit in like 2015, I think. And, it had his converted affiliate links in there. He presented to his audience that did really well. And then we went, that’s a nice headline. What if we like to have to tells a nice story?

And so we started running that as a paid ad to his, you know, he was even, he was even getting likes off and everything and it just, it converted so well.

Alex: [00:32:05]
In that scenario. You were, you were, you were Hintwater and PatFlynn was the hustle.

Nathan: [00:32:09]
Right. But I hadn’t thought about that from the hustles perspective of they’re like, yeah, you fit the bill, we’ll write the editorial and lens the brand and the, you know, the website real estate.

Alex: [00:32:23]

Nathan: [00:32:24]

Alex: [00:32:25]
I think part of the reason was that I think at some point Facebook started cracking down on it as they saw individual brands spending like. Millions of dollars on these advertorial pieces, which I’m interested in, why, you know, why, Facebook really cared. But yeah, I th I think that’s the only reason, but it definitely was something that worked, for a number of brands.

Nathan: [00:32:48]
Yeah, you have like a whole thing. The morning group is very known for, if we were to mention referral programs related to email, in relation to email, someone would be like, oh, like Morning Brew. so I guess two sides of it. One, what were the things that worked for them for our program? And tell us a little more about that.

And then I’m always curious when two concepts get so closely associated, I feel like then there’s all these misconceptions that come from it and they’re like, oh yeah, good morning. Where did this? And it’s like, well, maybe they didn’t or did some aspects of it.

Alex: [00:33:20]
We, we definitely, we definitely did not create the referral that is for sure. we, you know, okay. So the way it worked was.

It was just a very linear process of thinking about how we could scale. Right? So step one was we had market corner that original newsletter, the way I got people to sign up for market quarter, because there was no website.

You literally had to tell me, email your email address, and I would sign you up manually. So I told my early subscribers, I was like, if you know people who are interested in this and give you permission, let me know their email addresses and I’ll type them in for them. and then I start getting email messages from random people saying, Hey, I heard about your, your Roundup called market quarter.

Can you add me to your list? Serve? That was step one. Then step two was we launched Morning Brew. And we were like, how do we grow this thing? And Austin and I were still on Michigan’s campus. And basically we were like, We, we need to, we have to think about it as like a hub and spoke model where you have these hubs, which are people, classes, organizations that have access to all of these spokes spokes, being the right audience you want to get in front of.

And the way you save time is you get in front of hubs. So you don’t have to go to every single spoke. And for us on Michigan’s campus, the hubs were business classes, business clubs. And so we spent, I don’t know, probably three or four weeks going to every single business class and every single business club on campus.

And it was super successful. We’d go into a class. We would give the Brew spiel for two, two or three minutes. We’d say, Hey, if you’re interested in it, we’re going to pass around a sheet of paper, write down your email address and you can sign up. And that’s what we did in every club in class. It was a great, like early bootcamp and just like.

Doing things that aren’t comfortable, like convincing a professor, why you should be able to sell something in their class. It was great for early selling and storytelling. And it was really good in thinking about just like an early exercise in conversion, because getting people to write on a sheet of paper, rather than asking them to take out their laptops and type Morning Brew into the URL, the old school more antiquated way did far better because you were just putting the utensil in the hand of someone and asking them to write it versus go through all of the steps.

So that’s what happened. And then we were like, we’ve cleared out Michigan. We have a strong hold on, Michigan. How do we do this in other colleges? Because Michigan is not the only college where students are going to care about better business news. So we were like, how do we find the Austin’s? And Alex’s in other places, that’s what led to our ambassador program.

So we had our ambassador program running and we were getting, you know, let’s call five to 10,000 new subscribers a semester by working with ambassadors. And there’s a whole story about the learnings of the ambassador program in the early days. But. Take the ambassador program, then we were like, okay. But we’re seeing that they’re actually people that aren’t ambassadors there that aren’t college students that really love Morning Brew because it’s just quick, it’s conversational.

They feel like they’re not talking to a robot. And so we’re like, how do we make everyone an ambassador? That’s what led to the referral program? The way we start our referral program is we first found out about kickoff labs. That was the website we used at the time. I think there’s another one called viral loops, that we were looking at at the time.

And we, we use kickoff labs and it was fine. And the reason we found out about kickoff labs I believe was because I think when Robin hood launched, I, if I’m not mistaken, they did their launch with kickoff labs to build up like a, the wait list for Robin Hood’s launch. And so we started using kickoff labs.

It was good, but a law allowed for no flexibility in our website. And so we couldn’t do anything with our website. So we’re like, this kind of sucks. We have no flexibility. So we’re like, we need to, how do we build our own? We looked up how to build your own referral program. And of course there was, there was an article on Tim Ferriss’s blog about Harry’s razors and how Harry’s razors use their user referral program.

When they launched the company to build up an email list of a couple hundred thousand people. And in that was like this, this, the actual code for building out your referral program. Then we were like, okay, let’s we want to do this. We went on Upwork. We found a developer in Ohio who we paid $500 to build effectively the Harry’s razors landing page.

Like it was the same exact thing, just different referral rewards and a different background rather than the wooly mammoth that they had. And, And the developer we found on Upwork had said that he had built this referral program like three or four times prior. So he probably literally didn’t have to do anything.

And it was just $500 in his pocket. And so we did that and then we ended up, as we brought developers onto the team to get it to scale, they rebuilt it in like a totally custom way. All that to say that we did not create the referral program referrals at their core, literally are just bringing scale to a friend, telling another friend about something they enjoy and being rewarded for it.

That is exactly that is as old as time. And the technology is pretty old. Also like people think it’s like, like wizardry and it is really the simplest tech. but we’ve found it to be so valuable. The reason we find it to be valuable is we found rewards that incentivize our power users, and we feel really confident about a product that gets our readers really excited to share with their networks.

If either of those two things didn’t work like the rewards weren’t good. And it was a friction lit, it was a high friction process or the newsletter and our content wasn’t good. The referral program would never work. And I think a lot of people say they want to do a referral program and they’re either not thoughtful about the rewards or they’re not thoughtful about why a referral program does or does not make sense for what their product is.

Nathan: [00:39:17]
What are some of those examples of rewards either in general that, you know, do, don’t work, or more specifically from what you learned in boarding group that worked?

Alex: [00:39:25]
So what I will say is a lot of people try adding a referral program to a, what I would say is more of a marketing driven newsletter. So people who have like a weekly newsletter that is a Roundup of links from their website, they strapper a referral program to it. And they’re like, we’re not growing really fast.

It’s not doing anything. And I guess the question is one, do people actually give a shit about your newsletter? Why should they give a shit about your newsletter? If your newsletter is just content marketing for your website, you want people to give a shit about your website and your newsletters, just a vehicle to take them there.

So why do you think people are going to share the newsletter and ultimately they end up on your website and the content they like is on your website. So that’s the first, the second is it’s always about like referral prize reader fit. And what I mean by that is like really thinking about. Who are the people who are going to want to refer your product and what is going to be the thing that gets them over the edge that takes them from mentally being like, okay, I’m on the subway.

I like have five things I could do. And the thing I’m going to choose to do now is refer like what’s going to get them to that mental state. What is going to be the thing you give them that gets them to that mental state. And so it’s about knowing, like who are the people that are most likely to refer it’s most likely going to be your power users.

So then it’s a question of like, who are your power users? And for Morning Brew, the power users are people who consider themselves to be a part of the Morning Brew community who feels so grateful that Morning Brew has become a tool for them to be a smarter, better professional. And for people who like really feel like they believe the Morning Brew brand, because they feel a part of the community.

And so the question always was what are the rewards that make someone be able to either get more of the content. That makes them feel smarter and better in their career or what are rewards that allow them to show off their status in a community that they really feel a part of. And so that’s why like everything from morning routine shirts to Morning Brew mugs to Morning Brew, crew necks, those were a combination of things that accomplish two things.

One. Give social status to someone who really identifies with the Morning Brew community, but also turns them into walking billboards because they’re products that you don’t just have in the comfort of your bedroom. They’re things you generally have either in an office on your desk that people see that like, that are seen in high traffic areas.

The other was doing things like a Morning Brew, Facebook community, or our Sunday edition, the light roast, which up until very recently, you would only get access to if you got three referrals, like putting content before behind the referral world wall made people not only feel special, but felt like they were getting more of the content that they love Morning Brew for.

And so it was that balance of understanding who would share, giving them a reason to share, and also doing so in a low cost way where we were really purposeful with picking rewards that were effective but efficient. So the acquisition costs from generating referrals, wasn’t super high, for example, like.

Our Sunday edition, the Facebook community. Those are cost. If you want to add a cost it’s whatever the time cost is of the employee who has to moderate the Facebook community or write the Sunday edition for something like mugs, mugs are one of the cheapest forms of paraphernalia. It’s like 23 cents a ceramic mug.

So the, the referral cost of a mug after getting it bought and shipped is super low.

Nathan: [00:42:56]
Yeah, that makes sense. Because a lot of people will default to these really expensive, you know, items or something like that. And I liked the connection that you’re talking about. It’s because it’s not the value of the reward or like the monetary value of the reward. It’s incentivizing more of those behaviors.

Like the t-shirt isn’t like, oh, you gave me this thing that maybe I would have bought for 15 or $20. It’s like, no, no, no. I have this Morning Brew. T-shirt. That I can only get by, you know? Yeah.

Alex: [00:43:25]
We’re sending you your Jersey.

Nathan: [00:43:27]
Yeah. Oh, that’s good. Okay. I want to talk about monetization because you’ve been heavy on sponsorships and advertising, for a long time.

Curious if you’ve done other things, but you’re also now into paid products. and so we take this in two sides. One, the like warning Brews are committed. We start there and then I’d love to also with go into newsletters as a whole paid newsletters versus, you know, all of that. Yeah. Give me your take.

Alex: [00:43:59]
So, okay. Well, I guess I’ll just give my thoughts on

how, like, how we made money with the Brew. So in the early days of the newsletter, first of all, we didn’t know the size at which we would be able to make. Money. I actually think in retrospect, we could have started monetizing earlier. And it’s funny in retrospect, because we were really worried about like the sanctity sanctity of the brand, which is why I think what delayed us spent, getting advertisers to spend with us in that, you know, now hindsight, like I think as long as you, as long as you’re doing native advertising with partners, you align with in a way where you don’t have too much ad load, it really should not be a concern.

And if that’s a way you monetize your business, you need to do it in order to run a viable business or, or you should just think about other business models of you’re really against advertising. and so we, I think we got our first advertiser around 75,000 subscribers. I’ve seen certain sub stackers.

Get advertisers with way fewer subscribers. probably at 25,000. I think the earliest I’ve seen a newsletter monetize itself, through advertising is probably 10 to 15,000. And again, you’re not making big money, but what you are doing is you’re learning whether your audience actually responds to advertisers.

And you’re also building up a list of testimonials as you get bigger and bigger, that will be super helpful in selling advertisers, as you do scale, the, the initial advertisers. So the first advertiser morning, wherever worked with was a completely just through a relationship of one of our investors.

One of our investors worked at an ad agency. He literally at the time referred to it as giving us some beer money. He got wa it was the first advertiser ever Morning Brew was, am Lockhart. And it was. College rings like college rings and like graduation stuff. They bought three ads in the Brew for 800 a piece, I believe.

So $2,400 ad buy. And again, didn’t, it wasn’t a lot of money, but he got the process going about learning how to sell ads. And so basically from that point on, then the process was okay, how, what is going to be the lowest hanging fruit in order to monetize our newsletter? And what we said it was going to be is who are the brands that are most likely to advertise in the Brew?

And what we came to the conclusion of is it will be smaller performance driven brands that could truly measure the ROI. or cared about the ROI of their ad. And so what that means is if they really cared about the ROI of their ad, they really don’t care where they’re spending, because it’s not about just getting their brand out in the world.

It’s really about driving actual revenue. And so, you know, if they could advertise in a gas station TV, but that drives revenue, they’re going to do it. And so our view is like focused on more performance driven advertisers versus brand marketing, driven advertisers and to let’s start with what we consider like the chronic newsletter buyer let’s see.

And what we literally did is we created, And email address of or something like that. And we signed up for 50 different newsletters and we would track every day in a spreadsheet who are the companies advertising in those newsletters? Because our view is, is if you see a bunch of companies advertising those newsletters or, companies that are advertising those newsletters, many times clearly they’re bought into newsletter as a marketing channel, which in the early days was a big point of friction because people, either thought newsletters were dead.

They bucketed them in a certain place in their mind. And it was really hard to get people over the mental hump of should they advertise it a newsletter. So we went after performance driven brands that already had advertised in newsletters. That’s where we started our, our focus. We also, in the early days, worked with an agency that focused specifically on working with CA call it these like chronic newsletter brands to place them into newsletters then as T and the way that we scaled this was, we basically just said, Well, the content has to continue to be great.

We have to continue to great get engaged readers so that we’re driving ROI for these advertisers. It also validated for us that we had really a really strong and, a really strong and just loyal audience in the early days, because it’s one of those things. When you work with performance brands, if your audience isn’t loyal and isn’t engaged with the brand, like you can’t fake it, it’s just like, you’re not going to drive revenue for these brands.

So I think it was a really good early proof point for the value of the audience we were building and the way we scaled revenues, we literally just said, okay, let’s say we were charging a thousand in ad. Let’s just keep raising it. And we just kept raising it every single time. We talked to a new advertiser until the point in time at which.

Advertisers said, Hey, like consistently said, Hey, we’re no longer hitting our return on ad spend targets. we need to like, we, we, we have to cut you guys off at it as a channel. Then once we got big enough and I would say big enough was really at like 200,000 subscribers. That’s what we were considered.

I would say at scale enough. To work with big brands. I’ll also say that having the testimonial or like the case study of working with a big brand before that 200,000 point, also helps in getting bigger brands. So we worked with the biggest, the first big brand we worked with was discover card. The only reason we worked with them or were able to work with them is because we had a relationship with the CFO of discover card because the CMO of discover card was a reader who found out from their kid who found out through the ambassador program that we were running at their child’s school.

And so this, we, we didn’t, it kind of like was the hack to, to not have to convince a brand marketer why they should advertise it a small newsletter because the CMOs saw the value of the audience. They were the audience and they didn’t care about that. They just said, allocate some budget to this Morning Brew thing.

And so that case study not only created a mental confidence, that we could talk to big brands, but it also was something that we could show to big brands to convince them, like you’re not going to be the first one who has to take a risk on this small newsletter.

Nathan: [00:50:33]
Yeah. Having that, that proof point is so important. And like, we had the same thing with ConvertKit where like Tim Ferris would be a great example. Like so many people would come to us and say, can you actually handle this? Like the handle, the scale and all that. And then once we had Tim’s list on there that he goes, oh, Oh, Tim uses Yanga and like the whole list of like due diligence questions or whatever.

They just like scrap all that. And, you know, and once you get that, it’s so important and your rights, and a lot of those initial things can come through like a backdoor aspect of it.

Alex: [00:51:05]
A hundred percent

Nathan: [00:51:06]
What about like, what’s your take on, on the, paid products and paid newsletters versus sponsorship, like, in the sub stacked newsletter world, we take two examples would be like Lenny Rachitsky and, and Packy McCormick, right? So Lenny has his paid newsletter pack is like, forget that I’m going sponsorship. It needs a better model. And I always love people showing those, those two sides of it because you can do it a ton of different ways.

Alex: [00:51:31]
I don’t think there’s one way that works better. I think, hook, I think what sits at the core of this is are you building an audience or not? If you’re building an audience like a true audience, like a trusted audience, you can make either work, like I guess said differently. Do I think Paki could have a great livelihood right now?

With a subscription based newsletter. Absolutely. Like I think people pay for package subscription. I think you’d be making as much as he made in his last job. Would his subscription business be as big as his advertising business right now? I don’t know, but to be honest, to be totally honest with you, I don’t know that it matters because I think once you get to a big enough size, you’ll end up having many revenue streams, not just a single one.

And so I think it’s like many paths that lead to a similar place and same thing with Lenny. Like could Lenny be making a great livelihood with his more product focused newsletter? Yeah, absolutely. I don’t know how it would be doing relative to his paid version, but what I would say is it’s more about trade-offs right.

So. I think by having a paid community by going paid first, it gives you the confidence and it gives you the relationship with your subscribers to do other paid things with a level of confidence. Like if you’re Lenny and you go and do. Courses, which he’s done. It gives you confidence to do that because you already have an audience that you know, is willing to pay for your stuff.

And to me, this is just an, a, an LTV driver for a portion of the people who are willing to pay for your newsletter. You know, for Packy, maybe the trade off is harder because Packy won’t necessarily have the confidence day one to go launch a cohort based course, because he has no idea of the audience has the affinity to take out their wallet and pay for it.

That said on the other side of the trade off is. Paki is going to have the ability to drive a larger audience because his content is able to like, you know, his content is able to maintain its vitality because it is open to everyone. And so, I’m kind of going to be Switzerland here, but it’s like what I truly believe, which is, I kind of don’t think it matters.

I think it ends up converging where you monetize yourself in multiple ways. If you asking me, what would I choose to do? I would choose to CRE to keep stuff free for as long as possible to open up my audience as much as possible. But I don’t think there’s like a clear time in which I would close it off.

I really do think it is based on field.

Nathan: [00:54:11]

One point that I hear in that is that the connection with the audience matters a ton.

Alex: [00:54:15]
It’s everything. You either have a real audience or you have no audience.

Nathan: [00:54:20]
I like it. cause that’s where all the monetization methods, everything else can, can get sorted out from there depending on what you do. So, I think that’s good. last question that I wanted to ask you about. And this is more like a, a meta business question and projects. And all of that is I see people like two different types of ventures that people start.

One is the, like, I’m going to start a newsletter letter. I’m going to start a blog, any of that. And they build it up. It has like side hustle, the full-time vibes to it. I don’t know how else to describe it. And there’s other people who start something and you’re like, it’s a force of nature. And it like turns into something like one number where it’s millions of subscribers.

You see it, even, you see it, startups agencies, like one person starts an agency. And like years later it’s like five people and someone else starts an agency and it’s the same business model and all that. And years later it’s like, I don’t know, VaynerMedia, or something on that scale. And so I’m curious when you see, how do you think about those things?

As one of those people who’s taken like a newsletter, which is typically a small business and grown it into something massive.

Alex: [00:55:31]
When I, when I reflect on this, I really think it’s about ambition, right? Like, I think it’s based on ambition and risk tolerance.

On one side you could say morning bruise, massive on another side, you could say, Morning Brew actually potentially could be bigger right now, if we raised more money, we are aggressive, more aggressive in our growth strategy.

And for the people, like you say that their thing is less of a force of nature. It’s interesting because maybe their goal is if it turns into a force of nature, that’s great, but maybe they don’t want a force of nature. Maybe they just want something that literally opens up their time to do anything else in life.

So, I don’t know. My answer would be that while to have the opportunity for something to be forced, to be a force of nature. I think it really has to be something that serves a specific audience in a really exceptional way. And it’s an even better case if it’s a growing niche. Like I think people think about niches as small.

And obviously like now people talk about all the time about niches and small. It’s just focused the ideal scenarios where it is focused and scaling. So like, what is a trend you’re latching onto that say has a hundred thousand people possible audience today, but like 5 million people, five years from now.

So, I think that is one piece of the pie where you have to have that to have the chance of being a force of nature. But then I think you have people who have not become forces of nature, maybe early making 150K with their product, but. Maybe the reason they don’t have that ambition is because ambition requires time.

And that time they actually think there’s an opportunity cost too in spending that time elsewhere in other aspects of their life. And so, like, that’s kind of how I think about it is, it’s it’s ambition, you hear the word ambition and you’re like, oh, that means someone really wants it, or they don’t really want it, but maybe there’s actually more nuance to it where it’s like, Not that perse someone really wants or not really want something in life, but it’s actually the reason they really, maybe they really want something.

Maybe they really want to make their thing, a force of nature because that’s what they’re super passionate about. And that’s where they would love to give their 70 hours a week. Or maybe you have someone who is not a force of nature. It actually is a great product market fit and it’s a scaling niche, but what they really want is giving 30 hours a week and the other 60 hours a week, they’re spending with their kids.

And that’s not to say people spend 70 hours a week. Don’t want to spend time with their kids, but I think there’s a spectrum. And that’s how I think about it.

Nathan: [00:58:08]
Yeah, that makes a lot of sense. And I think we see people scale up any of these opportunities when they have leveraged coming in that they’re able to, to either scale something crazy, or they’re able to use that leverage and redirect it to something else.

Thanks so much for talking today.

Where should people go to listen to your podcasts, follow all the new stuff you’re creating and then yeah, everything else?

Alex: [00:58:32]
Yeah. you want to follow me on Twitter? It’s @businessbarista. And then podcasts just on any of the players. It’s called Founder’s Journal and, three days a week, eight minute to 12 minute episodes. And the whole idea is like accelerating your career as a, as a monitor business leader.

Nathan: [00:58:50]
I like it. Well, thanks so much for coming on and we’ll have to chat soon.

Alex: [00:58:53]
Yeah. Thanks so much for having me.

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