One of the best sources of wealth is recurring income. Matt Paulson knows this, and is effectively using that business model with his paid newsletter subscription business.
00:32 – The email newsletter subscription model
01:24 – What does “freemium” mean?
01:59 – From free subscribers to paying customers
05:00 – How Matt promotes his content
06:22 – Let’s talk pricing
09:15 – The role of split testing
10:37 – Matt’s product explained
12:01 – What’s next for Matt
13:42 – Where else is it applicable?
14:54 – A backend affiliate practice
16:21 – Ads in other newsletters
19:24 – How Matt got started
20:19 – The technical side of things
23:23 – Additional content channels
24:30 – Subject lines that do well
27:56 – Some parting words of wisdom
James Schramko here. Welcome back to SuperFastBusiness.com. Today’s topic is email newsletters and I think this is really interesting. It’s something that is a simple business model to set up if you want to monetize a website. If you want to go beyond AdSense or affiliate marketing and I thought it would be great to get back someone who I’ve had on the show before. Welcome to the call, Matt Paulson.
Matt: Hey, James. How are you?
James: Good! Now last time we caught up, we were talking about AdSense and you mentioned that there are other monetization models and one that you’re doing effectively is an email newsletter subscription model and I think this would be a great topic to talk about today because most of our listeners have a website.
Most of them have some kind of opt-in or newsletter or giveaway or OwnTheRacecourse thing where they’re emailing people, telling them to go back to the website when there’s new content. But what you’ve done is pretty cool. You’ve got a freemium newsletter model. So let’s start out by explaining what freemium actually means.
What Freemium Means
Matt: Sure! So, freemium means there’s a free product and if you get that and you only get that, you get good value out of it. It’s not like a trial or something cheap and kind of useless that’s just an ad to get you to do or buy something. It’s in and out itself is a good product but there’s also, a part of that there’s an option to upgrade and get more if you like what you already getting.
James: Excellent! And you have found a way to turn your email subscribers into paying customers. Let’s talk about how that works.
How To Turn Email Subscribers Into Paying Customers
Matt: Yup. So, I have about 55,000 subscribers to my free newsletter. It’s an investment newsletter that goes out every… everyday and it covers what brokerages are saying about stocks. So if JPMorgan Chase upgrades whatever, Apple, and gives them a good rating, and say we think the stocks are worth this in a year.
I compile those about for about 300 brokerages everyday and that goes out in the newsletter. But then some people want to get that information earlier in the day and there are more information that goes out in the free newsletter.
So I also have a paid version that’s 15 bucks a month where you can get that say half hour before the stock market opens so you have time to place your trades before kind of like the general market does. So that’s how it kind of plays out in what I do.
So far I’ve got say maybe 1200 people subscribed to that and I make maybe 150 grand a year from that business. So it’s kind of a neat way to make some money that’s not Google AdSense, that’s not something that’s dependent on search traffic. It’s… you know you own the customer. You own the payment method. You own the content.
Google can’t come in and change the algorithm on you and take your subscribers away so that’s kind of a neat business model that’s diversified from what a lot of people are doing.
James: Well, I’m a huge fan of owning the racecourse so I like that and It’s got very few moving parts so I imagine to do this, you’re going to need a website of some kind where you can put your offer for people to join the newsletter. Then you’re going to need some way to take subscription like a payment gateway or a merchant facility or a PayPal account.
James: And you’re going to need an email system.
Matt: Yup, and there should be stuff that, I mean most were echoed, but there’s no reason that you couldn’t do it with a couple of different lists and say MailChimp I’m using PayPal subscriptions or it would just be, you know, when somebody signs up, you have to add them to like a distribution list so, you know the technology is not really that hard.
You have a free list and then say, a landing page will send you the PayPal subscription and then when they can sign up for that then you can add and do the paid list if you wanted to.
James: Now do you send people the free daily newsletter once they’re paid subscribers in addition to it or do you take them off that list?
Matt: No, I take them off the list because the paid version is kind of a beefed-up version of the free version. So you get the same information but then you also get more.
Matt: So, we just call it the free versions ARN Daily and the paid version is ARN Daily Premium. So it’s kind of a superset of what’s in the free newsletters. There would be no reason for them to get both editions.
James: Nice. So, for a listener, if you’re wondering how to do this, even systems like AWeber will allow you to have little rules when someone joins this list, take them off that list and it will also work well with OfficeAutoPilot or Infusionsoft. Now, interesting, when you send out the free one, does every single one of those have a sales pitch for the paid membership?
Matt: Yup, they’re pretty minimal. It’ll say, Subscribe to ARN Daily Premium for $14.97 per month and get this, this and this. So that’s we might put one at the top of the newsletter and one at the bottom. But there’s nothing that would kind of throw people off.
James: And they click on that link, where does that take them?
Matt: That will take them to a landing page that’s got a video and some text. But then just a link to sign up to it straight or through PayPal.
James: Right. So it’s very minimal technology required to set this up. Do you do any other types of promotions or price testing or offers in your content elsewhere? Or Is it really just driving people to the free email that causes the migration to pay?
Matt: So, typically what I do is I try to make it as easy as possible for people to get on the free list. You know if they like it, there’s an autoresponder series to get them to do a 30-day trial that tends to get on people than say, like in November, we do Black Friday sale and like say in May, I do a thing where people sign up for a year, I’ll give half of the payment to charity: water.
So I do a few things like that in a year that kind of encourage people to take action. You know with the certain kind of window of time.
All About Pricing
James: Right. Let’s just talk pricing for a second here. Have you tested different price points and do you have different subscription options other than monthly? You mentioned an annual one just then.
Matt: Yup. So when I first started to kind of figure out the price, you know I was looking at what paid-for investment newsletters cost on kind of annual basis and I tried to price myself somewhere in there. I’ve done some tests, up and down and I found that you know $14.97 is a pretty good base price than you know if I want to do a sale, I can drop it down to $9.97.
I do offer annual plans and now I recently started offering biannual plans where people can pay 149 bucks so that’s 10 months, and get kind of a year, or they can pay, I don’t know, equivalent to five months free if they want to pay for two years.
And you know that a certain percentage of them will cancel every month that’s your churn rate and so if you can get them to pre-pay for a year or two years even, one, you got all the money upfront, which is kind of nice; and two, you know that they’re guaranteed to stay subscribed for 12 or 24 months which will reduce return rates significantly. So we hit a few one offer month free or two months free to pay for a year that is definitely worth doing.
James: And do you have a warm-up campaign close to the end of that two year period?
Matt: Well, what I typically do is when somebody is about to have a renewal, all I do is send them an email say, “Hey, you’re going to renew on this date. If you don’t want to continue, cancel.” So I don’t do anything specifically to try and activate them again. But maybe that would be a smart thing to do if I…
James: Yeah, I have an annual subscription plan for my memberships at SuperFastBusiness.com and at the 11-month mark, it just sends them a reminder that soon to the renewal period and same thing you’re talking about.
But I’m sure that it could be enhanced and updated with what’s current or new at the time because inevitably, there’ll be some changes. Now, does the business grow? Do you have more people coming in than who leaves due to natural attrition?
Matt: Yup. So right now, the way I track our revenue is an annual recurring revenue so how much is a subscriber worth me over a year. So right now the business is about 155 grand in annual recurring revenue and that’s been going up by about 10 grand a month this year.
So I had a pretty good growth the way SaaS metrics work is you know eventually there will be a point where it kind of the cancellation rate hits the sign up rate and you’ll peak. And I’ve kind of figured out that would be about 250 grand a year for me. So I will have to find a way to kind of improve kind of like cancellation rate, you know, get more people to sign up for improve my conversion rate if I want to grow beyond that.
James: You do stuff like send split tests for your broadcast where you’ll send 50% of your free newsletter, one call to action and 50% a different call to action and see what, you know, track the cohort metrics, like, of that group of people if they migrate through to a longer subscription or a high sign-up rate?
Matt: So the split testing I do is typically on, is not in the newsletter itself. If I do it more when I do, like, a campaign for, say, a discount or something, you know try different subject lines, different opt-ins, different calls to action and maybe even different price points. And so I do that and then I also do a lot of split testing on the landing page itself.
One of the things that I recently split tested is when I have a sale, I do the original price and cross that out and put a new price. Just doing that alone increased my conversion rates by 5 to 20% which that was the better split test for me I’ve done lately.
James: Nice! Yeah, I was interviewing Brent Hodgson about how to force multiply your online business just recently. Everything from the open, the subject line to the email copy to the call to action to the landing page to the pricing, these things can all be tested. And I guess you got enough volume to make this work.
I do have a question regarding the product itself: Do you also make stock trades? Do you have to use things like case studies or are there owner’s disclaimers that are required for business model like yours?
Matt: Not so much. Typically the general disclaimer for investing is that you’re not making specific recommendations to buy and sell any security and that kind of gets you out. What I do differently than most kind of investment newsletters is stay off telling them “buy the stock, buy the stock.” What I do is I say these people are saying buy the stock and here’s these people’s track records.
So I can say, “Merrill Lynch says the stock has a strong buy ratings… Then I say, well, you might want not want to ignore that because Merrill Lynch says strong buy ratings have a good record track over the long haul. So that’s how I can get around than most people I think.
James: So you’ve taken on the role of the reporter or you’re kind of like an analyst of analysts.
Matt: Yup. So I take 30 different data sources for ratings I get everyday. I stick that in the database and that generates the newsletter. So I’ve just been able to see a place where the information is not well-reported and compile that in some kind of a format that is well-reported and people find value in that.
James: Nice! So what do you think the next steps for you will be as you grow this business, Matt?
Matt: In the last six months, kind of my big push has been to increase my revenue per subscriber. So I had an investment guide that came out that was 40 bucks that I may have made about 10 grand from. And trying to do… probably add a couple more products to my portfolio in the next year.
Right now I have three different newsletters and then kind of an investment research software. So I try to get people sign up for one, then they’ll maybe sign up for the other one. So if I increase you know, get people to sign up for two or three different things, then the revenue per subscriber is up. Obviously that’s a lot better. That will increase how the business is worth for me for a year so that probably will be my big focus.
James: Do you ever see yourself creating a community of investors like a subscription forum, paid Facebook group or Ning or something?
Matt: You know there’s a lot of those out there. There’s a lot of investment forums and I just don’t see that as a big opportunity for me personally because I kind of know where my gifts are and I don’t think that would be it.
James: That’s honest and refreshing. So the thing that appeals to me about your business model is that really is quite straightforward. You have predominantly a website with an email opt-in that is relatively automated in terms of how it works and you’ve got software compiling and curating.
So you’ve been able to get the deliverable and you’re filling in a gap that wasn’t there in the marketplace. It’s a very clever business model and have you seen this business model applied by people in other niches? Perhaps a listener is in a different niche altogether. Could they consider a paid newsletter market or is it specific to investments?
Matt: No, it can be just about anything. Justin and Joe from the Adsense Flippers did something like that about a year ago. After the interview, they had a paid newsletter called Niche Site where they would tell people domain ideas and then they could buy them for whatever. So they’ve done something like that and I’ve seen that applied in other areas as well. There’s a podcast and a 5by5 network called Quit!.
They have a newsletter that’s three or four bucks a month that people can sign up for. You know Kevin Rose has a paid newsletter that people subscribe to and they can get access to his podcast early.
So there’s… a lot of people are doing it in kind of a lot of different ways and I think, you know if you have people that would want to receive email from you and you have content that’s valuable to them, you can format it in such a way where a newsletter can work to be the content delivery mechanism and you know if they want more of that, they can pay you for that.
James: And do you have any backend, sort of affiliate things, like recommending brokers and getting a trailing commission or that sort of stuff?
Matt: Yup. One thing I started doing since about January is, once they sign up for my newsletter, on the Thank You Page, there are I think five offers for other kind of things they can sign up for and then I’ll get, say, three bucks for every one they signed up for.
So that’s turned into a revenue stream of one grand a month. I guess from those, because I get say four or five thousand people that sign up every month, at a certain percent they also sign up you know, the kind of offers at the end of the sign-up form.
Then once kind of they’re on my list, you know certainly they promote my products as the main thing but every now and then I would do an email blast for, say, something they want to advertise or through an affiliate product. I haven’t done all that well with affiliate stuff so far. So maybe I just don’t know how to do it right or I haven’t found the right fit. So maybe there’s an opportunity. I just don’t know what it is yet.