Alex Lieberman started a newsletter during his final year at the University of Michigan in 2015. He had already accepted a job as a trader at Morgan Stanley and used his free-time on campus to email a recap of the day’s business news as a brief for friends looking for finance jobs:
“I asked students how they kept up with business news, and they all had the same canned answer. They read the Wall Street Journal but had no time to read it cover to cover. After spending 3 hours a day preparing friends for interviews and providing companies with my view on the business world, I decided that there had to be a more productive platform to quickly inform business-interested college students.”
Profitable from the start
That was the start of Morning Brew by Lieberman and fellow business student Austin Rief. In 2017, they raised $750k from up to 15 family and friends.
The founders carefully kept “comfortable” majority control of the company. By the end of the following year, their fledgling business was profitable with $3m revenue and 10 full-time employees.
One year on, revenue had jumped to $13m. In 2020 (now with all of 40 people) Morning Brew expects revenue of some $20-25m. Its operating profit may exceed $10m. Some growth from a startup that has been nowhere near venture capital.
Morning Brew’s revenue comes from carefully crafted native advertising, in the form of a “Together with” branding at the top of the newsletter and sponsored content. More than 40 clients (many in finance, computing, and sportswear) are charged for every unique reader who actually opens the email, which averages some 45% of the current 2m (non-paying) subscribers.
The BuzzFeed difference
It’s been a spectacular first five years for Morning Brew, albeit that it was a part-time business for the first two. But the five years happen to coincide with the period during which another kind of digital news service, BuzzFeed, has raised no less than $400m. But, just like the legacy news brands with which it competes, BuzzFeed has learned the hard way that Facebook and Google can “give” huge audiences but also “take” most of the money. So no profit yet, and the cutbacks keep coming.
The next BuzzFeed chapter seems likely to be its sale to Apple, Amazon, Google or Facebook, or perhaps the Daily Mail or Vox. But, far from matching its onetime $1.7bn valuation, the 14-year-old company’s price seems unlikely even to match the $500m that Morning Brew could, presumably, raise today – if it wanted to.
But the New York-based Morning Brew is not looking for investment. The founders have resisted countless offers of funding and have proved the point by generating high-margin profits without them. Their business education is serving them well.
The daily newsletter, which goes out six days per week, accounts for 89% of overall revenue with most of the rest coming from new verticals: Retail Brew (100k subscribers) and Emerging Tech Brew (160k). Then there’s The Turnout (60k), a pop-up politics and business newsletter for US presidential election year. And the Business Casual podcast recently exceeded 1m downloads. Austin Rief says that spreading the (still fast growing) revenue across more of its products is a deliberate strategy to strengthen the company.
And the new ideas keep coming.
As the Covid pandemic took hold, Morning Brew launched a guide telling readers how best to work from home. It quickly became a pop-up three-days-a-week newsletter, The Essentials, with tips on how to be active, healthy and happy during quarantine. It notched up 75,000 subscribers in the first three days and is now sponsored by a cold-brew coffee company: “Another example of our mission and how we’re being a resource to readers, providing them with the content they need in every facet of their life, from professional to personal.”
While the company will be launching many more newsletters, they also want to use other media and have ambitions to grow substantially in audio but probably not video.
The bigger strategy is (of course) to move the business away from its current dependance on advertising and sponsorship. Even though Morning Brew is experiencing few of the Covid ructions that have stripped advertising from mainstream media, they want to develop multiple revenue streams. Perhaps they have an eye on the kind of problems they might one day face in, say, having to give readers more control over the data the publisher holds for the benefit of its advertising sales.
Alex Lieberman says they are examining ways of “charging our consumers directly to own a relationship with them” which may imply the development of some kind of concierge membership service. The Morning Brew founders see themselves as curators and educators for ambitious professionals that are willing to pay to improve their lives.
As a company which is good at producing newsletters, they could produce them also on behalf of their advertisers.
Proud to be part of it
One measure of Morning Brew’s success are the 300,000 subscribers who have referred at least one person to it. These committed readers may be motivated by the rewards: sweatshirts, stickers, mugs, access to an “exclusive” Facebook group, or just a special Sunday (Light Roast) newsletter that they win for x number of referrals. Or they may just be proud to be part of Morning Brew.
The support encourages the founders to think they could get their subscribers to pay. For twenty somethings like Alex Lieberman, Austin Rief and millions of others, this is a tribe they love being part of. They have the energy and excitement of great friends, a dynamic, inventive business, and a flagship newsletter with bags of personality.
But Morning Brew is not magic. It is the product of a sparky team who know their audience: “We are our readers”. They (like others) have recognised the unique ability of low-tech, low-cost email newsletters to dictate the day and workflow of readers: “The new home page” – replacing the daily paper of their parents.
Newspapers which use daily emails simply to promote their print and digital content may be missing the point.