January 22, 2021
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Breaking Down Forbes’ Newsletter Strategy

The first time I made money on the internet, I was 16 or 17 years old. I should have been writing essays for scholarships, but I was so intrigued by making money online, I started writing SEO articles for blogs, earning $5 per 500 words.

I quickly realized how awful it was to be paid so little, so I took a break from freelancing and instead tried my hand at actually operating the sites. I learned a lot doing that and paid for a lot of beer and Chinese food in college.

It was 2010—after graduating and before I got my first full-time job—that I started getting really interested in earning money freelance writing again. So, I did what every freelance writing website said… I applied (and didn’t get accepted) to write on About.com and Forbes.

It’s because of this that I wasn’t entirely surprised when I saw that Forbes would be launching a newsletter product where journalists could earn unlimited upside. As reported by Axios:

Forbes is launching a newsletter platform that will allow journalists to launch their own paid newsletters and split the revenue with the 103-year-old publisher, executives tell Axios.

Writers will be able to split subscription revenue for the newsletters 50/50 with Forbes. They will also be able to receive a cut of advertising revenue with Forbes, with no cap on potential earnings.

In more detail, writers can get a full-time salary, legal support, editing, and various other benefits in exchange for 50% of the revenue that is earned from their writing. One of the critical benefits there that none of the current platforms can offer is an audience. Across the world, over 108 million people visit Forbes (this is self-reported). We’ll come back to that.

Forbes is built for this type of business for a variety of reasons. At the core of it is the contributor network that it launched a decade ago. Nearly 3,000 people are part of the program, many of which are paid a small stipend each month. According to Forbes, that monthly payment can increase depending on how much content is created, how many pageviews are generated, and my guess, how much revenue those articles earn.

This looks similar to the models of many content farms from the late aughts and early 2010s. Most ultimately failed, but Forbes—likely because of its brand name and its complete disregard for user experience—was able to keep the business going and, apparently, stay profitable.

Here’s the surprising thing… this isn’t the first paid newsletter business that Forbes operates. Enter Forbes Investing Newsletters.

Looking at this site reminds me that many of the longest standing newsletters to this day are investment ones. Year after year, people pay hundreds or thousands of dollars hoping to get a tip that’ll make them rich. Whether it actually happens or not, I have no idea.

The model here appears to share a similar one to what Forbes is looking to do now. It finds writers that have strong brands, helps them set up the newsletter, and then has them focus on writing while Forbes handles the backend and customer service. Forbes contracted with a company called Enterprise Subscription Processing to power this offering.

While I was unable to find any research on how much money Forbes earns on this product or what the revenue split is, it’s likely not an incredible amount of money. According to the Axios article, “the company makes most of its money from advertising, events and sponsorship deals around its popular Forbes Under 30 franchise.” No mention of its subscription business.

But this time, it’s trying something different. It’s looking to expand outside of the world of investments and attempt to serve a much broader swathe of business interests. And since all the additional features I described above have a greater cost, I can understand why Forbes believes it deserves 50% of the revenue.

However, here’s the reality… the only way this actually works for Forbes is if it figures out how to direct those tens of millions of users to paid newsletters. The difference between paying 10% to Substack and paying 50% to Forbes is in the speed at which the publication grows.

If Forbes drives no audience and the onus is on the individual to do all the marketing, why pay 50%? That would imply that all Forbes intends to do is act as the infrastructure of the newsletter. There are better opportunities out there for writers looking to build a paid newsletter; we’ve talked about that ad nauseam.

But if Forbes looks at its audience and then starts directing people to specific paid newsletters based on their consumption behavior, things start to look very different. Suddenly, Forbes provides more than just the infrastructure. They become a partner.

Let’s assume a writer can grow 10% a month on their own and starts with 100 paid subscribers. After twelve months, that newsletter will have grown to 285 people. After the 10% fee and a $10/m subscription cost, the writer is left earning approximately $2,560 per month.

Let’s take a different hypothetical now. Forbes markets the newsletters to its various audiences either with onsite advertising, targeted email campaigns, or whatever other opportunities exist within the network. Instead of 10% growth, it can achieve 20% monthly growth. For the first seven months, the deal is bad for the writer. Even though the writer has over 100 additional paying subscribers compared to the 10% monthly growth, the 50% cut eats into that.

But by the end of the year, there are 743 people paying for the newsletter and after the 50% fee, the writer is earning $3,715 per month. That’s a sizeable difference. Extrapolate that monthly revenue to a full year and the individual is earning $44,580 versus $30,720 on their own.

That’s why larger revenue shares are not always inherently bad. If Forbes can drive growth, there’s potentially really good upside for these writers. More specifically, if Forbes acts as a vested partner rather than an infrastructure player, the business could be very interesting.

But this type of arrangement is for a very specific writer that just wants to write. That’s very important because I think most people romanticize the “going out on their own” notion. There is a lot of non-writing work that goes into building one of these businesses. If I had to guess, the dream job for most journalists/writers is becoming a columnist for The New York Times. Why? You write one piece a week and get a six-figure salary. Forbes offering stability (salary) with upside, but taking 50% of the revenue might not bother as many people as we operators might imagine.

There are a lot of other details that can play into this. A major one, at least for me, is the ownership of the content and the email list. Although I haven’t seen the fine print, one writer I know was approached by Forbes to be part of this. While she ultimately turned down the opportunity, her feeling was that the content and audience would wind up belonging to Forbes. From the perspective of the publisher, that makes a lot of sense. They’re taking all the risk, so they should have the long-term protection of owning the IP.

This brings me to my final question… is this going to work? There are a few important things Forbes needs to do if it wants a shot at success.

First, Forbes can’t just launch hundreds of newsletters and assume that they are going to work. If it’s offering salaries, that’s going to come with heavy fixed costs. That means it needs to treat this like any other editorial expansion and really research what the audience is looking for. According to Axios, the publisher is launching a paid newsletter tied to its Midas List and SportsMoney franchises. But as the offering expands, it needs to be deliberate with the products.

Second, Forbes needs to find the right people for this. The publisher told Axios it is looking for “people who already have a big following in their area of expertise.” Since so many of these paid newsletters are really a subscription to the individual, finding the right people will be critical.

And finally, Forbes needs to be vested in the audience development of these newsletters. That means investing in systems to drive potential subscribers to the right newsletter. This is the critical piece of the strategy. An infrastructure play is not worth 50%. An infrastructure play with editing is also not worth 50%. But an infrastructure play with all the offerings of a media company and audience development… well, that could be worth a 50/50 partnership.

Fail at any of those and this will be a dud.

I’ve seen some people suggest that this dies on the vine because Forbes is not a Tier 1 brand anymore. More specifically, with its abysmal ad experience and the amount of contributor content that runs through the site, there’s no way any self-respecting writer would decide to do this.

I don’t share that opinion. The reality is money talks. And so does the audience. With the amount of scale Forbes has, writers can see past a lot of the annoying parts of the publisher. Additionally, with how gutted journalism has become, this is a legitimate opportunity for people with followings in niche areas of focus to build a small business for themselves.

There is a final, macro-level discussion to be had about this strategy. Do we believe that a large, generalist business publication is the right approach for this? And here is where I think the idea starts to fall apart. The people who are going to pay hundreds of dollars a year for a newsletter are people that need specific information. It reminds me of this tweet:

The ability to serve a very specific, niche business audience requires nuance. And when I am seeking nuance on a particular topic, I seek out publications that are dedicated to that topic. Therefore, I return to something I have been saying for a while. I think there is an interesting opportunity for niche media companies to partner with experts in sub-niches and build these paid, individual-led newsletter products.

I don’t believe that most people are going to seek out a central repository for paid newsletters. They are going to seek out information about specific topics, get pushed through the audience funnel, and then subscribe to a paid newsletter. My money is on more of that occurring on niche websites than large, generalist business publications.

But I could be wrong…

To wrap up, it’s good to see Forbes taking a stab at this. In my opinion, the terms are fair to both parties, albeit slightly weighted in Forbes’ favor since they own the content and user data. It’s not for everyone (I wouldn’t do it), but for the vast majority of people, stability is more important than the revenue share.

I would be curious to see if other publications try to do this. None at the scale of Forbes, but smaller ones could prove interesting.

Join me in the AMO Slack to discuss this further.

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