Does an AI-Powered Newsletter Have Any Moat?
Happy Tuesday, everyone. I’m excited to announce a few more speakers that are joining the AMO Summit on October 15th. Tickets are available, so be sure to buy now.
- Nick Thompson, CEO of The Atlantic.
- Robert Gray, Operating Partner at private equity firm EagleTree Capital (The Channel Co., Arc, Northstar Travel Group, and ALM), joining a panel on the State of Media M&A.
- Matt Middleton, Founder & CEO of Future Proof, which operates finance-related events, joining a panel on What’s Working in Events.
- Daniel Pitchford, CEO of Collingwood, joining a panel on the State of Media M&A.
And we’ll have more to share over the coming days, so register today.
It is a big, strategic initiative to move from a free to a paid subscription product. It could be one of the most important strategic decisions you can make because it fundamentally changes your relationship with the reader.
But making that shift isn’t just about throwing up a paywall. There’s a lot that goes into it from understanding strategy, to having the right data, and utilizing the right technology and tools.
Omeda has a new white paper out that can help media operators develop and sustain a paid subscription model. In it, you’ll learn how to make that pivot from free to paid with some great examples from various types of media companies.
Download the white paper here.
Trending Now hits 1 million subs
Press Gazette has a story about Trending Now, a subsidiary of Media 10, which recently hit 1 million subscriptions across its network of newsletters without needing a single editor or journalist.
Newton said: “In a nutshell… it scours the internet for news and you can train it to aggregate and identify top trending news in specific sectors or industries or on specific topics of interest or anything really.
“So we thought, well, rather than sell licences for brands to have access to use this tool in their own way, why don’t we launch loads of our own newsletters that we own… publications that we own, where they’re all powered by this AI and we can generate our revenue by selling advertising, sponsorship and lead gen with these newsletters?”
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Construction is Trending Now‘s biggest industry currently, with more than 461,000 subscriptions [in] this sector, followed by design (368,000) and business (78,000) which includes marketing and HR. Healthcare, technology and transport are also covered and cryptocurrency could be next on the cards.
There’s an interesting discussion to have about sending out newsletters without any editorial oversight, but that seems like a pretty insignificant point. There is no editorial here. It’s a souped-up RSS feed that aggregates what other publishers have released.
And honestly, it’s one of the lesser offensive versions of that because it barely includes any copy about the story. Take a look at yesterday’s biotech newsletter. It’s got a number of stories in there and when clicked, it takes you to Trending Now’s website. But none of the content is visible there. And when you click “read more,” it takes you to the original publisher’s website.
In a nutshell, what this product is attempting to do is arbitrage user acquisition. It believes that if it can acquire enough people in specific industries with no expenditure associated with serving those people, it can then generate margin. Newsrooms cost money and if you can put out product that people engage with for free, all the better. I have no idea if this arbitrage will work, but we’ll see.
Here’s the problem…
There aren’t strong moats. Warren Buffett popularized the notion of a moat in business, which is something defensible that competitors can’t easily beat. This could be network effects like Uber where more cars on the road mean more passengers which then means more cars on the road (See: Lyft vs. Uber). This could be brand (See: Apple). And it could be unbelievable reporters who have a stake in the business (see: Puck). In all of these cases, the winner has some sort of an inherent advantage over the competition that makes it harder to beat them.
What’s the inherent advantage for an AI-powered newsletter? It’s costs are lower, so that could be an advantage because it can charge less for ads to make the same margin compared to a media company with editorial costs. But what else is there? It being AI-powered is not an inherent advantage.
OpenAI is currently beta testing its SearchGPT prototype. Perplexity is stealing everyone’s content with no regard. Heck, I asked it for the five biggest biotech stories today. You can see the answer here. What’s to stop me from turning that into a newsletter? That’d take me about five minutes. The outcome would be a product of similar style to the Trending Now newsletter.
It ultimately boils down to two things:
- Sales
- Growth
In other words, do you have the best people who can sell that audience and do you have enough budget to acquire sufficient subscribers? That’s it. And frankly, that’s not a moat. There are tons of sales people out there and newsletter growth, especially with a product like this, is a function of dollars. How much money can you pump into growing the newsletter list?
There’s a reason that engagement with newsletters has dropped over the last couple of years. It became so easy to grow newsletters that anyone could do it. And if anyone can do something, you’re going to get a ton of crap. At the Newsletter Conference back in May, I was asked if we were in a newsletter bubble. I said, “No. We’re in a crappy newsletter bubble.” That’s the reality.
I don’t mean to drag Trending Now because, like I said, it’s just another aggregator. But if I can create a competitor in a matter of minutes, so can anyone. At what point will I be able to ask Perplexity to send me an email every morning with the latest biotech news?
This is why I come back to this notion that for media companies to survive going forward, our moat must become uniqueness. Industry Dive has a ton of newsletters that compete with Trending Now. What Industry Dive can provide its audience is unique information that readers can’t get anywhere else. That means you’ve got to subscribe to read it. What’s the urgency to subscribe to an AI-powered newsletter?
I suspect Trending Now will make some short-term revenue from its list size, but that engagement will inherently drop as people find other sources for their information. What might make this a more compelling product would be a blend of unique information tied with the aggregation. No one can compete with unique.
Brand is a moat
Speaking of brand moats, there’s a good quote I want to share. On the People vs. Algorithms podcast, Joe Marchese from Human Ventures, said:
If you believe that performance media can get you a customer and that that is your gateway to getting your customer, you have to believe that whatever is the gateway to that customer controls that customer. The idea that you can build a brand or business on performance media alone is totally flawed.
The only way to reduce customer acquisition costs over time is brand. And you can’t measure brand on a short feedback loop.
That bolded part is such a powerful statement. As publishers, we need to build a brand where people view us as totally unique and high quality. Equally as important, we need to help our advertising partners understand how important brand is to the long-term success of their businesses. Yes, performance media matters, but you’re going to be in a constant arms race if you don’t develop a brand.
AMO Pro: As Traffic Gets Harder to Acquire, LTV Becomes Even More Important
We have entered an era where traffic is harder to get. Whether it’s Facebook, X, and Google sending fewer people, or more people using chat-based offerings and never needing to click over to begin with, the reality is, fewer people are hitting our websites.
We have reached a point where the industry needs to reframe the conversation. We need to do a better job with the people that we do acquire. We need to be smarter about how we retain people and, ultimately, monetize them. The lifetime value of one of our readers needs to improve if our revenue is to remain constant, let alone grow.
Become an AMO Pro member and read the full piece here.
AMO Pro: Informa Completes Capital Recycling With Ascential Acquisition
Informa has made a $1.5 billion offer to acquire Ascential, the operator of both Cannes Lions and Money 20/20. This, alone, is a big move and adds big festivals to Informa’s portfolio of events.
But this is also the culmination of a two year capital recycling program that Informa has been on where it replaced high valuation revenue for lower valuation revenue, resulting in far more EBITDA along the way. It’s an example of taking advantage of the asymmetry in how investors value different types of assets.
Become an AMO Pro member and read the full piece here.
AMO Pro: Informa Reports Double Digit Percent Revenue Growth in 1H 2024
Speaking of Informa… it reported its 1H 2024 financials last week and the business is seeing great success across the board.
- Revenue: $2.18 billion, up 11.5% from H1 2023
- Adjusted operating profit: $600 million, up 12.9%
- Adjusted operating margin: 27.5%, up from 27.2%
In this piece, we break down the financials in more detail, look at the divisions driving more of that growth, and discuss the AI deals that Informa has made thus far.
Become an AMO Pro member and read the full piece here.
That’s all we’ve got this week. If you have thoughts, hit reply. Become an AMO Pro member so you can read everything we publish. And be sure to get your tickets to the AMO Summit. See you soon!
