April 2, 2024

Payload Makes Transition to Media Company

I’ll keep this top blurb short and sweet because the newsletter is jam-packed with some original news today. But as we move into Q2, I am feeling really excited. Thanks to everyone for reading, and if there’s ever anything you want to see, just hit reply and let me know.

We’re less than two months away from the Omeda Idea Exchange, and I’m getting really excited. Held May 15-17 in Chicago, this is a must-attend event for media operators. 

I’ll be there doing interviews with operators that I admire and respect, and I would love to see you all there, too. It’s a great opportunity to meet other media operators who are building audience-first media companies and prioritizing the acquisition and activation of 1st-party data.

Whether you sit in sessions, chat 1:1, or enjoy one of the afterparties, the Omeda Idea Exchange is a can’t-miss event. Buy your tickets now, and see you in Chicago!

Payload sees ‘out of the inbox’ as key growth area

The major allure of newsletters is the ease with which you can spin one up. That wasn’t always the case, but with tools like Beehiiv and Substack, we now see a proliferation of newsletters. Having more control over the distribution of your content is compelling. Converting fly-by traffic into a more owned audience is the key to a successful media business.

And thanks to the efforts of companies like Morning Brew, The Hustle, The Skimm, etc., monetizing newsletters has also become much easier. Agencies are far more comfortable with the medium than they used to be, and that makes it much easier to generate advertiser demand.

Nevertheless, there comes a point where the newsletter is not enough. For a variety of reasons, growth starts to slow. It happens with most single-product newsletter companies. And so, there are three paths forward for continuing to grow. I wrote about this last year, but the first major path is to expand into new channels entirely: podcasts, events, social, etc. And while it’s compelling, there are inherent risks:

This introduces the first major risk. Expansion into new channels means an increase in fixed costs. And since it’s an entirely new channel, you have to invest the time to grow it while carrying those fixed costs. This isn’t inherently bad since the margins on the newsletter might be high, but it adds legitimate risk.

And it’s not just new content creators. It’s more sellers to support the new products; more support staff to create the extra advertising; more back office people to help support those people. And if you don’t properly allocate capital, this can very quickly fall out of balance.

But if done right, it’s how a newsletter company can become a media company. This unlocks numerous new monetization opportunities and opens up deeper touch points with your audience, and this is exactly what Payload is trying to pull off.

Payload launched in September 2021 to cover the business and policy of space. Since then, it has incrementally expanded, launching new products—first a weekly newsletter, then going daily, then moving out of the inbox entirely. In an interview with A Media Operator, co-founder Ari Lewis said, “We expect more than 53% of our revenue to come from alternative revenue sources, including custom content, events, and podcast advertising.”

According to Lewis, the business generated just a touch over $1m in revenue last year and was cash flow positive. Looking at Q1 and at the time of the interview, he expected the business to generate $420k in Q1, an approximately 70% increase from a year prior. [Correction: The original data from Payload had said quarter-over-quarter]. “And it’s a profitable Q1,” Lewis said. And it doesn’t take a lot of growth to get there.

We have about 20,000 subscribers. Honestly, a lot of our growth is doubling down on growing LTV of each user and each subscriber rather than growing the liast. Growing a list in b2b for sake of growing the list is not that great. You want to make sure the people reading you work in the space industry. The reality of b2b is that there are only so many people that work in this industry. We’re never going to have a list that has 1,000,000 subscribers and if we do, it means we did something wrong.

They have grown that LTV in two ways. The first is through the launch of new products, such as events. Not only do they do custom events, such as a prominent activation at SXSW for Millennial Space—a subsidiary of Boeing—but they’ve also launched their own branded events. Payload will host its annual investor conference in November, an exclusive, apply-to-attend event.

Co-founder Mo Islam said, “The key to event differentiation isn’t just marketing your event, but curating your event so you have the best audience for attendees and sponsors.” That means, even if someone wants to pay to attend if they’re not the right person, they can’t come.

The second way to grow is through an expansion into new verticals. On February 22nd, it published the first edition of Ignition, a publication serving the nuclear energy industry. While Lewis wouldn’t talk too much about the new launch, he did talk about the natural overlap in audience and sponsors.

The economies of scale when you have a sales person and you have overlapping clients, it’s obviously easier to sell. Epsilion 3 was the flagship sponsor for Ignition and they’re also a client in Payload. Orrick is a big law firm and they sponsor both.

Another sign that it’s evolving from newsletter-only to a media company is its focus on collecting first-party data. Lewis says, “The more data you have on your subscribers, the more valuable it is for your sponsors. The more data you have on your subscribers, the more you can monetize it and the more targeted it can be. Plus, it’s important for the reader because we don’t want to show the wrong content to the readers.”

From newsletter to media company. It’s a transition that more will take, but Payload’s early data is a clear example of how it works. But as I wrote a year ago, introducing new channels is challenging. You have to be incredibly intentional. But if you get it right, the business becomes much more valuable.

The Atlantic finally hits profitability

In a press release, The Atlantic announced that it had finally achieved profitability. According to the release:

The Atlantic now has more than 1 million subscriptions and is profitable, surpassing two goals that the company set several years ago. In an email to The Atlantic’s staff, quoted in part below, Editor in Chief Jeffrey Goldberg and CEO Nicholas Thompson announce this news.

Overall revenue is up more than 10 percent year over year; advertising booked year-to-date is also up 33 percent year over year. Subscriptions to The Atlantic have increased by double-digit percentages in each of the past four years––and surged 14 percent in the past year. The Atlantic has more than doubled the total number of paid subscriptions since it launched digital and a digital + print bundle four years ago.

How did it do it? According to The Wall Street Journal:

A core part of [CEO Nick] Thompson’s strategy was to figure out how much readers would be willing to pay for a subscription. He ended up raising subscription prices by more than 50%, and made it harder for people to read stories without paying.

Meanwhile, Editor in Chief Jeffrey Goldberg oversaw an evolving editorial approach—moving away from day-to-day news coverage and taking bigger swings on fewer, deeply reported stories that appeal to people from across the country and political spectrum.

These are two critical points, and neither can stand alone. I’ll start with the second. The internet is full of derivative content. Everyone is chasing the same news story. The issue with that strategy is that it’s completely undifferentiated. Dozens of outlets might have the same story as everyone else. And so, why should anyone fork over any money? If I can’t get it on The Atlantic, I’ll get it somewhere else.

Editor in Chief Goldberg told The Wall Street Journal that The Atlantic used to be in the “traffic-chasing business” and “had a handful of breaking news and business reporters.” As he said, “That worked until it didn’t.” Getting out of that business matters because this is a decision that more media companies will have to make. Eventually, they’ll get off the traffic race and start producing something worth paying for.

Which brings us to the second point. If you’re going to increase the quality of the product considerably, you should also increase the price of the product. Low-priced subscriptions were a strategy of magazines where you wanted to maximize your circulation for ad sales. A digital subscription business, though, needs to maximize average revenue per user (ARPU). Therefore, testing your readership’s comfort in paying more for a subscription is important.

But that’s why the two points are dependent on each other. You need to produce a great product to get more, higher-paying subscriptions, and then you need to use those resources to continue producing a great product.

It’s a big win for The Atlantic. But as with everything in media, the game’s not over yet. It must continue finding new subscribers, retaining its current ones, and remaining profitable. But I suspect the team feels far more confident about that today than it might have a few years ago.

Thanks for reading today’s AMO. If you have thoughts, hit reply or become an AMO Pro member to start receiving everything A Media Operator offers, including additional pieces from the AMO team each week, podcast transcripts, and an invitation to the AMO Slack. Have a great week!