15 Nov The gnarly truth about the content business
Selling your time for money is such a clichéd way of becoming an entrepreneur. In fact, in the world of hyper-growth startups and unicorns, billing by the hour might not even qualify as starting your own business; stay in your lane, you’re a consultant.
You can’t scale. You’re not generating passive income. You can’t take a vacation. You’re not leveraging the tech stack. And unless you’re a partner at Skadden, there’s a ceiling to how much you can bill – and hence how much you can earn.
I’m guilty of propagating these ideas from both ends of the spectrum. I pooh-pooh’d becoming a consultant, while glamorized the freedom and opportunity that comes from being a digital solopreneur (the unbundled career). And while I’ve spent most of my time over the past two years creating content, the dirty little secret is that I’ve failed to monetize that content. All I can do is trade my time for money.
I want to break down for you with specifics why it’s so damn hard. I believe that transparency on visitors, subscribers, affiliate deals, and sponsorship rates will help you determine if this career path is desirable and realistic. And though the picture may not be pretty, I’ve never been more convinced that I’m on the right track.
Becoming an accidental entrepreneur
When I left Blackrock in 2015, I was a total noobs when it came to digital entrepreneurship and the business of content creation. RadReads began as an accidental email newsletter, yet I quickly realized that a consistent writing practice could create a ton of opportunity (and optionality). Today, I’m blown away by what I’ve been able to build by myself :
- An email newsletter with 15,300 subscribers
- A blog averaging 11,000 monthly unique visitors
- 52 self-produced podcast episodes averaging 3,000 downloads
- A small-ish social media following (6k on Twitter, 4.7k on Medium and 1.6k on Instagram)
- Some great earned media from CNN, Bloomberg, Barrons and public talks at the WSJ and TEDx
Yet when it comes to digital revenue, I’ve barely covered my long list hosting (i.e. WordPress, LibSyn) and SaaS costs (i.e. Quickbooks, Mailchimp, Dropbox). What gives?
Breaking down the different digital business models
From my vantage point, these are some typical ways to generate digital revenue. By no means is this an exhaustive list and I’ve denoted the models I’ve tested in bold.
- Ads and Sponsorships
- Digital products (courses and eBooks)
- Physical products (i.e. “merch”)
The generosity of the community is by far the largest source of revenue. Patreon manages the donations and each month roughly 150 patrons donate $1,082 a month (net of processing fees) for a total of $13,000 per year. Patreon allows creators to offer gifts for each level of donation. So hypothetically, for $2.45 could get a RadReads sticker and $10 could get you access to “paywalled” content, like AMAs, private blog posts or videos.
This represents a challenge for a solopreneur. On one end, it’s daunting (i.e. time consuming) to create unique content for a small subset of fans. (Imagine writing a blog post for 150 people, when you have an audience of 25,000.) However, once you’ve exhausted the list of purely generous donors (i.e. those who don’t expect anything in return), why should someone donate if they’re not getting any preferential treatment? I believe this is why my Patreon has basically flatlined and wouldn’t expect it to grow until new gifts/incentives are offered.
The New York Times’ $30 mm acquisition of Wirecutter felt like a watershed event for content businesses. The blog is a digital take on Consumer Reports, offering high quality recommendations for pretty much any consumer product. And if you bought something through their links, the site would take a small affiliate fee (usually from Amazon).
And guess what, anyone with a blog can set up an affiliate program. It’s super logical: your readers trust you, they don’t pay the fee (Amazon does) and you can be totally transparent about the arrangement. Everyone wins. So what’s the catch? Volume. For this strategy to work, you need a ton of traffic. Let me demonstrate with two examples: a native post with links and a reading list.
Here’s a solid performing post for me: Why do people hate on FIRE. It got re-shared a bunch of times (including on reddit) and FIRE is super zeitgeist-y. The post had roughly 3,500 unique visitors and two discrete (i.e. “native”) links for books (Ramit Sethi’s I Will Teach you to be Rich and Lynne Twist’s The Soul of Money.)
Now here are the affiliate metrics:
- Uniques: 3,500
- Affiliate link clicks: 225
- Ordered items: 14
- Shipped revenue: $172
- Khe’s earnings: $8.50
Yes, a really good blog post generated $8.50 in revenue. Even if I had 10x the number of visitors (i.e. 35,000) it would be $85. And unless you’ve got some built in distribution partnerships, I don’t know many bloggers that can drive 35k uniques.
The next example was much more targeted to generate affiliate revenue, a fiction reading list. It’s much less appealing to a reader, however, the call to actions are direct. Here are the metrics:
- Uniques: 700
- Affiliate link clicks: 388
- Ordered items: 25
- Shipped revenue: $308
- Khe’s earnings: $14.62
While the earnings are double, a post like this does not have enough intrinsic value to be re-shared and thus is capped from a traffic perspective. Think about it: how often are you willing to a) read a reading list about books and b) buy a book off of it.
But there’s one more lever to pull in the affiliate game. The price of the item you’re selling. Yes, books (and other Amazon knick knacks) are easy to sell, but the low dollar price caps your upside. What if you could sell something with a higher price point, but with less volume? I tried this approach with two products: online courses (roughly $1,000 in revenue) and in-person coaching ($2,000). Not too shabby, but unless traffic grows significantly, it’s unclear to me how to grow affiliate revenue.
Ads and sponsorships
I’ll tackle advertising across three mediums: the blog, newsletter, and podcast.
Impressions-based advertising on the blog will follow a similar pattern to affiliate fees (with, you guessed it, significantly lower payouts). I don’t even bother, but I pulled some sample rates for illustrative purpose. The ad network Carbon pays $1.00-1.60 per 1,000 unique visitors (known as the cost per impression or “CPM”). So RadReads’ 11k monthly uniques would translate into $11.
Things get a bit better with the RadReads newsletter because email CPMs are more variable and you can make a compelling case that the community is a desirable demographic. In fact, Bloomberg reported that our readership included “top 60 hedge funds, representing roughly $675 billion in assets.” Newsletter sponsorships are priced at $500 an issue and typical clients have been financial and consulting firms, often looking to recruit. Email sponsorships have generated approximately $5,000 in revenue this year.
Podcasts sponsorships are a bit like the newsletter, but the significantly lower audience (3k downloads) makes them harder to sell. Furthermore, audio is a time consuming medium which adds another layer of production and editorial complexity. I priced the sponsorships at $500 per episode (well above the market CPM of $50) and sold approximately $3,500 worth of podcast sponsorships during one season of Rad Awakenings. For context, it cost me $9,000 and 520 hours to produce one season! Here’s a rough pie of my revenue mix:
What levers can you pull?
Before tackling the remaining business models, I’ve got to digress to talk about time. As a solopreneur, you are a one-man (or woman) wrecking crew: you do everything. The audience (i.e. you guys) only sees the well edited and regularly scheduled content. But creating content is just one of the many hats I wear. I’m the webmaster, copy editor, graphic designer, social media and SEO analyst, accountant, head of business development, PR specialist, event planner, and videographer. This post took 3.5 hours to write, but I’ll probably spend another 1.5 hours cross-posting and promoting it!
And those 12 hours are the price of entry into the game. They don’t include new growth initiatives or experimentation with new formats (like courses or YouTube). Or trying to land new sponsors. Spending 12 hours a week (for years), just to get in the game can feel like a losing proposition. So what levers can you pull?
Lever 1: Grow traffic
This one seems obvious. If your traffic increases, so will your ad and affiliate revenue. One way to do this is using social media and search engine optimization (SEO). But this type of work is for experts and it’s naive to think that I have the skills and time to do this myself.
Another way to grow your audience is through partnerships with bigger blogs and media companies. I’ve been a Contributing Editor for Quartz at Work for two years now and it’s absolutely raised my profile in the industry. And while it’s impossible to measure the impact it’s had on the RadReads community, empirically it’s probably not that much. Think about it, how often to you read a piece you like and then subscribe to the writer’s email newsletter?
Next there’s earned media. For those outside of the industry, it’s a fancy way of saying “getting other people to write about you” (and is also known as public relations). It’s the seemingly simple act of pitching reporters, bloggers, and podcast hosts to get them to write about you. Yet what I’ve learned is that even for someone with a decent-sized network, this is an insider’s game, that once again, is extremely time consuming. It’s no longer surprising to me that there are so many PR firms. (One way to capture this benefit would be to write a book, but not only is it hard to get the book deal, writing and promoting the book will take over a year.)
So to summarize, growing traffic at this juncture seems like making a leap from the JV team to the big leagues – it’s unclear if I have the core skills to get there.
Lever 2: Grow your staff
If you’re convinced about the upper limits of content creation, then the logical remedy would be to outsource these activities. Hire freelancers to edit your newsletter, growth analysts to manage your social media, and even salespeople to work for commissions to drum up sponsorships.
This is absolutely the way to go, but any manager knows that this takes a ton of time. Managing payroll, one-on-ones, benefits, product road maps are full-time jobs in their own right. And I’d be coming out of pocket (even more) to hire said contractors. But most importantly, just a single hire takes away a key part of solopreneurship: your freedom. As you scale, your accountability to others increases. It becomes that much harder to dictate your own schedule.
So what’s the RAD game plan?
I know that I may have painted a bleak picture of how I spend my time and RadReads’ financial prospects. And yes, it’s been three years of funding the business out of my own pocket. And TBH, I’m a little gun shy about taking on a new creative project (like Season 2 of the podcast). I’m acutely aware of the breakdown between time spent creating and the lack of ensuing revenue. So what about the remaining business models? Any new forms content that I create will probably live behind some kind of premium paywall, be it Patreon or a true subscription product. I’m mulling some online courses and a series of eBooks, but I’m apprehensive about the amount of time it will take to get them off the ground. (And selling merchandise will never be my thing.)
But more importantly, while the digital model has failed to monetize, the consulting business continues to take off. This consists of public speaking gigs, coaching individuals about their relationship with money, and consulting organizations about how they can improve their cultures. And herein lies the beauty of the “content flywheel” – every day, whether it’s via an Instagram Story or a blog post, I’m doing a little bit of new business development. Yes, I need to get tighter about my offerings and pricing (and maybe get a bit more direct about my asks) – creating high quality content for 40,000 people is a great way to stay relevant and top of mind.
The pieces are all there
Your takeaway shouldn’t be that I’m a jaded entrepreneur who regrets leaving a cushy job. Yes, it’s way harder than it looks. Yes, I’m unsure about the path forward. But every day spent tinkering, testing, creating and interacting with you guys grows my confidence. I am 100% certain that this is the work I’m meant to be doing. And I now know with certainty that the path to profitability is there. It’s just going to take a little more creativity to put all of the pieces into place.
And I wouldn’t be doing it without all of your support. So from the bottom of my heart, thank you.
This post was inspired by Sam Yu.
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- Dollars and Sense: How we Misthink Money and how to Spend Better, Dan Ariely – The behavioral scientist on how emotions shape our spending decision
- The Soul of Money: Transforming your Relationship with Money and Life, Lynne Twist – The definitive guide on shaking “scarcity thinking” – the belief that we don’t have enough.