The power of third-party data has diminished. With more restrictions, data collected from external sources with no connection to the consumer is becoming harder to acquire. Newsletter audiences may fill that void.
The importance of first-party identifiers has steadily risen over the years as web browsers evolved to emphasize consumer privacy. Then, Apple rolled out an iOS 14 update that requires all apps to earn explicit permission from users to track their data, bringing marketers’ fears to a fever pitch. IDFA, or identifiers for advertisers, are used to measure and target advertising efficacy on a user level across any mobile device. Marketing performance agencies like Tinuiti estimate that IDFA will drop from 70% to 10% in light of Apple’s new privacy measures.
In a January interview with trade publication Luxury Daily, Tinuiti’s senior director of mobile app strategy explained:
Things aren’t going to fully go away; things are just going to be powered a lot differently. I think it really just increases the need for a strong first-party data strategy and infrastructure.
First-party data will define the next wave of advertising and sales. American businesses are now in a race: They’ll build, acquire, or market to the audiences that have it. The independent media industry is quick to discuss outcomes but rarely do we dissect the early steps. As more pursue first-party data, audience development will become one of the most coveted skills on the market.
To acquire targeted customers, first-party audiences are replacing third-party collections. An early indicator of things to come: Over the past six months, two major newsletters were acquired by much larger companies.
Business Insider’s parent company acquired a controlling stake of Morning Brew in an all-cash deal. Just five months later, Hubspot acquired The Hustle, a smaller competitor to Morning Brew. The value of that acquisition has been disputed, but the impact on Hubspot’s marketing operation is likely invaluable. Both launched in 2015 and amassed large, dueling audiences of loyal fans. Two of the best sources of first-party data out there were acquired leading up to the iOS 14 update due to impact advertisers. But while we spend plenty of time discussing the acquisitions or revenues of these businesses, their ideals of scale may be more instructive.
We overestimate the value of distribution and underestimate the value of quality. Before Morning Brew maintained an audience of millions, its content captivated thousands. Over six years of independence, the quality and consistency of the content developed and retained the growing audience. I studied the work of Anthony Pompliano, owner of the Pomp Letter.
Everyone focuses on distribution because that’s the easiest thing to see. Distribution only gets them to the front door; the quality makes them stick around. The key is to write great content consistently. In a conversation with Alex Lieberman, CEO of Morning Brew, he suggested the same:
Very simply, when we started the Brew all we focused on was a three-step process to turn newsletter-as-a-hobby into newsletter-as-a-business: Create the best daily business read for millennials bar none, get the right eyeballs in front of that daily read, and convince brands to tell their story in front of these quality eyeballs.
Lieberman, along with co-founder Austin Rief and team, focused on quality and impact before monetization. I call this “the ideals of scale,” and it contends with many of the trends that we see today in the creator economy. We see Bleeple’s $69 million NFT sale but we forget that he drew daily for five years. We see Li Jin sell a .gif for $25,000 but we forget that she researched and wrote incessantly for years, quietly building a reputation for her work. To explore this topic further, I spoke with the co-chairs of one of the most successful families in newsletter audience development: Anthony Pompliano and Polina Marinova Pompliano.
The Skillset: Ideals of Scale
The shift away from third-party data has not been a complete surprise. Some entrepreneurs have long anticipated the rising value of niche audience development. In a recent thread by the former president of The Hustle, Adam Ryan riffed on one of the strategies of Anthony Pompliano, an entrepreneur and investor with a penchant for Bitcoin, debate, and audience development. Ryan’s thread on Anthony began:
Newsletters are the highway of a business. [1]
The senior “Pomp” Twitter personality would not agree with Ryan’s assessment. Two of his younger brothers have joined Twitter in the previous months: John and Joe. Joe seems to be following the Twitter-turned-newsletter strategy that has worked so well for Anthony:
- Twitter: produce meaningful and consistent content
- Substack: drive readers elsewhere to explore the depth of your thinking
- Monetization: develop value-add strategies in line with readership expectations
Newsletters aren’t the highway for the Pompliano family. Rather, the highway is a combination of quality and consistency served through Twitter. Anthony, Polina, and Joe are in the business of connecting with like-minded people. They are not in the content business. They are in the “building companies and investing in companies” business. The way to build companies today is to build audiences first.
The first-party approach to business development is alive and well. Joe Pompliano has a thriving media operation at Huddle Up, where he writes on the business of sports. Despite launching his Twitter account and newsletter in the summer of 2020 (amassing 170,000 Twitter followers), Joe is already a partner at Roundhill Investment’s Sports MVP ETF, an innovative means of monetizing his passionate audience of readers. He recently told Forbes:
Professional sports teams and leagues are premium, scarce assets that have a strong record of value appreciation. [2]
In short, Joe launched a monetization strategy in line with readership expectations. Similarly, Anthony has parlayed his near-700,000 Twitter following and his Pomp Letter media brand into a crypto jobs board, a personal investment vehicle (80% crypto investments), a podcast, and the “No. 1 technology newsletter on Substack,” according to Anthony. Twitter may be the highway but quality, consistency, and authenticity form the engine.
No one understands this more thoroughly than Anthony’s much better half, Polina Marinova Pompliano, who left Fortune Magazine in 2020 after three years of building her personal media brand, also on Substack.
With nearly 80,000 followers on Twitter, Polina downplayed the platform as a major factor in the success of The Profile, where she’s covered luminaries such as: Dwayne “The Rock” Johnson, David Goggins, Kris Jenner, Tyler Perry, and Guy Raz. Her husband Anthony cites her as the entrepreneurial family’s “north star” of content, quality, and consistency, making sure to remind me that she has yet to miss a day’s assignment.
When I spoke to her separately she contended that Twitter was part of her success but that a number of other growth channels also contributed to it. Essentially, she is hyper-focused on good content and consistency and has been since 2017. According to her, there is no formula beyond that.
Quality, Quality, Quality
In conversation, Anthony Pompliano denied the idea that he is at the center of his family’s content flywheel, a view that Polina shares. As younger Pompliano brother was developing his audience early on, you’d find the occasional barb made about Joe’s prolific Twitter thread styling or his reliance on his brother’s cosign. Anthony would point to the co-sign of others like Darren Rovell as examples of Joe’s inevitability.
Like Polina’s success, Anthony also credits Joe’s explosion in popularity to quality and time. They work to review content together, patterning the work for audience and algorithms.
In effect, the family often works to structure the content of tweets for the “probability of reach” with the hope that the “audience and the algorithm take over.” Anthony credits the family’s success to three daily actions: they cheer, they help (or amplify), and they hold one another accountable to their schedules and the quality of the work. But while content is what they’re known for, it seems to be the tip of the iceberg for each. Anthony has repeatedly stated that the content business is the first step for Joe, John, and himself.
The creator economy would be better served if mindset changed from “I am a content creator” to “I am an entrepreneur,” he says. This pressure to produce content at the highest level, coupled with authenticity, seems to be the approach that produces a winning combination. In our conversations over the years, he has cited the need to be “super authentic,” a comment that he left in our podcast conversations. This is true, if someone doesn’t enjoy the work, you can see right through it.
There are dozens of high-potential, independent media operators with stories similar to those above. While the strategies will be different between creators, they will share three similarities: quality, consistency, and authenticity. Interested acquisition partners may have to rely on the dozens of other newsletter targets who adopted similar strategies to the Pomplianos.
The strategy in brief: Twitter is the highway and newsletters are the path from “off-ramp to the neighborhood.” And once those neighborly relationships form, monetization amplifies the operation – financing stronger, more authentic, and meaningful work over time. I share this strategy, though not to their degree of success.
For enterprises seeking to circumvent third-party data shortages, the first-party data proffered by niche audience development will grow in popularity.
As the need for first-party data continues to grow, companies will look to entrepreneurial publishers like Polina, Anthony, and Joe for acquisition or partnership. But before I could finish the question to the eldest Pompliano brother, he made it clear. The Pomp family isn’t looking to sell a thing. Anthony has often stated that freedom is priceless to them. I doubt he’ll ever sell his assets. He’s been known to hodl.
Additional listening: Joe Pompliano (2PM Audio), Anthony Pompliano (2PM Audio)
Special Report: The Changes To Come
Memo: The Type House
Bundle and unbundle, bundle and unbundle, bundle and unbundle – but then generate profits on both. These weren’t his exact words but that was the message. In one sentence, my father described his industry. At 12, I sat in a cubicle in a Houston industrial park, an unofficial intern of his Time Warner Communications division. I would go on to work the traditional work weeks, each summer, between that year and my graduating year of high school. I was paid in perspective, and I mean that sincerely.
At the time, my father was the senior executive in charge of a fledgling broadband internet project called “RoadRunner.” (It would later go on to power Texas’ residential internet needs, but that’s a different story.) His words were transcendent to me because they explained that the value of a product could be amplified by how it’s packaged.
By now, you’ve heard of the TikTok influencer craze. (You may have even felt a twinge of fatigue by the momentum of it all. There is new terminology, dance moves and global political implications to keep up with, along with the excessive screen time required to digest it all.) This creative platform has further popularized the concept of the “collaborative house” made popular by YouTube creators David Dobrik (Vlog Squad) and Jake Paul (Team 10). For the most marketable of these houses, the platform began to matter less. Dobrik, a videographer and philanthropist who began on YouTube, nearly duplicated the magnitude of his audience on TikTok in just a month’s time. New members join, old members leave as their profiles grow. Collaborative groups are reminiscent of the cable industry’s intrigue: bundle, unbundle, bundle, unbundle.
In the land of TikTok, the Hype House is a particular group of 20-something content creators who live in or around Los Angeles; many of whom cohabitate. The group includes a number of the best and brightest creators in the space, including former members Charli D’Amelio and her sister Dixie. Together, the sisters have amassed 10s of millions of subscribers across TikTok, YouTube, Twitter and Instagram. Some industry analysts argue that the D’Amelio family is the next Kardashian clan. Objectively speaking, that anointing is the golden calf of media and commerce opportunities.
No Title
D’Amelio family is the new Kardashian family.@charlidamelio + @dixiedamelio + @marcdamelio + @heididamelio
The TikTok house seems like it exists in an entirely different media universe than the email newsletter, but there are more similarities than it would appear. Critics of the newsletter industry say its missing the above frameworks: collaborative houses, bundling, unbundling, platform agnostic growth, and the power of media-driven commerce. There aren’t many venture-funded companies with as much raw potential as Charli D’Amelio or David Dobrik. In both cases, the young entrepreneurs mastered the physics of new media. In its own way, the newsletter industry is hoping to crown their own winners. Those winners will accomplish the same.
Consider the inevitability of “subscription fatigue.” It’s a common refrain made by critics of the burgeoning newsletter industry, one that Substack has helped to democratize and Ben Thompson’s Stratechery has helped to inspire. In 2019, Gartner’s Laurie Wurster wrote:
By 2020, all new entrants and 80% of historical vendors will offer subscription-based business models.
But the fear of paid subscription fatigue may be overstated. There are two categories of monthly subscriptions:
Category No. 1: entertainment, distraction, or light enrichment.
Category No. 2: helps to build a new world by enabling education, professional growth, or networking opportunities.
Each of our paid subscriptions can be placed, primarily, into one of the above categories. The first category has dwindling demand elasticity. This may explain Quibi’s current trouble: consumers can only tolerate so many distractions. There’s infinite substitutes for entertainment, sensationalism, dopamine hits. The subscription ecosystem becomes finite at a certain extent. This category includes streaming services, games, digital entertainment.
The second category has demand elasticity that may hold steady. This group of subscriptions may also compete with continued education, social clubs, or corporate networking. Certain newsletters may improve or outright replace certain social or professional functions. Some of the best newsletters are also building communities around ideas, possibility, and navigating the future of the industry.
A play on the TikTok craze, the newsletter industry has its own brand of collaborative house. In it: great ideas have been ideated, concepted, and executed.
Founded by Nathan Baschez, The Type House is a group of 40 newsletter publishers: former A16Z associate Li Jin, Turner Novak, David Perrell, Sriram Krishnan, Lenny Rachitsky, Brett Bivens, Blake Robbins, Ian Kar, Alex Kantrowitz, Cherie Hu, Packy McCormick, Adam Keesling, Dan Shipper, Polina Marinova, Sari Azout, Nikhil Trivedi, Nikhil Krishnan, Brad Wolverton, Josh Constine, Sid Jha, Laura Chau, Morning Brew CEO Alex Lieberman, Trapital‘s Dan Runcie, Byrne Hobart, Allen Gannett, Sarah Nockel, Brett G, Paul Smalera, Trends.vc’s Dru Riley, Justin Gage, Rui Ma, Cat Lee, Can Duruk, Alex Taussig, Seyi Taylor, and myself.
Bundle and unbundle, bundle and unbundle, bundle and unbundle – but then generate profits on both.
The group is diverse in every sense of the term. Within it, you can observe the mechanics of media-driven commerce at work. Of the highlights, consider David Perrell. The writer-turned-teacher has monetized with educational courses. His company is now generating seven-figures in annual revenue. Morning Brew is one of the most promising newsletter-driven companies in business today. Dan Runcie has pivoted from media to consulting those in the hip hop industry. In doing so, his existing Trapital product has become top-of-funnel for lucrative consulting projects. 2PM continues to successfully navigate high level consulting and the growth of its own paid community of senior executives, artists, scientist, and independent thinkers. Polymathic is nearing its first year in existence. But, perhaps, the greatest indication of what’s to come is a throwback to my time in the Houston cubicle. Bundle and unbundle, bundle and unbundle.
Of Substack’s brightest opportunities to solidify its place in the creator ecosystem, the Everything Bundle began as an experiment between Nathan Baschez and Dan Shipper. It has since grown to include Adam Keesling, Li Jin, and Tiago Forte’s work. By bundling their individual efforts, they’ve developed a flywheel of business that has propelled them to Substack’s famed leaderboard. Though each of them are very capable of self-promotion, its their collective works that seem to drive new consumers to sign on for $20 per month or $200 per year. With each new property that is added to Everything, a new wave of subscriptions follow suit. I’ve likened the pivot to Basche and Shipper building The Athletic of business and intellectualism. And it just might work.
The value of prolific writing and creativity is that you’re always in a pattern of thought. You’re constantly assessing beliefs and designing paths to further your understanding of a topic. When entrepreneurial thinkers begin a newsletter on the platform of their choosing, they are doing so out of sheer passion. Their minds are always thinking of enrichment, improvement, development, and progress. Like the YouTube videographers of yesterday, or the TikTok minds of today, or any creator of tomorrow, the art is rarely contained by the platform. The great secret of creativity is that it can evolve. Many of today’s brightest businesses were yesterday’s projects-turned-ventures.
There is great potential for any subscription-driven media company to grow beyond its early intentions. If and when subscription fatigue begins to hinder the newsletter industry’s growth, the best and brightest will identify new mediums for their message and their engaged communities will follow. From YouTube to Vine to TikTok, this is what great digital creators have always done. They’ve outworked fatigue. It’s due time to place newsletter entrepreneurs in this coveted category.
By Web Smith | Editor: Hilary Milnes | Art: Andrew Haynes | About 2PM