Data-Labor-Technology

Word of mouth and advocating for the brand as a subscriber is a top method for garnering high quality new subscribers, according to the leaders of four newsletter subscription publishers: The Hustle, Morning Brew, The Daily Pnut and Finimize. And referral programs that gamify and enable participants to track exactly how large of an impact they have had on growing a newsletter’s subscriber base in many cases make that participant a more valuable subscriber than any other reader.

However, getting a referral program off the ground and growing can be a difficult and expensive task, as often times the tech stacks for such programs are built in house and they also don’t always appeal the top brand advocates in the way that publishers would expect.

Despite this, Morning Brew’s and The Hustle’s referral programs have both been successful in driving up the value of the participants’ lifetime value.

The tech and business newsletter The Hustle, which has a free daily newsletter as well as paid online subscription product, has a total of 1.5 million active users, according to president Adam Ryan. And as of October, it had 10,000 ambassadors, or brand evangelists that are a part of The Hustle’s referral program.

The lifetime value of a referral program participant is multiple times higher than the average subscriber, Ryan said, adding that the open rate is double for a referred subscriber compared to an average subscriber. But there is also important value added from the fact that ambassadors are given first access to beta tests and provide feedback on new paid products.

The Hustle is also planning to launch a new ambassadors program for its annual paid product. The idea is that the company will be able to tap further into “the loyalty that that group has and monetize them more effectively and get more information out of them faster,” said Ryan.

Morning Brew’s chief operating officer Austin Rief said the daily newsletter has over 2 million subscribers and receives, on average, 1,000 new signups from referrals per day. More than 225,000 people have referred at least one person and its referral program also accounts for 35% of growth on the daily newsletter.

The referral program has been successful enough for Morning Brew that the publisher has created referral programs for its vertical newsletters as well, including its Emerging Tech Brew and Retail Brew.

There is “a lot of potential for referral programs and [I] feel it’s an undervalued growth channel for newsletter writers,” said Martijn de Kuijper, founder of editorial newsletter tool Revue. “These readers are highly engaged and have a close relationship and are thus more likely to become an advocate and refer others,” he added.

The Daily Pnut, a daily newsletter covering global news, has more than 120,000 active subscribers and an average open rate around 40%, according to Tim Hsia, CEO of the newsletter’s parent company Media Mobilize. Readers that came through its referral program, however, have a much higher average open rate of 51%.

The newsletter relaunched its referral program on May 26 after shutting down the original program shortly after Media Mobilize’s acquisition of the newsletter in 2016, Hsia said. That the original one was too difficult to maintain from a technological standpoint. The Daily Pnut team ended up building its own referral program tech stack, which Hsia noted was a significant investment both monetarily and time-wise.

Publishers should “plan three to six months to build a reasonable, solid” referral program, he said. And while it has brought in about 2,000 new subscribers in just over a month and a half, both Hsia and his growth marketing head, Nick Chen, said that they are still far off from paying off the upfront investment. 

“This was a long term investment in the belief that the referral will work,” Hsia said.

Not all newsletter publishers have found that their referral program incentivizes their top performing brand evangelists, however.

“We noticed that our most engaged users are not necessarily the people who use the referral program,” said Maximilian Rofagha, founder of financial literacy daily newsletter Finimize, which has close to 1 million active subscribers. Word of mouth, or non-incentivized sharing, is still the ultimate driver for new subscribers, he said.

However, the group of subscribers that came to the brand through the referral program still has a higher than average open rate — its average is around 40% — similar to The Daily Pnut and The Hustle. And since the Finimize’s revenue comes from ads and the CPMs for those ads are dependent on open rates, this group has a higher lifetime value than the average subscriber, he said.

And with the end of the third-party cookie nigh, there is the added value of referral programs collecting more first-party data about readers, said Kerel Cooper, svp of global marketing at email marketing company LiveIntent. 

“There is the short term value of growing your subscription list, which leads to greater monetization, ” said Cooper. “But the long term play is that the clock that’s ticking on the third-party cookie and if you’re building your first party database with email at the center,” then they’ll be in a stronger position than most.

Yet those imbalances are even more pronounced on the sales and revenue side of most media companies, where broken talent and recruiting pipelines, inadequate mentoring, diversity and inclusion practices and double standards create workforces that are disproportionately white and male, according to five sources that spoke to Digiday for this story. All five sources say the events of the past two months have injected urgency into conversations on this subject, and several say that they think there is a chance for real change.

“You hear real urgency now,” said one top sales executive at a legacy publisher, who added that it could take years to manifest meaningful change.

Yet some are dubious that any real change is coming. The factors that contribute to this imbalance are systemic and spread across the entire ecosystem, leaving little chance for a fix.

“I don’t know if there’s a reckoning yet, and I don’t know that there’s going to be one,” said one Hispanic revenue leader at a media company. “You need to fix the entire line [of the ecosystem]. If you have a client that is not a person of color talking to an agency rep that’s not a person of color speaking to a sales rep who’s not a person of color, how is that representative of reality?”

It is difficult to find data that speaks to the scope of this problem in media. The sales profession as a whole remains male-dominated, even after significant gains in leadership made by women in recent years. Research firm Gartner this year found that just 11% of sales leadership positions are held by women, up from just 5% in 2017.

A separate Gartner report published last month found that men and women of color occupy few senior roles of any kind in the arts, entertainment and recreation industries, which includes media: Just 11% of senior roles are held by women of color, and men of color occupy just 16%, the report said.

Claire Telling, the CEO of executive recruiting firm GraceBlue, estimates that people of color represent around 6% of the C-suite in advertising and media as a whole. (A number of advertising agencies have begun releasing their diversity numbers over the past month) In cases when clients are determined to vet non-white candidates for sales and revenue roles, Telling and her colleagues frequently have to look outside of media.

There are abundant reasons for that talent shortage, starting at the most junior level.

“There just aren’t a lot of people getting into the field,” said Keith Hernandez, the founder of the consultancy Launch Angle and a former sales executive at publications including BuzzFeed, Bleacher Report and Slate. “There’s not a National Association of African American Advertising Sales going to Syracuse and Penn State [to recruit].”

And non-white people who do enter the space face a battery of obstacles, including double standards that many say put non-white employees at a disadvantage. For example, where a white sales person might be allowed to miss their numbers, or be given a chance to grow into a role they had not yet earned, non-white employees don’t get similar chances.   

“We’re not always allowed to fail the way others have been allowed to fail,” Cavel Khan, the chief revenue officer of Tumblr, told Beet.tv last month. “You feel this pressure to be perfect every time.”  

Those that do stick it out have to navigate cultural barriers as they try to build relationships and advance their careers. “Golfing, ski trips, these are predominantly white activities, that start to deselect people out,” Hernandez said.  “A guy decides not to go and gets a rep that he doesn’t like to have fun, but really, he just doesn’t know how to ski. You’re throwing people into a situation where they’d hurt themselves more by going.”

While disparities this stark are problematic on their own, these imbalances come with an economic cost for publishers too.

“I find it hard to work with the general market because they don’t give me what I need,” said Armando Azarloza, the founder of The Axis Agency, a multicultural agency whose services include media buying.

Even though many mainstream publications might have the audience and the content that fits well with clients’ objectives, the white reps often do a poor job selling it; mainstream publications are “100%” leaving money on the table because of the composition of their sales forces, Azarloza said.

“They have a superficial understanding of the marketplace,” he added.

Amid these systemic challenges, media companies have scrambled to look for ways to add diversity to the ranks of their sales and revenue teams. Over the past several weeks, Telling said many of her media clients have said that they are eager to find more diverse candidates for positions they have open.

But she cautioned that the jobs have to be real. “People can smell tokenism,” Telling said. “Talent knows when that’s going on.”

More than half (11) of the 20 largest Facebook advertisers to have paused ad spending have been reducing the amount they spend in the U.S. over the last two years. In 2018, those 11 advertisers spent a combined $825.8 million in advertising on the social network, per analytics firm Pathmatics.

In 2019, that figure was $417 million. That’s a 49% drop in ad spending over those two years, based on Pathmatics’ analysis of a panel of opt-in Facebook users and CPM calculations based on the social network’s publicly reported figures. 

The biggest drop over those two years came from retailer Target. Between 2018 and 2019, its spending fell 67%, from $142.5 million to $46.4 million, according to Pathmatics. The smallest drop over the period was at Volkswagen. Its spending fell 7%, from $14.7 million in 2018 to $13.7 million a year later. 

The cutbacks came in the same year that Facebook tweaked its algorithm to favor content from friends and family over news articles and promoted posts from advertisers. 

The tweak throttled the number of ad impressions available on the social network and consequently made competition for marketing space more intense, driving up costs. This happened around the same time that Facebook limited targeting features on the platform, which reduced the number of audiences available and also subsequently contributed to rising costs.

“The main problem advertisers have been facing in the last two years as it relates to Facebook, and other social media platforms, is that there is too much reliance on the platform itself and when the rules change (as we’ve seen in recent weeks for Facebook), advertisers then need to quickly adjust and adapt their strategies to coincide with those changes,” said Jeff Kupietzky, CEO of ad tech vendor PowerInbox’ Insights.

Microsoft, for example, bought $146.9 million worth of ads on Facebook ads in 2018, up 48% from the 76.3 million it spent the year prior, per Pathmatics. In 2019, however, spending on the platform dropped 21% to $115 million. The steady decline in spending over those two years foreshadowed the advertiser’s decision to suspend advertising on Facebook and Instagram in the U.S. in May, per an Axios report that Microsoft confirmed. 

Even those nine advertisers that did increase spending on Facebook in 2018 and 2019 look set to cut back in 2020, according to Pathmatics. Between 2018 and 2019, Starbucks dialed up spending on Facebook, from $51.6 million to $94.9 million. In 2020, the advertiser’s spending is set to dip to $19 million, per Pathmatics. That’s a 79% year-over-year drop.

“As a brand, if I believe my core consumer still exists on Facebook, is it best to either distance or disassociate myself to avoid any adverse consumer backlash from appearing complicit with Facebook’s content policy decisions,” said Brian Leder, president of media agency Ramp97.

That there were advertisers actively pulling media dollars from Facebook prior to this month’s boycott spotlights underlying tensions between marketers and platform. When the #StopHateForProfit campaign launched last month, advertisers like The North Face and Patagonia backed the plan to defund Facebook until stricter policies are put in place to stop hateful, violent, or racist content from being shared.

Despite hundreds of advertisers backing the boycott since then, very few have committed to a permanent exit from the platform. In many ways, the response from big advertisers has been less about hurting Facebook’s financially, and more about trying to reassert influence over a business that hasn’t been as responsive to their needs as other online partners. 

“For a long time, the lure of a logged-in, addressable platform with incremental audiences was enough to make the pain of Facebook not allowing an advertiser to take its learnings elsewhere worthwhile,” said Kerel Cooper, svp of global marketing at ad tech firm LiveIntent.

“This boycott may be the leverage to give advertisers what they want: data to flow to them, not away from,” said Cooper. “And it might be achieved under the guise of demanding a platform with less hostile content for minorities.”