#145: Matt McGarry – The man behind email acquisition for The Hustle, Codie Sanchez, Sahil Bloom, and The Milk Road

April 18, 2023

#145: Matt McGarry – The man behind email acquisition for The Hustle, Codie Sanchez, Sahil Bloom, and The Milk Road
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Breaking down how the best of the best grow their newsletters with paid acquisition.

EPISODE DESCRIPTION

Matt McGarry is the owner of Growletter, an agency helping some of the biggest newsletters in the world grow. He's helped The Hustle, Codie Sanchez, The Milk Road, and others attract millions of email subscribers.

He also studies the world’s best newsletters, content creators, and media companies and shares their strategies and tactics through his newsletter, called The Newsletter Operator.

He is THE guy to know if you’re focused on building a newsletter and are interested in growing through paid acquisition.

In this episode, you’ll learn:

  • How paid acquisition works
  • The costs you can expect
  • How to run a successful campaign
  • And how to calculate ROI

Full transcript and show notes

Follow Matt on Twitter / LinkedIn

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Transcript

Jay Clouse  00:00

Hello, my friend this week I'm sharing a very recent conversation with Matt McGarry. Now, you may not know Matt by name, but you may recognize some other names like the hustle milk road. Sahil bloom, Cody Sanchez. Those are all Matt's clients in his newsletter agency grow letter has helped them acquire literally millions of email subscribers. Matt works with and studies the world's best newsletters, content creators and media companies and shares their email strategies and tactics through his newsletter. The newsletter operator sounds very meta, but his newsletter is called the newsletter operator. He is the guy to know if you are focused on building a newsletter and you're interested in growing through paid acquisition. Matt recently joined my membership community the lab and I also hired him to help me with my own paid email acquisition for creator science. So in this episode, we get really nerdy we talk about how paid acquisition works through Facebook and Instagram, we talked about the cost that you can expect if you want to do a paid acquisition campaign, we talked about how to run a successful paid acquisition campaign, and how you can calculate the ROI or payback period on your ad spend. And by the way, if you want to join the lab, my membership community, you can join the Starter Membership right now, just visit creator science.com/lab. To learn more and join, you'll get instant access to all of the educational materials that we have in the lab. It's something like $1,500 worth of educational materials and courses, and you can get that for $700 per year. Go to creator science.com/lab to learn more. I would love to hear your thoughts on this episode. As you listen. You can find me on Twitter or Instagram at Jay Clouse tag me say hello, let me know you're listening. But now let's talk with Matt.

 

Matt McGarry  01:58

All right, Matt, excited to chat with you here today. I think just to set the table real quick. I want to do a little bit of an origin story to hear. How did Matt become the newsletter guy? Yeah, I guess it all started. When I got a job with the hustle which is it's acquired. It was acquired by HubSpot recently. But before that, it was an independent media company we had over when I left there over 2 million newsletter subscribers. Before that, I was in direct response digital marketing, and then kind of fell into this trap at the hustle where I started leading the newsletter growth. What did that direct response job look like? So it started off out of high school doing freelance work doing website design, copywriting Facebook ads, eventually got really into media buying Facebook ads, Google ads, I got a job at one startup that was a freelance client of mine. Then I got a job at another startup. And then I landed the job of the hustle. And that was kind of my, my best job. So far. I'm working for myself now. But that was my favorite job. I'm always really impressed by companies like the hustle like morning brew, who grow really quickly, because it's a it's a sign that they hired really well. How did you get onto their radar? And in when that job do you think it's funny, it's like I applied for like, I was very picky about the jobs that I applied to in the companies I wanted to work at. I only wanted to work at companies that I love the product. And I have been like a subscriber of the hustle and a listener to their podcast and a member of their premium community for years. And I think that helped a lot. So I applied there, they reached out to me like five minutes later, I got an interview, I got the job after a few more interviews. I think they're looking for people. I mean, it's really weird because Sam, he doesn't Sam power was the founder of the hustle. He doesn't look for traditional people, maybe the people that worked at the hustle, were all very entrepreneurial. And like since they've left, they've all founded their own companies and done a lot of small, but really interesting stuff. So I think that entrepreneurial interests that I had helped, I think my direct response background help, I think being a subscriber and like a big fan of the company helped a ton. And I think I was very young and like optimistic and willing to hustle. And that also helped a ton. And then one other thing. One side note was I reached out to Sam like years before over Twitter, and just answered a question that he had on Twitter. He had a question about the Agora companies. I wrote up like a two page, Google doc about some research I've done about the company as I share that now that probably helped to wow, at that time, when you had that interview and got that job. You said, you know, in the previous job, you had started doing some some media buying Facebook ads and Google ads and things. Were you already good at that. Was that part of getting the job where they're looking for that specifically? Yeah, that was really key. Because the way we grew the subscribers when we read the list was with with paid marketing. And so Facebook ads is one of their largest acquisition sources for the newsletter for the business in general. And so that was that was a really important part of the job. Affiliate marketing was really key. I didn't have as much experience with affiliate marketing, but it picked that up really quickly there. And so really, all of my experience was around Facebook ads and copywriting which seems kind of narrow, but it's a really it's

 

Matt McGarry  05:00

A wide field because so many companies are using those things. The idea

 

Jay Clouse  05:03

of Facebook ads enters into the Creator world all the time. But most people just can't do it. And it's gotten to the point where I have for the longest time just kind of ruled it out entirely as like, Man, from what I hear, I either need to hire somebody who knows it really well. Or I need to be willing to burn like 1000s of dollars to learn it to be able to do it well myself. Can you talk about like the current Facebook ads landscape and what somebody needs to be willing to do in order to make it successful for them? Yeah, Facebook,

 

Matt McGarry  05:37

I think it can work really well for most businesses. And I think a lot of people write it off because it's so popular. It's the second largest advertising platform. And it's there's lots of complexities to it. But there's also a way to do it simply, they've built this big complicated dashboard of lots of buttons and lots of things to click over the years. Yeah. And so yeah, it is. And it for me, because I've used the hay, I've been in that window, so to speak for like so many years, it's very straightforward to me. But when you first log into it, it just seems overwhelming, right? I really wish there were more resources available to teach people how to use it properly. There's really some great YouTube videos out there are some free courses, but you really have to spend a lot of time to get those right. And I think another issue is that there's different ways to use it for different companies, right. So a way a Creator would use it, or a media company or a newsletter to use it is different than E commerce are different than SAS. And a lot of the tutorials you might find online are related to e commerce, SAS or local business for lead generation. And you have to find the right tactics and methods for your specific type of business what you're doing. So that's number one is identifying who can teach you how to do it for what your actual outcome is, what your business type is. And so I specialize in media companies and creators and newsletters. And so that's what I've been focused on. And there's really, unfortunately, not a lot of resources around how to do Facebook ads for those companies. I'm making more, but it's still an ongoing process.

 

Jay Clouse  06:57

Yeah, well, you know, in the past, the way it has entered into a lot of people's world is people thought that it was kind of a direct conversion to core sales is what I saw a lot is they figured out, some people figured out like, hey, we can advertise this course, here's the funnel, that quickly becomes a course sale. And the narrative that I've heard a lot over the last year and a half couple of years is that those ads are no longer as economical. And so it's much harder to make that model of advertising directly for core sales work. But what's interesting about the work that you do, and what I hear from people have worked with you is that you really focus on let's just the stew subscribers. And what you do with those subscribers after the fact is, you know, different for whatever your business is. But it sounds like you've really helped people crack down on the economics of getting an email subscriber.

 

Matt McGarry  07:48

Yeah, what I focus on is helping people grow their email list profitably or grow their newsletter profitably. And what we do is once they get on the list, of course, we market them to whatever product or service they have in over a period of days or weeks or months, they'll convert to those other paid products. But what we try and do is make back the money we spend on ads within 30 days. And for some businesses, that takes longer, but especially for a new, smaller business or startup, you want that payback period to be very short. And then as you grow and scale over time and your your CPS go up because you're getting more platform that the payback period will be longer. And that's okay, because you're at a larger scale. And you have more data about how these subscribers will ROI over time, right. And so all of the ads we do are the majority of ad spend we do is focused on getting a newsletter subscriber, and particularly around advertising for an editorial newsletter, not just a lead magnet. And a key reason around that is because if someone joins for a lead magnet, a lot of times they'll come to the lead magnet, and they'll be less engaged with your emails with your newsletters or email sequences. They just kind of come and unsubscribe or come and leave or they're just open rate is a lot lower versus when you advertise for your newsletter, crater science or whatever it may be. And they're coming for that content every single week. They stick around in the engage more and they buy more. And so that's one of the key differences in what we do. Versus a lot of other ads you see like lead magnets are very common, but I don't find them to work as well.

 

Jay Clouse  09:05

Is that because editorial ads monetize predominantly with sponsorship?

 

Matt McGarry  09:10

Yeah, a lot of the newsletters that I work with the companies I work with have really thought this morning brew hustle the skin model, where they have a daily newsletter that goes out five or seven days a week and they monetize primarily of sponsorships. What you would call like native ad slots in those newsletters. And so that's a great model but I also will work with a lot of people who I will call creators like Cody Sanchez. She has a weekly editorial newsletter but most of our revenue is going to come from what I'll call information products like courses, masterminds, things like that. And so for her we still advertise for the newsletter and over time through the newsletter through email marketing and also through retargeting ads. We convert those people to the digital products.

 

Jay Clouse  09:49

I love this concept of the payback period. You know the the period of time after you pay for the ads that you earn that back because I think a lot of people who play in this space don't use that term or even like hold themselves to that standard, necessarily. They'll say like, Hey, let me show you how to run some ads. And you'll see results. But we won't follow through and connect the dots all the way to showing you that you got this paid back pretty quickly.

 

Matt McGarry  10:11

Yeah, people just don't, they don't think about the math. And like, I'm not an expert on on math either. But like, you can do very simple funnel or marketing math for this stuff. And so you can look at like how much you earn per subscriber per month, obviously, what your CPA is cost per acquisition for a subscriber, and do the math there to calculate your payback period, how many people convert to a paid product, and what that value is to calculate it, we won't do the math now. But it's really important to understand those numbers. It's not always easy to figure out for some businesses, if they have multiple revenue streams, or if they're not able to attribute where customers come from. And so doing the work to make sure you can say, hey, a subscriber came from a Facebook ad. And then over time, they bought this product. And they came from this acquisition sources, this is what we spend on that Acquisition Source, that's really important. And it's tricky to do, right. So when I worked the hustle, we had, you know, to engineers, and we had lots of robust analytics built out. For an individual creator, it's a lot more of a challenge. And so you kind of have to rely on the tech you're using. And so you can, you can do this with tools like ConvertKit, but you have to maybe do it a little bit different than you would, you would normally think or you can do with tools like beehive too. But if some tools like MailChimp, or substack, kind of make it really difficult to measure ROI, and row as from paid advertising, or some tools make it easier. And so a lot of times I don't work with clients, or I recommend clients move to a different platform. So we can actually track these things.

 

Jay Clouse  11:32

You just use the term row as which I believe is an acronym for return on adspend.

 

Matt McGarry  11:37

Yeah, return on adspend. I'll kind of use those interchangeably with ROI and row as like kind of mean the same thing in this context. But ROI is probably the simpler term to use.

 

Jay Clouse  11:45

This is the mission that I want to embark on over the next few months. Because it seems very clear to me that as a creator who has email heavily as part of my strategy, you know, I send two newsletters per week, both of them have an ad slot in it that are pretty much fully booked out through the year already. It seems to me that I should be able to understand a subscriber is worth this to me. And so if I can buy a subscriber for less than that over, you know, a 30 day period, there's just infinite upside until I guess I get to some scale where I can't compete anymore. It happens.

 

Matt McGarry  12:17

I mean, it will happen at scale, but it happens at a very large scale, like 10s, or hundreds of 1000s of subscribers before those numbers really change a ton. I think that's very doable. For most people. If you have a newsletter, usually that already has 10s of 1000s of subscribers, or even less than that, and people are interested in it, you can run ads to successfully get high quality subscribers and return on adspend. Especially if you already booked out on your sponsorships and already have products that you can sell those subscribers like you do. And so maybe I'll break down like my process for what I would do in that case. So you have the greater science newsletter. One thing we'll talk about too is sparkling subscribe, it's like very in the weeds. But I think it's worth mentioning because it really helps with that payback period. And so we won't get into the nitty gritty of like how to actually set up a Facebook ad campaign and what buttons to click is that's that's hard to do right now. But let's say we're running a Facebook ad, the ad itself will talk about the benefits of the newsletter, why people should read it, what they'll get out of it, what they'll learn. We also focus a lot on social proof and authority. And so how many other people read it, and actually who reads it. So just wouldn't work in this scenario. But we'll say like readers work at these prestigious companies, or will showcase reader testimonials, or will even show a video testimonial from readers. Those help a ton because we kind of combined two things. One is like does the topic interest me. And then the other people that I admire and look up to also read the media content. And so if those two things match up, if it's interesting to them, and other prestigious people, authorities also consume the content or read it, then people are more likely to subscribe and keep reading. And so it's key to cover both. Because if you just if you just say this is this is cool, and like show all the benefits of it. And you don't show social proof authority and just proof in general, people are much less likely to subscribe. Just a

 

Jay Clouse  13:59

quick break for our sponsors. And we'll be right back to the show. And now back to the show. When you say Facebook ads, do you mean literally just Facebook? Or are these run on Instagram too?

 

Matt McGarry  14:10

Yeah, good question. I, I need to use that term more generally, because a lot of marketers will say Facebook and we mean the Facebook ad platform, and what it's now called the meta ad platform. But that term hasn't really caught up on the marketing community. So yeah, when we're talking about Facebook, we're talking about Facebook ad platform, Facebook and Instagram. There's other placements too, like WhatsApp and audience network that we don't use, but um, the whole platform in general, what proportion

 

Jay Clouse  14:33

do you see coming from Facebook versus Instagram? In most cases,

 

Matt McGarry  14:37

it all depends on the niche and the newsletter content. Sometimes it's 5050. But a lot of times it is 8021 way or another. Most of the time Instagram is more dominant than Facebook for most people I work with and probably most general now. Yeah, it is. I mean, there's less Instagram users overall, just speaking of like overall numbers, but as far as the the types of businesses that I work with like the creators and media companies Instagrams a little bit more, more popular of a platform. And those ads usually work better. However, we're still targeting on both platforms, I think about Facebook is they really want your targeting, and your placements to be broad. And they want their algorithm to pick the best spot in time to show your ads. So they don't want you to narrow your focus too much. And that's usually the best practice is to keep things very broad, let Facebook decide what the best decision is. And they'll usually make a better decision than we can if we do it manually.

 

Jay Clouse  15:27

Interesting. This is this is an another story I've told myself about Facebook ads is that my people aren't even on Facebook anymore. But that seems like that's probably a limiting belief to based on your like actual data. And

 

Matt McGarry  15:41

when I hear a lot, but I think I think like 60% of Internet users are using some type of metal product every day. And so they are on there, even if they're not posting primarily on there, maybe the conversation is on Twitter or LinkedIn or YouTube, they're still using the platform, even if it's not their like, their, their engagement platform or where they post their content. So you can still target them. And obviously Facebook or meta has a ton of data about those users and what they do on other platforms and other websites, too. So you can get really granular and how you target those folks? Do you

 

Jay Clouse  16:11

see that the subscribers your clients? And in your own experience people are getting from the meta platform? Are they as high quality as things I would get from organic shares or something like that? And how do you measure that,

 

Matt McGarry  16:26

they're gonna be a little bit lower quality, what we find is, if you look at your overall over, let's say it's 50%, of Facebook ads subscriber or meta ad subscriber might be about five to 10%, lower, so maybe it's 45% 40%, sometimes it can be a lot closer, just two or 3%, lower, but it's gonna be a little bit lower, just because they have less context. And they probably know less about you versus someone who, you know, followed you on Twitter, they read two or three threads, and then they subscribed, they just have more contacts, they're more likely to read and open your future future emails. So that is a con to it. However, there's a lot more scale available. And it can be a lot more automated to grow a Facebook ads versus publishing content consistently.

 

Jay Clouse  17:01

So if that's true, do you recommend that somebody like me, has a different unique welcome or onboarding experience for these subscribers because they might not know me as well out of the box?

 

Matt McGarry  17:12

It depends. I think, I've seen your onboarding sequence and your landing page, thank you page. And I think it's really good. Honestly, most businesses, they don't even have the best practices in place for a great thank you page, a great welcome, email, a great welcome sequence. And if they just get good at that and follow those best practices that will be more than enough to convert people are good people and engage from an ad.

 

Jay Clouse  17:32

Okay, so let's let's take this situation where it is me it is greater science, and I've come to you, how would you figure out like your target cost per acquisition through the metal platform? Yeah,

 

Matt McGarry  17:44

we kind of have to work backwards and see how much you know, revenue we can generate from a subscriber. However, there are a lot of benchmarks that I see across a bunch of different creators, media companies, newsletters, we can kind of target. And so what we find is for what we call like a b2c newsletter, kind of a general topic that could be sports, business, finance, even entrepreneurship. This was targeted for a general audience that has an interest, a $2. CPA is often really doable. For a b2b newsletter, it's focused on specific industry vertical like HR, you know, finance, let's say like construction, retail, the CPAs are a lot higher, more like the three to $5 range on meta ads. And so I think we'll say b2b is three to $5. Generally, b2c is two to $3. It's very doable. However, in many cases, it makes sense to acquire subscribers for a higher cost if you're able to get a return on adspend. So we'll talk about that in a minute, too.

 

Jay Clouse  18:41

Has that been trending upwards? And if so, how quickly,

 

Matt McGarry  18:45

it hasn't really, in a lot of people talked about Facebook ad costs rising over time, and they have for a lot of advertisers. I think one of the things that really hurt advertisers that are not media companies where like the loss of lookalike audiences or the loss of retargeting, and so I don't want to get double discussion about ATT and abstracting transparency and cookies and all that good stuff. But basically, retargeting isn't as powerful because you're no longer able to track iOS users through cookies, right? If I go to a website on my iPhone, they won't know if I visited that website or not, Facebook won't know. And so a lot of businesses that rely on retargeting like a ecommerce store, for example, or SAS. The retargeting has been cut so dramatically, because you just can't retarget people anymore at the same level you you can't retarget almost anyone on iOS. However, newsletters and media companies, they don't really rely on retargeting ads, because the conversion rate in the consideration period is so different. So for example, a newsletter conversion rate could be 3040 50% on a landing page versus an e commerce Store. It might be two or 3% or even less than that. And then the consideration period for a newsletter or media product, especially like a newsletter is very low. It's just like a few minutes a few seconds. But for a physical product that's hundreds of dollars or even dozens of dollars the consideration period could The weeks you know, for you to decide what type of shoe you want or what type of like clothing you want. And so that's why retargeting so it's so important for those types of businesses. But it's not nearly as important for media businesses, we can really get the conversion on the first go around, which is a long explanation to say that ads are just as effective for newsletters, media companies, as they were before att. And even though other verticals have had a lot of problems with advertising with Facebook, media companies haven't been as heavily affected. And also because those other verticals have problems, they spent less on Facebook ads. And now the costs are not as high as they used to be years ago, or they haven't risen as quickly as they did years ago. And that's very much on the weeds. But like, I have to kind of explain all those details.

 

Jay Clouse  20:44

We're about getting into the weeds here. It's all good. You're saying ATT is another acronym. Do you know what the acronym stands for? I think it sounds sounds broadly like an apple privacy policy.

 

Matt McGarry  20:53

Yeah, that's another term for it. It's abstracting transparency. And it is Apple's privacy policy that basically, I'm not going to explain that technically. But um, you know, everything is based on if you follow the Facebook pixel, that's all based on JavaScript that tracks something called a cookie on your browser or on your phone, right. And for iOS devices, we're not able to track them in the same way that we are for Android or for other devices. And I probably did a horrible job explaining that. But it's, it's somewhat accurate, right?

 

Jay Clouse  21:21

We get into the weeds on the things that are important. But the things that are policy changes that we can't change, it's fine, we'll we'll go a little surface level. What's interesting to me is that you, you mentioned that you find his best practice when you're sending out these ads to start broad and let Facebook figure out where to place it, which is also counter to what I've heard in the past. Like in the past, it seemed like you wanted to go really narrow and really specific as much as you could. So you can get these look alike audiences. But it sounds like that's not the process you're advocating at this point.

 

Matt McGarry  21:48

Yeah, lookalike audiences really don't work like they used to. And that a lot of that is because of att. And Facebook just has less data on users. And that's why broad targeting works a lot better now. And also broad targeting as a positive, because it's a lot easier to do. You don't need to have all these different technical look alike audiences and all these different keywords and interest groups, you can just go into a Facebook campaign like credit card conversion campaign and target people who are you know, 18 to 65. And if you create really good ads, and you have a good landing page and way to convert subscribers and customers, you can do really well, you don't have to be a technical advanced media buyer. And so the media buying side of Facebook has gotten a lot easier, which is kind of putting people like me out of a job, but that's totally okay. Because if you get to the creative side, we can still win.

 

Jay Clouse  22:32

Our guests that broad targeting is also cheaper.

 

Matt McGarry  22:34

Yeah, CPMs are a lot lower. If you want to target a really narrow look alike audience or just a narrow group of job titles or people in a certain income range. That's very expensive. The CPMs cost per 1000 impressions are much higher. And so a broad targeting, we can get a CPM of, you know, less than 10 or $20. I know it's a broad range, but the ranges are very broad for CPMs. Whereas if you want to target a look alike audience, it could be 30 or $40. CPM. So your the cost to show people an ad is double when you're targeting narrow.

 

Jay Clouse  23:03

Let's talk about the payback period. Let's talk about the business model that you're seeing for a lot of editorial newspapers, newspapers, newsletters like mine. How does that work? How do we how do we get paid back?

 

Matt McGarry  23:13

Yeah, so there's two ways it depends how you monetize the course. So sponsorships, and subscriptions in physical products. I mean, it can be a lot of different ways, because creators and media companies have so many different types of products. It's not like SAS or E commerce, where you just have this one product or this one subscription around one thing, right. And so it's hard to break down the math now but sponsorships you can calculate that based off of CPM, there's some tools people have built to calculate these that are that are pretty helpful bi of as a as a good tool called the newsletter navigator, that helps a lot. And so what you can do with sponsorships is calculate your revenue per subscriber per month. And you can calculate your payback period that way, with like an information product like a chorus or a premium newsletter, a paid newsletter, it's actually a little bit easier, because you can directly see how many people from Facebook came and subscribe and you can calculate rows that way based off the price of the product, right? So honestly, sponsorships make it a little bit more tricky to calculate your payback period and your LTV than just having a product at a set price or a subscription.

 

Jay Clouse  24:11

I'm going to do something very dangerous. I'm going to try to do some public math real quick. Let's let's see how this goes. So if I have two ad spots per week, essentially I've one ad spot per newsletter two newsletters per week, that's $1,500 We'll spend four weeks per month that's $6,000 in sponsorship in my newsletter, if I divide that by subscribers, 6000 divided by 22,000. We're looking at 27 cents per subscriber per month. Does that make sense? Does that

 

Matt McGarry  24:43

make sense? And that sounds pretty spot on for a newsletter that's sending at your size and who's sending at your current rate. And so the sponsorship revenue for a newsletter that's only sending bi weekly or weekly really isn't significant and that's why if you have a weekly newsletter and like what you have most If your revenue is probably coming from a different source, it's like the right course your product, your service. And so when you start to get a lot of requests from sponsorships is when you start to send more often in sell more ads. And that's why you see morning brew and the hustle. And those companies, they send newsletters five to seven days a week versus the average creator might send a newsletter once a week.

 

Jay Clouse  25:18

Right. But that doesn't mean that this is not an opportunity for me, because I am monetizing in other ways. So we just have to be able to calculate how much to what degree Am I monetizing? And and what period of time it is any of that coming from the ad spend, right?

 

Matt McGarry  25:33

Yeah, and what we'll do is, we'll break down how to do that. So you want to calculate that into your model. But most of your ROI will come from your paid products like the lab and the courses that you have, let's say you acquire a subscriber for $3, and X percent of those subscribers by the lab, which is I don't know how much does 1000s of dollars per year, we can calculate ROI that way. And what we would do is we would probably have a landing page and an email sequence in ConvertKit, that we just send Facebook subscribers into. And so you don't have to create a new one, you would just duplicate your current one. Yeah, and duplicate your current landing page. And so everybody from Facebook or meta ads goes into that one sequence. And we have tracking links within that one sequence. And within all those emails, so you can easily track from AD to email to click to purchase, who came from Facebook. And then we just say, Okay, we got this much revenue from this email sequence that we created. That's a duplicate, and we spent this much on Facebook, and here's our ROI, right. And so that's how you do it with ConvertKit.

 

Jay Clouse  26:29

Man, having conversations like this just makes me want to flip my desk because it's so frustrating that I just didn't think this way sooner. You know, like there are a lot of times when I have to remind myself that I'm building a business, the business is for the purpose of creating value for the people who are interacting with it, and also capturing some of that value. For me as a business owner. This is just like a really obvious clear way where I can, in a very simple fundamental set of math problems. Understand, can I make everybody win and generate profit through like a fairly simple

 

Matt McGarry  27:05

input? Get, it's not super complicated when you break it down like that. And then also, we talked about briefly earlier spark loop, subscribe. And that's just a tool that allows you to do co registration, when someone subscribes and send recommendations to other newsletters and get paid for those recommendations. And so what's cool about that is a lot of people are seeing earnings per subscriber of two to $4, sometimes even higher when someone subscribes to their newsletter. And so if you can go ahead and get a subscriber on meta ads for $3, and you get $3 and sparkle, subscribe, you've now broke even on that subscriber on day one, instead of all in the future, and everything on your back end for your email sequences and through your newsletters. When you have those call to actions to your to your other products. That's all your profit, so to speak. So it's really powerful. And I think the opportunity to scale a creator or a media company with paid advertising is actually better than it was years ago because of the tools that are available now. I think advertising is less competitive. I think sparklers Subscribe, and Like tools like beehive and ConvertKit are so powerful, we just have those even like two years ago, they didn't exist.

 

Jay Clouse  28:08

Yeah. And you know, even though advertising is not the the main driver of revenue in my business, if I'm able to break even on day one with up scribe which I use, I'm still going to start charging more for my ads, because I'm going to be reaching more people. So like, you break even you grow the subscriber base for free, they're nearly as high quality of subscribers, I'm collecting more ad revenue, and I have the upside of being able to sell more products. It's just so mind blowing that this is so accessible. And the other thing about subscribe, I was talking to Justin Moore about this because he's doing he worked with you for greater wizard and he's doing this paid acquisition. And he and I have a handshake agreement that I recommend his newsletter, he recommends mine, we don't even pay each other for that it's just a handshake agreement while he's doing paid acquisition. I'm reaping the benefits of that I'm reaping the benefits. And if I do the same, he's also going to reap the benefits. And so effectively, our cost of acquisition is kind of halved. In that way.

 

Matt McGarry  29:05

Yeah, this recommendation engine that it's really do substack started with their recommendation feature. And then I think beehive did it and now ConvertKit and out now spark loop has it. And it's very new and it's growing newsletters tremendously. If you look at some of the bigger newsletters on substack. Most of the subscribers are coming from recommendations. That's when someone signs up for a newsletter and then you recommend other newsletters on the thank you page or the page after they subscribe. And so these partnerships grown with partnerships has become a really smart move. And finding people have synergies in their content makes a ton of sense right now, and I

 

Jay Clouse  29:38

don't want to make people panic, but I feel like this probably won't exist in the same form forever. You know, like how long until every newsletter I subscribe to is recommending five other newsletters and I just feel like my inbox is going to explode. Do you feel the same way? Does it feel like a window opportunity to you?

 

Matt McGarry  29:55

Yeah, it is I think people need to dial back the recommendations a little bit So I have some clients that I work with who just they limit it to three, because when someone joins your newsletter, you probably don't want them to join five other newsletters to your open rate might be lower. And so eliminate it to two or three makes sense. And so even though you may make less on the when someone subscribes in the long term, that might be a better, I also think potentially, we might over time, I don't think it will go away the recommendations, subscribe, I don't think it will go away, potentially, you might earn less from a subscriber. So right now, we might be able to get four or five or $6. But over time in the future, the middle, maybe one or $2, because advertisers, other newsletters will pay less for those subscribers. That's a possibility that I see based off of some dynamics in the market. Right now, there's a lot of recommendations, but there's not enough people paying for those recommendations yet. Yeah, so they have to get on big publishers on board to pay for those and not a lot of those.

 

Jay Clouse  30:46

So you feel like macro CPMs might go down, I could also see where just like open rates generally go down. Because people feel like they got too much their inbox, they care way less about opening any particular email that enters.

 

Matt McGarry  30:59

Yeah, and the the subscribers you're going to send to someone else from a recommendation like that is just going to have a lower open rate. Because they have less context on the newsletter, they just saw kind of a bubble in a recommendation, they checked a box and they subscribe, they didn't see content, they didn't see an ad. And so the subscriber quality isn't as good. And that's why people might pay less for those subscribers in the future. Now, right now, people are paying two or three bucks per subscriber. But in the future, I think that will be probably be lower. But that's okay. I think if you can get $2 or $1.50 per subscriber that you get that helps a ton offset in your ad cost or just offsetting your growth cost in general. So it's still really helpful.

 

Jay Clouse  31:33

Just a quick break for our sponsors. And we'll be right back to the show. And now back to the show. Anecdotally, I've heard that the subscriber quality, as scored by ConvertKit is very comparable between recommendations from Spark loop and Facebook ads, which surprised me,

 

Matt McGarry  31:50

I think so I don't know a ton about that data. And also, a lot of people just do do Facebook ads completely wrong, where they advertise not for the newsletter, but for a lead magnet or for something else, and they kind of almost bribe people into subscribing rather than selling people and subscribing. And so it really depends. We've seen some some Facebook ad subscribers open it, you know, 55 60% and that's obviously for our newsletter has really high overall open rate and engagement. But it's definitely

 

Jay Clouse  32:16

possible for me to do this ad strategy effectively. Do I need to be a great graphic designer to make creative that converts?

 

Matt McGarry  32:27

No, you don't you do have to be good at creative and copywriting. But you don't need to make beautiful in pretty designs at all. A lot of times scrappy stuff works better. And so a lot of times we find memes work really well kind of memes about your newsletter, they grab attention really easily because people are naturally trained to look at and read a meme, it just grabs attention from our conditioning. A lot of like scrappy iPhone style or tick tock style or UGC style videos work really well. Those are actually the best performing creative short 15 to 32nd videos that you can film on your phone or even in this up like we have now that works great. Another creative angle we see that works really well is like a podcast style ad. So it looks like a podcast, but it's not. And so some people have gone far enough to like replicate the Joe Rogan set in their house and pretend like they're on the Joe Rogan experience but talk about their own product and run that as an ad. But people just you've seen the like the rise of podcast clips on like shorts, tick tock, et cetera, how those work really well. Those also work really well as ads because people are conditioned to watch those are really entertaining. So if you can make an ad in your current setup, and it seems like a casual, casual conversation, rather than you talking directly to the camera, that can work really well isn't that too, so you don't have to have a lot of production value to make a great app.

 

Jay Clouse  33:41

Oh my gosh, I'm resisting the urge to just do it right now in this conversation so that we can rip this clip out later. You should subscribe to creator science.

 

Matt McGarry  33:48

Yeah, we can give you a little prompt and we can go for it.

 

Jay Clouse  33:52

Oh my gosh, let's do it.

 

Matt McGarry  33:53

Okay, let me I have what would be a good. Honestly, I don't know a ton about your newsletter. And so you have over 20,000 subscribers, right? But I haven't actually checked it out yet. I've checked out your other products. Tell me like what's it about? Who reads it? What am I going to get out of it by subscribing.

 

Jay Clouse  34:07

So creator science delivers twice a week, it helps you become a smarter creator in 10 minutes or less. We're all doing a ton of work as creators to get attention, but very few people are actually monetized and attention capturing value for themselves and making this a living for themselves as creators. So creator science will help you actually earn a living as a creator.

 

Matt McGarry  34:26

And how many subscribers do you have now?

 

Jay Clouse  34:28

We have 22,000 subscribers, almost 23,000 subscribers.

 

Matt McGarry  34:32

Awesome. That's really cool. I was gonna think of some more prompts to ask like as follow up to that, but I'm bad at doing stuff on this practice.

 

Jay Clouse  34:38

We'll practice we'll probably we'll probably record that elsewhere. But that's that's a fun exercise. And let's see how this goes live. Something I pulled from a thread that you posted on Twitter recently. It's your pin tweet right now talking about the morning brew for X model being the new Uber for x. But you have a couple of tweets in there about the economics and you talked about CPMs CPM and other acronym meaning cost per meal Cost Per 1000 impressions, and you broke down the math here. You said for example, let's say a newsletter has 10,000 subscribers and a 50% unique open rate, that newsletter will get 5000 opens aka 5000 impressions. In your experience, are advertisers sophisticated enough to be charging CPMs based on opens versus total subscribers?

 

Matt McGarry  35:23

Yeah, and that's usually I don't know about your experience, but I've seen that to be the most common way to charge just based off of opens okay impressions for for newsletters, that's kind of the industry standard. In the CPMs. If you compare them to other like influenced replacement, or a podcast AD, the CPMs are really high and competitive. So like a $50, CPM seems to be about the industry standard. And a lot of newsletters can charge a much higher CPM if they have more of a niche targeted or b2b audience.

 

Jay Clouse  35:49

Interesting. Yeah, I've seen it both ways. I've seen a lot of advertisers who don't make that distinction don't quite understand it. And that has kind of slowed me down from being even more ruthless about cleaning my subscribers, I'd love to hear your thoughts on this. Because you know, right now I have around like a 42 to 45% open rate. And I'd actually love for it to be more like 60, or at least above 50. To achieve that, you know, I would basically clean the subscribers who aren't opening, and now my average numbers go up, but the total number is less impressive. And I wonder about the value not just to selling more subscribers to advertisers. But in doing ad creative like this, it seems more valuable for me to say I have 23,000 subscribers, it seems like better social proof than to say, I have 16,000 subscribers, but the open rate is massive. You know what you think about that? Yeah, it's

 

Matt McGarry  36:41

really tough. It's a trade off, we have to balance in some advertisers, they're just not totally informed on how to buy a newsletter out or what to look for. And actually, a red flag would be to have a newsletter that has a large list size, let's say 100,000 subscribers, but a very low open rate, like a 20% open rate. So even if I'm not gonna do the math correctly here, but even if you had a newsletter that had less subscribers, and a higher open rate, and you were getting less overall opens for the ad that you bought, it makes sense to buy an ad in the more engaged newsletter versus the listing less engaged, because the subscribers are just, they're more likely to read it or they have more affinity to the newsletter to the content. And that ad that you buy in the smaller, more engaged newsletter will actually be more effective than the larger, less engaged newsletters, even if you're getting a lower CPM on opens for the larger, less engaged newsletter. A lot of advertisers don't know what they're doing. And I don't know how we educate everybody on that it's not totally possible or realistic to do. But you kind of have to make that trade off of like how, what advertisers are buying based on like, what your social proof is, I would be somewhat conservative and pruning people, especially when you're at the stage where you're less than 100,000 subscribers, because a lot of people who don't open, it's not because they don't open, it's because maybe their email service better doesn't track that open correctly. Maybe they're using a platform like hey.com, that doesn't track that open. There's lots of other like edge cases where they may be opening, engaging, but your email service provider doesn't correctly see that. And you remove people who are actually actually want the newsletter, right. And so it's really hard to do, I don't have a best practice for it. At the hospital where we had millions of subscribers, we would remove people who didn't open after 60 to 90 days. And that's probably a good medium for most people, maybe between 60 and 120 days.

 

Jay Clouse  38:25

I'm going to ask you some opinions and hot takes now with the rest of the time that we have here. You set up your newsletter, which is fantastic newsletter operator, using beehive right? Yep. So if I'm listening to this, and I'm thinking, Man, I gotta get on the ball I want to start a newsletter is beehive what you recommend to people who were starting a newsletter today

 

Matt McGarry  38:45

depends on your purpose, I would say convert can be here with only two options I would recommend for a creator or a media focused newsletter or a newsletter for focus business. The other options really don't make sense. And so I like ConvertKit for people who focus on having a community or online course or a mastermind or information product because ConvertKit email automations are a lot more powerful than beehive. beehive is fantastic. But the one area where they're lacking is in the email automations that email automations are very simple right now, where you can get a lot more sophisticated with ConvertKit. One of the things I love about beehive is their analytics. And this is actually where ConvertKit needs to improve a lot. beehive lets you see engagement in different metrics by source where ConvertKit doesn't with ConvertKit you can kind of see okay, what's my overall open rate and click through rate etc for my entire email list? What's my open rate click through rate for an individual sender broadcast and what's that open rate and click the rate for an email sequence. But I can't go in look at subscribers that came from Facebook ads subscribers that came from Twitter ads subscribers that came from Twitter, organic versus inorganic, how do they engage differently? What percent of people bought a product what percent of people opened and subscribed and collect beehive let's see do that. And that's really important to grow in a newsletter with paid acquisition because you're gonna have lots of different sources. And you have to identify which sources to invest more in. And so it's hard to explain about a visual. But basically, I can go into beehive, I can put in a UTM source, like Facebook ads, for example. And I can see the open rate of those subscribers. And I can also like cut that up in different time periods. So I can look at past 30 days, 90 days, etc, past seven days, it allows, we had these features built for us the hustle by an engineering team, and it kind of gives those advanced analytic features out of the box where ConvertKit has the advanced automation, but not the advanced analytics yet. Yeah,

 

Jay Clouse  40:32

man, there's always a trade off. You know, like there's there's nothing that's just perfect. All right, now, I want to ask you one of my favorite questions, especially for data oriented people, what is something that you believe to be true that you do not yet have data to support

 

Matt McGarry  40:50

the next big media companies and companies in general are going to be built around personalities and creators, rather than a brand, for example. And so the next morning brew, or the hustle or Axios, or industry dive is not going to be built around those individual media brands, but built around a creator like Shay or Matt, or Sahil bloom or Cody Sanchez. And they'll probably be tied to a brand name like crater science, or Cody has contrarian thinking it but there'll be kind of the affinity will be very similar, right. And so we're already seeing this with a lot of eighth graders, Mr. Bass workweek is a company who's doing this, they just started recently. But they're kind of building the industry to over the morning brew. But all the craters instead of having marketing Brewer morning, Brewer finance brew, is suppose we're on an individual creator and the newsletters built around their content. So I think that's a trend we'll see.

 

Jay Clouse  41:38

Anything that I didn't ask that you had prepared for that you wanted me to ask?

 

Matt McGarry  41:43

One thing, it's hard to explain some of the recommendations on like how to actually make an ad that converts, I love to go, like, go back to your example for one for one sec. And like, talk about how to grow that because I think that would be really interesting.

 

Jay Clouse  41:55

Okay, so I want to grow the Creator science newsletter, how do I make ad creative that will help me do

 

Matt McGarry  42:03

that? Yeah, there's a few different ways. So like, basically, in the Facebook platform, we call it static. So we have images, and then we have videos. And so we talked a little bit about images, what we find works really well is very scrappy stuff. And so like the stuff you would post on like your personal Instagram or personal Facebook works really well. So there will be pictures of you if your family just casually in your office, images like that work really well, stuff you would see posted from a friend. And so like the whole idea with Facebook ads or Instagram ads is we want our ads to not look like an ad, we want them to look like Instagram posts, for example. And so images like that works super well. Another image that works well is kind of just showcasing your content. And so if you have a newsletter that is or immediate comments really focused on different powerful headlines, you could basically do a carousel of just the top stories in your newsletter, and just make a carousel ad around the top five or 10 stories that perform the best or had the most traffic. And so all those can work really well on the image side. Another random thing we find work really well is just going into your iPhone Notes app on your phone, typing in some good copy about why people should subscribe the benefits your newsletter, taking a screenshot of that, and then using that as an ad. And so it kind of throws people off. And they subscribe to that because it's kind of a pattern interrupt, right? You could do the same thing on notion. Even you could write down like on a legal pad, copy about your newsletter, why people should subscribe, take a picture of that use that as an ad, things that kind of look authentic work really well. And so that's what works well on the image side. On the video side, I think we did a great job talking about that. So I won't get too much into it. But what's working well is really short, authentic videos. And so what I like to do is find creators on Tiktok, and creators on Fiverr. And we write video scripts for them, have them perform a 15 to 32nd video about the newsletter. It's somewhat testimonial style. So they'll talk about why they liked the content. And then we kind of bring in like the very simple like subtitles and graphics that work well. So bringing in beautiful footage, bringing in animated subtitles stuff to grab people's attention. On the video side, even though it's a really short video, we find that if you if you every five to 10 seconds if you have something different going on screen, whether it be B roll or like animation or icon or an image that keeps people's attention throughout the video and gets them to watch towards the end, of course, we're going to have a call to action at the end. And so that's really the two types of things that work well is like videos of people and then authentic looking images.

 

Jay Clouse  44:18

When it comes to video does paying a random person on Fiverr work better than paying a known person on cameo?

 

Matt McGarry  44:27

Yeah, that's a good point. I don't know if cameo works as well as it used to because now they have the business side of cameo, which is a lot more expensive. And a lot of times you can only give people on cameo just a limited set of instructions like there's only so much text you can put into the input form. And so they don't really have a lot of context about your business. So I would recommend actually finding someone who you think is a good content creator, like going on Tik Tok YouTube shorts, wherever that may be. You're even on Fiverr or Upwork and finding people who you like their content and if you like their content, like they're just a good content creator or a good video creator. They'll be able to make a good ad if you give them a good script and good instructions.

 

Jay Clouse  44:59

I know You've probably seen varying results from different clients, but broad stroke, how would you rank still images versus carousel of images versus video?

 

Matt McGarry  45:11

Video is by far the best you really have to be doing video and it helps you stand out because there's just a lot higher barrier to entry to make a video versus making an image anybody can throw up Canva Nick image very quickly, but when you make great video ads you really stand out amongst other advertisers

 

Jay Clouse  45:30

I hope you enjoyed this conversation with Matt McGarry. I know that I'm excited to put a paid acquisition strategy in place and maybe now you are too. If you wanna learn more about Matt, you could subscribe to his newsletter at newsletter operator.com or find him on Twitter at Jay That's the letter J. Matthew McGarry links to both of those are in the show notes. Thanks to Matt for being on the show. Thank you to Emily class for making our work this episode. Thanks Nathan Todhunter for mixing the show and Brian skill for creating our music. If you like this episode, you can tweet at Jay Clouse and let me know if you really want to say thank you. Please leave a review on Apple podcasts or Spotify. Thanks for listening, and I'll talk to you next week.