What's a realistic conversion rate for paid newsletters?

A very small subset of your newsletter readers will pay you for content.

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What's a realistic conversion rate for paid newsletters?

The tech journalist Casey Newton hit the one-year anniversary of launching his paid Substack newsletter, and to commemorate the occasion he wrote about what he’s learned thus far from the experience. While the entire piece is worth reading, one line jumped out to me and others within the newsletter-writing community:

Guidance I had gotten from Substack suggested I might expect 10 percent or so of my free subscribers to go paid. Given that 24,000 people had been reading me four days a week when I launched — some for three years — I thought that 10 percent would be a slam dunk. Instead, it was closer to 5 percent. That number has grown a bit over the past year, but it’s still well under 10.

In Substack’s early days, it did tout 10% as a reasonable estimate for paid conversion; it’s since promoted a sliding scale that ties your conversion rate with your open rate in a rather confusing way. Suffice it to say, Newton’s 5% estimate sounds about right, both from my own experience and also speaking to other professional newsletter writers.

So what does this tell us? A few things. First, it hammers home the fact that a very small portion of your readership will ever pay for your content. I always find it a little amusing when someone informs me in an email that they’re huge fans of my work, but then when I go to check their subscription status I find that they’re only signed up for a free account. There’s just a huge chasm between those who generally like your work and those who like it so much that they’re willing to commit $100 a year to supporting it.

That 5% rate also allows us to reverse engineer some basic benchmarks you’ll need to hit if you want to turn your newsletter into a successful business.

For the sake of this piece, let’s just focus on solo newsletter operations, though these principles could be applied to a larger media outlet. Let’s also assume that you as a newsletter writer want to generate at least $100,000 per year.

So how big will your free list have to be if you want to reach your goals? Well, if you’re charging around $100 a year, you would need to reach 20,000 signups in order to convert 1,000 of them into subscribers. And how difficult is it to get to 20,000 signups? If you’re starting a newsletter from scratch, it would take you upwards of four years to reach that threshold if you managed to add just 100 net new signups a week. And I can tell you from experience that very few newsletters consistently add 100 net new signups per week.

What if you want to charge $50 a year? Well, I think it’s safe to say that the lower price will lead to a slightly higher free-to-paid conversion rate; let’s assume 7.5%. You’d then need to reach approximately 27,000 free signups. Even if you managed to sign up 100 new people per week, it would still take you nearly five and a half years to reach your goals.

Of course, that’s assuming that you’re solely focused on paid subscriptions as a revenue generator. Lots of newsletter writers are dabbling in selling native advertising within their free newsletters. Let’s assume that you’re producing two newsletters a week — one free and the second for paid subscribers — and you’re able to sell ads within the free version at a $50 CPM rate. And then let’s also assume you’re charging $100 a year for the paid version of your newsletter.

Under those parameters, you could reach your $100,000 revenue goal with 14,000 free signups to your newsletter. If you’re adding 100 signups a week, then you could hit your numbers in just under three years.

Of course, all of this is just back-of-the-envelope math. Conversion rates will vary widely from newsletter to newsletter. But I do think it’s a helpful way to think about prospective growth and a realistic time horizon you’ll need if you want to build a successful subscription business.

Quick hits

TechCrunch reports that creators have only generated around $6,000 through Twitter’s Super Follows. [TechCrunch] This is kind of sad, though it's worth noting that the vast majority of Twitter users don't yet have the ability to launch Super Follows. I still think it's a big mistake that the product hasn't been integrated with Revue subscriptions.

Clubhouse is trying to lure media outlets onto its platform. [CNN] It should follow in Snapchat's footsteps and offer large cash incentives for news organizations to create original programming.

This is interesting: the Washington Post announced 41 new newsroom roles, but they aren't for reporters. They're for editors. [Washington Post]

Wall Street firms don't just compete with each other for talent; they now have to compete with TikTok and YouTube. [Bloomberg]

The New York Times produces two daily products — its podcast and morning newsletter — that are consumed by a combined 9 million people. That's just an incredible level of reach in terms of building daily habits. [Insider]

"You could say advertising is the low-hanging fruit on the Apple tree. It’s also lucrative. Bernstein analyst Toni Sacconaghi estimates that Apple will make around $3 billion in ad revenue in the September 2021 fiscal year." [Digiday]

Axios will generate $85 million in 2021 and is gearing up to launch paid newsletters. [Insider]