Alex Lieberman, Co-Founder @ Morning Brew
Ascent Conference 2019
[00:00:07] Well, I’m excited to be here today. My hope is through the story of Morning Brew, you’ll get a good sense of one when being a co-founder does work out well. And also for people who in so many ways were unqualified to run a media company, somehow figure out how to do it and how. We text our audience from 100000 subscribers to one point six million subscribers in less than two years. Let’s set the stage. It’s September of 2016. I had just resigned from my full time job at Morgan Stanley, where I was a fixed income trader. I’d been there for a year and a half after graduating from the University of Michigan because had I done Morning Brew full time after Michigan, my overprotective Jewish mom in the second row would have killed me. I love her dearly, though, and so I spent a little time at Morgan Stanley and ended up going full time on on Morning Brew by right after Labor Day of 2016. At the same time, my co-founder Austan Reiff was a senior at the University of Michigan. He was finishing up his studies and then upon graduation, he would join me with the brew. So at that point in time, we knew where we were with the business. If I wanted to even call it a business, since we weren’t making any money yet, we had a modest audience, not a massive audience, right around thirty thousand subscribers. We had no clear monetization strategy. It hadn’t made a cent on the business. And we knew we had a good newsletter, not a great newsletter. At the same time, we knew where we wanted to go with the business. We knew we wanted a best in class read. That was the best daily business read for millennials bar none. We knew we wanted to build a profitable seven figure advertising based media business within the coming years and we knew we wanted to get to scale with our newsletter, which at the time we had no idea what that meant. So we picked a number that felt good, which was 200000 subscribers. So I’m going to walk you all through how we got there. High level, it kind of sounds ridiculous, but I think Austin, in my naivete, played a huge part in both us starting the business as well as us making certain unorthodox decisions that I think helped us in a very meaningful way. You know, if we pan back and look at when when we were starting Morning Brew at seniors in Michigan, this was 2015 and the media environment probably has only gotten more challenging since then. But you’re looking at, first of all, an industry specifically in business media where we had these legacy incumbents, Bloomberg, Wall Street Journal, Reuters, CNBC, the list goes on. And then you had all of these digital upstarts that had raised a boatload of money, the Vox’s Skim Cheddar Austin. I knew about none of these. And it’s very possible that our decision about starting a business would have changed if we knew about what the landscape looked like. The second is just in general, from a technical perspective, you look at media and 60 percent of digital advertising dollars have been sucked up by the duopoly of Facebook and Google. So not only is there incredible competition, but it is harder than ever to monetize your media business again. Austin, I didn’t know what we didn’t know since we had no idea how to make money at that point. The second is, what are certain decisions we made as a business from just a product and strategy perspective that ended up being really meaningful for us. While the first is probably the most obvious email, we decided to have email be the primary platform for how we would disseminate information to our readers. Now, for those of you that aren’t in media, I would say the way that legacy media companies think about email is oftentimes as either a retention mechanism or just a way that it’s a complementary asset to drive your readers back to your website or to your app or to whatever whatever your owned and operated primary asset is for Morning Brew. That was our asset. And at the end of the end of the day, there are two reasons that we picked that as our channel. The first is because it was cheap. Honestly, we had no money to spend on growing our business in the beginning. Morning Brew for the first 12 months cost one hundred dollars a month. And so for us, we were just looking for a technology that could scale over time. The second is we just thought about who our readers were and they were college students interested in the business world. And we thought about what mediums of content do they use to consume that we don’t have to change their behavior when we’re trying to create a new product for them. And email was something that we knew was a go to for them. And so we did it from the fact of we didn’t want to cause behavioral change.
[00:04:36] The second, I believe that Austin and I are incredibly lucky to have one another and, you know. Frame this with the fact that the third largest cause for startups failing is founder issues, it is such an important part of the business if you are not on the same page as your co-founder, that Waterfall Waterfall’s throughout the entire business and it causes incredible issues. What I will say is I think I had decent intuition around selecting Austin as my co-founder, but I think a lot of it was luck to give you some context. You know, I was in my senior year at Michigan. I had started writing a daily business roundup. It wasn’t called morning, but at the time it was called the market corner. It was a daily newsletter like The Brew. Just imagine it being like five notches worse, written by a mediocre writer. I was writing it every day. I was curating the stories. It wasn’t in email. I simply had a PDF. I pulled an image of a burnable fighting from Google Images, whether with a watermark going across. And the reason I ended up bringing on Austin as a co-founder, it was very simple. I realized very early on that people generally are really bad at giving feedback. And I think it comes from two places. One is I think generally people are either analytical enough or thoughtful enough to give thoughtful feedback that is actually actionable. And I think the second is people are just generally afraid of confrontation. Both of those Austin had kind of the objectivity to not worry about. And so for me, if a 19 year old was able to help me push my product forward better than people twice his age, he was someone that I wanted to surround myself with. Fast forward. I can’t begin to emphasize how incredibly lucky I am for my co-founder and how we complement each other incredibly well. As I as it says here I am the right brain. He’s the left. I spent my time thinking about how are we selling Morning Brew to Google, to Nike, to Microsoft to convince them to advertise in front of our audience. If we’re launching a podcast, what is the name of the podcast and how are we thinking about the qualities of the guests we want to have on the pod? Since a podcast guest spends 80 percent of the time thinking and your host spends 20 percent of the time speaking, how are we going to get Mark Cuban on the podcast? So those are some of the things I think about. What Austin thinks about is how are we going to increase revenue per day in the newsletter? How are we going to tie metrics that are measurable to our senior leadership so that we push the company forward? How do we think about growth and what our engagement metrics for growing the newsletter? So, Austin, I have been complimentary throughout and it’s been a massive asset to the business. The third, we we are horses, that’s quite literally us now, we’ve been incredibly focused since the beginning of the company. You know, at the end of the day, a startup is defined by constrained resources. You’re constrained by the time you have in a day and you’re constrained by people. And I believe that’s the success of a startup is oftentimes dictated by you will always have 15 things to do. You will always only have enough time for.
[00:07:37] Hello.
[00:07:38] Well, for 10 things, how do you prioritize those 10 things and if you can prioritize those 10 things and the right way over the long term, I believe you’re poised for success throughout the course of the business.
[00:07:49] Austin and I have had shiny objects thrown at us forever, like we’ve been asked to go into video very early on. If anyone knows anything about the media industry, the pivot to video has not fared well for a lot of media businesses. We’ve had early venture capital money thrown at us. We’ve. Partnership, but in front of us from from people that we thought it could be really good, but it also be a huge time suck. And so what Austin I knew is we knew you knew we needed to stay focused. And we knew that no matter how unsexy people thought email was as a platform, our view was that if we could set a strategy, stay focused to that strategy and build deep brand loyalty with an audience and then leverage that in other ways. There was nothing more than that. And so that’s what we focused on for the last three years.
[00:08:37] So those were like the high level soft things that I believe set us up for success, but there are kind of these four theses that Austin and I have around the world of media that we used as kind of the pillars to build our business or our house on top of the first being. Traditional business news does not engage the modern business leader. This was kind of the first pillar that also and I realized very early on when we were starting the company at the University of Michigan, very simply, I would have conversation with students who were in recruiting. And I would always ask, how do you keep up with the business world? Every single student would have the same answer. They would say, you know, I read The Wall Street Journal and I read it because I feel like I have to because it’s a prerequisite to say I’m well read in business, but it’s it’s dry and I don’t have enough time in my day. Cover to cover, and so at some point, Ozzy and I were like, this is crazy, these kids are working their asses off to asses off to have careers in business, yet they don’t have content.
[00:09:35] That story tells the business world in a fun and engaging way. So our view was it is neither in the DNA of legacy business companies to write for the emerging business leader, nor is it their incentive. At the end of the day, the 55 year old who’s been in business for 30 years, who’s making 750 career, is still a more valuable customer to these companies than the twenty six year old who’s working in business. And the issue is, is that they start writing for me. They may start isolating their most valuable customer. We saw whitespace there and that was kind of where we wanted to extract value.
[00:10:08] The second visible media scares the shit out of us and has proven unsuccessful, so I want to start by saying Austin and myself don’t think that venture capital is inherently bad for media.
[00:10:20] But our view is that the incentives of venture capitalists investing in media and the incentives of media companies to be successful, which our view of success in media is a multi revenue stream company that is profitable. Those incentives are misaligned. Oftentimes venture capital dollars and media cause you to grow in organically, which means you focus more on quantity than quality and find short term ways to monetize your business through advertising, which don’t scale over time. So this thesis led Austinite to make sure that we were growing our business in a profitable manner where we didn’t rely on outside capital. The third content creation is democratized, but brand trust is not commodities. So if you think about it, with the advent of the personal computer 50 years ago, we’ve had all these tools created for us where we as people can create content and hypothetically distribute that content to anyone in the world that has a phone or a tablet, a computer at any given time layer on the fact that social media laid the pipes of distribution where it makes it even easier to get that content in front of people. And now you have tools like Patreon or Substract that make it even easier for content creators to build an audience and monetize an audience. It should be easier than ever to build a media brand. Yet when you start really thinking about it, there are so few media properties that have actually built a loyal audience like actually build an obsessive reader that gives a shit about their content that if they didn’t get your content tomorrow, they would actually feel like they were missing out.
[00:11:53] Just show of hands. Like who? If you had to think about a media brand that you obsess over, like it is a need in your life, what are some that would come to mind? Yep. New York Times, definitely one of them.
[00:12:10] The daily awesome. Farnam Street is great one. Yep, red, it’s awesome, and the others.
[00:12:21] The Hustle Hustle is also great, similar newsletter to Morning Brew. So it’s interesting, every time I talk to a group of people, it’s kind of the same 10 companies. Honestly, the only one in here that I hadn’t heard before, but I agree is awesome is Farnam Street. Every other one a been. And it’s not because you guys aren’t original, it’s because there’s a very finite number of media properties that have actually built a loyal audience at scale and. The way that Austin, I thought about it is we wanted to build brand obsession because we knew if we built an obsessive audience, we could leverage that in other ways. Just a fun little litmus test that Austin I use to think about the world of brand building is if you don’t have put all subscription businesses aside. So put The New York Times aside. If you have a non subscription media business, a way that you should be good at gauging how you’ve built loyalty is would your reader unsolicited be willing to wear your swag with your company’s name in public if the answer is no or unsure? I think it’s worth having a conversation about what are you doing to build a relationship with your reader? If the answer is yes, I think that’s pretty a pretty good sense of how you’ve built a relationship and how you should continue to. Hello. The fourth pillar and the final general interest media is out and niche media is. And so we’re seeing this interesting dynamic in media where you have the consolidation of a few massive media companies just last week, Vox or Vice and Refinery29, you have Vox and you have New York media and you’re going to continue to see this trend of consolidation happening as again, media companies are trying to basically suck up the 40 percent of advertising that’s left outside of what Facebook and Google are taking. And now Amazon is rushing to take as well. But at the same time, you’re seeing this unbundling of content from a subject matter perspective. We’re going deeper into specific topics is very in given. We need to find ways to monetize it in other ways. And when I think about what are some media companies that are truly successful, by the metric that I talked about earlier, multiple revenue revenue streams and profitable, I think about niche media players. I think about a shift in travel. I think about digital and media marketing and advertising. I think of industry. Divx, which has multiple verticals, some including retail, social media, health care, they sold for 80 million dollars last week, which with, I believe the upside for one hundred million. And it makes sense. Right at the end of the day, we need to create content that is a must have and not a nice to have. If we expect to be able to monetize our audiences through subscription, through research, through B2B events, through basically anything outside of advertising. And so now we had kind of the foundation of the business, right, we had our thesis, we are naive, yet we were focused. And so what we did is we developed a very simple playbook that we thought would allow us to both survive and thrive in the world of media at a time when media was really challenging and we called it. The circle of life.
[00:15:28] The circle is very simple, it was a three step process that included content, growth and sales. But at the end of the day, our focus could not deviate from these three things. We knew that if we built out this circle, we would build a niche profitable at scale media business that we could then expand into many other directions.
[00:15:49] The first was content. At the end of the day, content is everything for our business and for us, we thought about there are three main things we needed to do to stand out and create content that was ten times better for who our consumer was. The first was the voice and tone of the newsletter. If you’ve ever read morning, it reads like you’re talking to your smart and sociable friend, someone who kind of gets the joke. But instead of going out four nights a week, is going out two nights a week and on the other two nights they’re reading a 10K or they’re seeing a TED talk. And because of that passion for learning, when they talk to you about it, you are equally as engaged with it. The second is curation again, morning brews in the business of curation. So we need to know our readers so well. So either know what they should know about that they didn’t realize or what they want to know about that we cater to. And the third is, again, we’re we’re catering to the young professional, someone who cares deeply about community and networking. So we knew that we had to break into our business, the ability to engage both with Morning Brew and our team members, as well as other readers of the Brew, both through different actions that we create internally with our newsletter, as well as things outside of the newsletter. So now Assume we complete one, we’ve created a best in class newsletter that we feel great about now the job is how do we get the right eyeballs in front of the right content? Keep in mind, we still haven’t monetized our business. That’s that’s step three in the circle of life. And so we have to figure out what we’re all of the organic growth strategies that we could employ to get the right people in front of the right content. And you can assume that we basically tried everything to call out a few. We did a ton of cross promotions. It’s a good example of you. If any of you have an email list, are trying to grow an email list, cross promotions tend to do very well. Again, if you’re getting in front of someone who is already an email subscriber, their predisposition to then sign up for another email is particularly high. So we did cross promotions with everything from CB Insights to Dave Pelz next draft to daily peanut. We also did PR and not like paid PR. We we went out and hustled ourself and got write ups in TechCrunch and other and other media outlets as well.
[00:18:00] And the final was our campus ambassador program, which for a long time was a major driver of the business. We had five hundred ambassadors on three hundred campuses and this was a huge driver for us. So if anyone wants to talk about how to run a campus ambassador program, I’m always happy to do that. But the fourth and most important and still the most important growth strategy within our business is our referral program. It’s responsible for 25 to 30 percent of all subscribers to Morning Brew. Over two hundred thousand of our readers have gotten at least one referral, and we average right around 1000 referrals per per day.
[00:18:36] In building the referral program, we took a page out of Harry’s raiser’s book, if you’re interested in it, you can look up online. But basically they were one of the first direct to consumer brands to really nail the referral reward landing page set up. And a lot of people have drawn inspiration from that so far. All you need to know about this is one referral.
[00:18:53] Readers are extremely high quality. We value them really highly. If you think about it, you refer a product to a friend. The likelihood of once your friend signs up being a high quality consumer is significantly higher. The second is in building this program, we just had to be thoughtful about what are the rewards that we create to incentivize morning brew superfans to share with their network. But how do we do so at the lowest cost possible so that we can scale this program? So if you’ll note, the first reward we have is the Sunday edition of Morning Brew. Again, no cost other than the cost of human capital. And the third is our VIP Facebook group, which has nine thousand readers basically just riffing about what’s going on in the business world. Again, all user generated content with a very small amount of moderation. So not high cost to the business.
[00:19:39] The final piece to the pie is sales, so we had great content, we had the right eyeballs reading this great content, and now we have to figure out how can we story tell Morning Brew, two brands that cared about getting in front of our reader. And I figured the best way to illustrate this is we’re just going to roleplay for a second. So you all together are going to be one company. We’re going to say you’re a financial services company and we’ll say it’s fidelity because, you know, we’ve worked with a lot of financial services firm firms and we had to learn how for you as fidelity we would storytelling morning brew as a brand in a really attractive way and specifically our audience. And so the way we think about it is your fidelity. You’re an increasingly competitive financial services landscape. You have all these legacy incumbents you you’ve gone up against for the last however many decades the Vanguard’s E trades, Morgan Stanley and Goldman Sachs is of the world. And then you have all of these highly venture backed upstarts like Robin Hood while front and betterment. At the same time, you’re both trying to steal share from the vanguards and trades while also get new dollars from the emerging business leader. And so the way we’d frame the conversation was simple. Morning Brew has built deep brand trust with a highly valuable audience. We have built a habit where for five minutes in someone’s morning routine, uninterrupted, you are paying attention to us and we are getting your day going with momentum. Our readers, the aspiring, affluent, emerging business leader, they’re young, hungry on the go on average. Twenty eight years old, making 100k year. They live in a large coastal city. They’re fashion forward, their tech forward. But the best part about it is not only have we built great brand trust with them, but they have these massive life moments coming up, buying a car, buying a house, having a child, putting some of their money to work. And you have the ability to tell that story through morning brews, voice and build habit with these people before your competitors have the ability to build a habit. And so that’s effectively what we did for the last three years is telling that story. One deal led to two deals, led to three deals. And basically what happened was we continue to work with partners and we tied all of our sales to growth of our audience. So the way we work with partners is we would charge based on opens the newsletter to create this virtuous cycle of not only just locking in sales deals, but locking in larger and larger sale deals as we continue to get the right eyeballs in front of the right content. The final piece to the puzzle was pulling putting fuel on the fire. We completed the circle of life. We had great content. We had great, great growth strategies. We knew how to story, tell the brand. But now it was about how do we speed up the circle exponentially? And so what we did is we took that increasing amount of revenue and profit and we reinvested it both into people as well, into paid acquisition. We tested everything under the sun from Facebook ads to Instagram ads, from Gmail ads to buying direct ads and other email newsletters, Reddit, Quora. We even bought ads in subways, like when you would sign up for Wi-Fi in the subway. We were there. We were on one of the boats that was floating around New York. We tried everything. And at the end of the day, all of it was just tied to how do we grow our audience as fast as humanly possible? But with quality metrics in mind, for us, that quality metric was what is the cost of getting a reader who opens the newsletter at least six times in their first twelve newsletters?
[00:22:48] So.
[00:22:50] Before I talked about where did we want to go and where we wanted to go was building an actual audience of at least two hundred thousand readers, we wanted to build a seven figure newsletter business, and we wanted to create the best daily business read for Millennial’s.
[00:23:04] Because of some naivete, some good strategy and the most important thing being focus, morning, Bruce. Scaled from one hundred twenty four thousand readers in January of twenty eighteen and doing about five figures of revenue per month to, as of last week, one point six million subscribers and seven figures of revenue a month. That’s it for me, and I’m happy to take any questions.
[00:23:30] Yep, so the question was, we’ve tested every paid acquisition tactic under the sun, what worked best for us. So what didn’t work best is the floating thing. Not a good idea. Only reason it worked is because somehow we got it for free. So the cost was zero. Really bad. Also as the subway thing, the cost to acquire subscriber, I might as well just bought them a full trip and hotels to like Bolly, what has worked for us is Facebook and Instagram like the boring stuff. It has just continued to scale over time where Facebook and Instagram have the most sophisticated advertising tools out of all of these platforms. They also have the largest audiences. And so it still continues to be, you know, 50 plus percent of our ad spend. We’re always looking to diversify it. But at the end of the day, there’s a reason that these companies are so valuable.
[00:24:20] Outside of that, buying ads in other email newsletters specifically for us has proven to be very successful because, again, we’re trying to incentivize someone who is already an email subscriber to subscribe to another email. You’re not having to reteach or teach from scratch behavior. And so those have worked well in addition. But again, the there’s a finite number of people reading email newsletters, and it’s a fragmented space where we have to go make direct relationships with every email newsletter to buy ads in those. So it’s less scalable than Facebook or Instagram.
[00:24:57] They’re definitely different strategies for both of them. Yeah.
Audience [00:25:03] I just have a quick question. Are your readers, are they paid or is it a free newsletter for them?
[00:25:08] It’s all free.
Audience [00:25:09] And then where do you get your content from?
[00:25:11] So the content is all curation from primary news sources that were then rewriting specifically with our reader in mind. And if you read the newsletter like, you’ll see that we end up linking out to all of the primary sources that so we’re a business of curation, not creation.
[00:25:27] All right. We can talk about it after. Well, thanks for the time.