If you’re not interested in learning how to build a content company then you’re not going like this post. Read this one instead.
Hey nerds,
A few months ago, about a month after launching The Hustle, I wrote an update on our traffic, revenue (or lackthereof), and a few other revealing tidbits about starting our company.
Surprisingly, a lot of you liked that article. Maybe you’re interested in building a media company and liked reading about our wins and losses. Or you’re just curious and liked seeing how things work (or don’t work). I’m not sure – but I got tons of emails asking for another one.
Because of that, I thought I’d do a second update, giving you an insider’s look on the first five months of The Hustle.
But first …how do media companies make money?
Before I get into our results, I want to address a question I get asked a lot: how do digital media companies make money?
Good question.
Everyone knows how traditional newspapers make money: subscriptions, classifieds, and advertisements. Digital media companies have similar business models plus a few other revenue streams that old school newspapers typically do not.
In our case, The Hustle has three major revenue streams:
Events
Most people don’t realize this, but events (concerts, conferences, etc.) make a ton of money for media companies. Pitchfork, Business Insider, TechCrunch, The Wall Street Journal, and dozens of other media companies make big bucks off of events. ReCode was acquired last year for $20m+ because their conference was making $10m a year. We’re no different.
Our conference, Hustle Con, is happening on May 13th, 2016. On the conservative side we’ll make $500,000. If we hit a home run we’ll net $1 million. If done correctly (most companies suck at this) a lot of that will be profit. There are a lot of upfront costs though, which is a drawback. And the fact that a lot of our revenue comes down to one day makes me sweat bullets. However, we’ll have thousands of our fans in a room at one time, which is equally important as the money.
But for all you soon-to-be founders who want to start a conference, know this: conferences typically get worse the bigger they get. Some people have built massive conference businesses, but it’s not common. I don’t think Hustle Con will be a significant source of revenue for us in the next five to ten years. It might be, but I doubt it. It could be a $10 million business in five years, but we’re betting that we’ll be making tens, if not hundreds, of millions of dollars in the next handful of years through other revenue streams. For now it’s a great way to sustain our content business as it grows and, most importantly, have a fun time meeting our readers.
Advertising
This is a big one. TV, magazines, newspapers, and radio ads are dying a miserable death. That makes me very happy. Why? Because those advertisers are now spending their budgets in digital advertising.
Banner ads, native advertising, content sponsorships – billions of dollars are being thrown at digital media companies like ours (insert evil laugh).
More specifically, big bucks are going towards native advertising and sponsorships. Native advertising and sponsorships were hilariously mocked by South Park and John Oliver, but the fact remains: it works. Brands love it and users don’t mind it.
The Hustle is in the content business. To make our shareholders filthy stinkin’ rich, we need to create the best content on the web for millennials, build a massive and engaged audience, and find advertisers. Our target is the 40 million millennials in America with a college degree. And because most companies suck at engaging that demographic, big brands will (hopefully) pay us lots of money to associate with us. This is how we can afford to keep making content that you all (hopefully) will like.
It’s a stupidly simple model and fun as hell to be part of, but tough to pull off.
For us specifically, we put ads in our email. When we do this, we charge anywhere from $50 to $250 per CPM (per 1,000 sends). This model is very similar to Thrillist, theSkimm, Refinery29, and a bunch of other email-focused content sites. Brands pay us money and we introduce them (in a non-annoying way) to our audience.
Again – stupidly simple in theory, but tough to pull off.
Creative services
You probably didn’t know about this one.
Amongst the new big digital media companies (Vice, BuzzFeed, Vox), creative services are a big source of revenue. They’re when the media companies behave like a marketing agency. Graphic design, media campaigns, copywriting, video production – things like that.
In the past, a brand like Grey Goose would hire an agency to create an ad, and then the agency would find a place to put the ad. With media companies getting into the game, the publisher makes the ad and then puts it on their own site so it gets seen. Now Grey Goose can go directly to a media company to create their ad and put in on their website. Things are more efficient this way.
In some cases, like with Vice, some people say they only do news as content marketing for their creative services. And it works really, really well. Vice will bring in north of $1 billion in revenue this year, with a lot of it coming from their creative services.
We are just starting with creative services. It’s one of those things where you need to be big to make it worth it, but we’re trying to make it work with a small team.
Now on to the results.
The good
Since my last update we’ve hit our first million visitors. On any given day we’ll have between 10,000 and 50,000 people visit the site and this month we’ll be close to 500,000 visitors. That’s still tiny, but it’s a great start for any media company.
However, I’m most proud of two things: practically all of our web traffic has been organic and it’s growing from each month. We’re on track to hit our 1,000,000 monthly user mark in the next four months. A lot of well-funded companies have hit one million monthly uniques a lot faster than we will, but not as many have done it with little to no funding.
And our email list is growing. We care about this number more than anything. A massive and loyal email list is a big asset, allowing us to make lots of money and access our readers easily. We’re on track to hitting 100,000 emails in our first year. But I think that will happen sooner.
And now, a topic that wasn’t going great last update but ain’t too bad now: revenue.
There are two main schools of thought when it comes to startups: raise lots of money, focus on growth and build a massive and engaged audience. Then, after hitting critical mass, start making money. Or there’s bootstrapping the business and making money along the way. There are pros and cons to both methods.
We fall somewhere in the middle.
We’ve raised about $250,000 so far and will most likely raise another $2 to $5 million within the next year. However, we are making money now and don’t need to raise more to survive. We need the money to grow faster.
Aside from revenue from our conference, we are also making email advertising revenue. We charge brands anywhere from $50 to $200 per 1,000 email sends. If our list was still at 10,000 (it’s much bigger now), then we’d charge anywhere from $500 to $2,000 to link to a brand in our email.
The bad
Hiring writers has been the hardest professional challenge I’ve ever had. Hiring in general is tough, but writers are especially tough. So much of their success relies on their own personality and taste. And trying to figure out if they have good taste through a few interviews and a writing assignment is super tough. Because of that, we’ve been very slow to hire. We’ve got the budget to bring on another writer or two but can’t find the right person.
Another problem we’ve been having is with our servers. Some days we’ll get 50,000 visitors and the site will crash. And because neither my cofounder or I are technical, our site is hacked together like a rowboat with duct tape over the holes.
It works most the time, but every once in awhile it falls apart and we have to figure out how to rig it up again. Fun, but ghetto.
Luck
And finally, I want to end this post by keeping it real.
Last time I did this I said that it’s the blind leading the blind. My cofounder and I have done lots research and now it certainly sound like we know what we’re talking about (I think), but we are 100% figuring it out as we go. We’re lucky to have people on our team who are significantly smarter and more experienced in the media game. But this time I want to emphasize something else: 50% of the time I think our success is because of luck, not skill.
I know a lot of our content is great, but I’ll admit that sometimes it totally blows. That happens and is expected. We can’t win every time. But somehow we still get signups and traffic. There are two reasons for this.
The first is luck. The market is craving smart business and millennial focused content. A market that craves a product is the biggest reason for success. We don’t control that. It’s 100% luck. I ain’t complaining, but I’d be an arrogant liar if I said that our mild amount of success thus far was completely from skill.
In a way, I think our audience is the same as CNN in the 1980’s. Turner Broadcast launched CNN on June 1st, 1980 out of a house out the outskirts of Atlanta. At the time, they were the underfunded upstart that few in the industry thought would succeed. However, there wasn’t a single station dedicated purely to news. Because of that, they crew like crazy. People needed what they had to offer. I think we our situation now is like CNN back then. Young people are craving smart news.
And the second reason why it seems like luck is playing a big role is because most founders, not matter how great, typically think their products are much worse than the outsider sees it. It’s like when I was a kid my Mom use to make me a PB&J. As I got older I’d make my own sandwiches. But they never tasted as good as my Mom’s.
And that’s how I feel about starting a company. When you do it yourself it’s not as impressive as when others do it for you.
Luck or not, I’m 100% confident that in five or ten years we will have a bigger, more engaged audience than The Wall Street Journal, Bloomberg, and similar publications.
Holler at ya boy,
Sam