How to pick a profitable niche for your newsletter

How to pick a profitable niche for your newsletter (a step-by-step guide):

When I started my newsletter, I was super interested in SaaS growth because one of the best results I brought as a Facebook media buyer was for a B2B/B2C SaaS company. 

Together with the team, we profitably scaled them from $2k/day in ad spend to $20k/day in ad spend with Facebook ads in just 2 months. It was pretty crazy!

So I created a newsletter about SaaS growth marketing. 

I had a feeling it would be too expensive to acquire subscribers in that niche with Facebook ads since my audience was so small. So I ran some Facebook ads to validate my hypothesis. 

And I was right. The cost per new subscriber was like $5-10 in the US. And yeah, it’s quite possible that my ads were bad. And it’s possible I didn’t give it enough time. But I still decided to rapidly iterate and test more ad angles.

So after testing new messages to different markets, I finally found one that brought me the lowest cost subscribers in the US, CA and UK, with about ~45% open rates. So I decided to stick with what works and iterate from there.

I kept iterating and testing my messages and value propositions. And 3 months later I settled on the content type and the audience I was going after.

So to recap, I wanted to find the audience I could acquire subscribers for a decent price, and then create a newsletter about it. So the first puzzle I wanted to solve was acquisition, not content or monetization.

Because if you have a great newsletter with awesome content but no way to acquire subscribers, then your newsletter business might be doomed. 

The key here isn't just following your passion but finding a balance between what you love and what can be monetized. Here's a quick guide on how to do exactly that:

Step 1. Identify your passions and skills. 

The easy way to do it is to ask yourself: “If I could write a newsletter, what would it be about?”

Write down whatever comes to mind first. And stick with it. That’s your niche.

I used to make this mistake where I would mathematically select what project to work on. But the truth is, you can’t fake yourself. Your passion will always overtake math and all the facts.

The wealthiest of this world like Jeff Bezos have been making their most important decisions with heart, intuition, and instinct. 

And if you think about it, you don’t select your spouse based on math and the data.

And you will probably spend a lot of time working on your business, so you better choose something you truly love.

I love this quote by Marc Andreessen: “The world is a very malleable place. If you know what you want, and you go for it with maximum energy and drive and passion, the world will often reconfigure itself around you much more quickly and easily than you would think.” 

Another way to select your niche is to find what you’re most interested in. Here’s how you do it:

1. Check your browser history. What content do you find yourself consuming the most? Write the top 3 things down.

2. Check your YouTube/Netflix/any other video/audio platform history. What content do you find yourself consuming the most? Write the top 3 things down

3. Ask your best friend/spouse the top 3 things you can’t stop talking about.

4. Now once you have found the things you are truly interested in…You might consider the monetization potential and profitability of the niche.

Step 2. Consider the monetization potential.

When choosing a niche, you might want to think upfront about ways you’d be making money. You will learn more about these ways in Part 4 of this book. We’ll just quickly cover the basics here.

A lot of newsletters rely on ad placements. SaaS, B2B software, finance or investing companies would place ads within the newsletters based on your newsletter metrics.

Another common way is selling owned products (like courses or memberships). That’s really good when you’re an expert in the niche or close to being one:)

Some lucrative niches include finance and investing, luxury items, B2B topics, sports betting, local news, and hyper-niche passions (like specific hobbies or collectibles).

One thing I like to do is go to Passionfroot and see how much newsletters in similar niches are charging for ads.

But as a very rough guide, based on a 2021 SparkLoop survey of 1000+ newsletters, you can expect:

A niche, consumer newsletter to have an SLV of $10-20/sub

A niche, B2B newsletter to have an SLV of $15-25/sub

A broad-appeal/news newsletter to have an SLV of $8-15/sub

A personal (or personality-driven) newsletter to have an SLV of $3-10/sub

Alex Liebermann, the co-founder of Morning Brew, revealed his process of picking a successfull newsletter niche. Here’s his process (you should read his tweet here) and part 2 here :

 The first thing is to ask: Is your niche valuable? You must answer YES to continue.

1) Is it a high-need audience?

- Personal passion (think: gardening, cars, luxury art)

- Prosumer (think: retail investing, alternative investing)

- Professional need (think: sales, software dev, therapy)

2) Is it trending up?

- Will the audience for this niche be bigger in 5 years? (look at 1 & 3 year trends in Google Search Trends & reddstats)

- Will the audience’s need/passion for the information be higher in 5 years?

1) Is there a strong advertising model? [must answer YES to continue]

Is it high CPM?

- Rule of thumb: higher-earning audiences command higher CPMs; niche audiences command higher CPMs than general audiences; professional audiences (industry/job function-specific) command higher CPMs than consumer audiences

Is there advertiser depth?

- If you listed out every possible advertiser that would likely be interested to get in front of this audience, how long is that list?

....<25: bad

....25-50: average (typical in b2b)

....50-100: good

....100+: great

- Two types of advertisers:

....Endemic: consistent with the content type

Example: Fidelity in Morning Brew

....Non-endemic: inconsistent with the content type

Example: BMW in Morning Brew

Is there a strong direct monetization model? [not a required YES, but huge plus]

- Would a large enough portion of the audience be willing to pay enough (for access to information, product, the community) to drive 7-figures?

....Community: Pavilion

....Premium Content: The Free Press

....Investment: Not Boring

....Events: A Media Operator

....Digital Products: Money With Katie

....Physical Products: Linus Tech Ti

Step 3. Growth channels and scalability.

Undisputedly, the fastest, most predictable way to grow a newsletter is through paid ads.

The free ways are organic social, cold email and dms, giveaways, forums, offline events or meetups.

For paid ads growth, the broader your niche is, the cheaper the cost of acquisition will be.

But that doesn’t mean you can’t grow niche B2B newsletters with paid ads profitably. It would just be more expensive and you have to manage the monetization part.

The narrower the niche, the fewer people there are, and the more expensive it is to reach them. But the good thing is that there are businesses that want to sell them stuff. 

And they recognize that it’s hard to reach them, so it warrants them to pay you more per each engaged subscriber. 

So when you build a hyper niche newsletter, you can still sell ads in it. Just pick a niche with people with money haha.

One last important thing is that your first niche/newsletter idea largely doesn’t matter. You can always easily change/iterate later.

What’s important is you start sooner because your time is limited. And while you’re thinking, at least 3 people are starting newsletters in the same niche.

How niche should I go?

After studying the most successful newsletters. I realized they were started because the founders felt that their newsletter can be helpful to other people. And either newsletters in their niches didn’t exist or could be done in a much much better way.

A few of these founders really thought logically about what’s going to be super popular or the biggest business in the world. 

So if you’re asking yourself “how deep do I niche down”?. That’s a wrong question. Because the answer to this question is up to you. It doesn’t matter. What matters is do you solve the problem better than everyone else. 

There are equally successful companies and newsletters out there in the smallest of the smallest niches and the broadest of the broadest.

And the reason for that is, value doesn’t scale linearly with newsletter size.

And you don’t require a giant list to make a few millions dollars or more.

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