Have Newsletter Recommendation Engines Created a Bubble?

By Jacob Cohen Donnelly June 16, 2023

When Substack started to pick up steam during the early pandemic, conversations started talking about “peak newsletter.” Everyone and their mother launched a newsletter.

And for the most part, what I expected to happen did. Many of these newsletters died while a few of them went on to become interesting media properties. But this made sense. It’s easy to write for four months. It’s hard to write for four years (which for AMO is two months away).

More than that, though, is the fact that growing a newsletter has always been hard. I can’t tell you how many people have emailed me telling me about their “newsletter discoverability” platform.

Some newsletters obviously figured it out. Ben Thompson proved you could do it on your own before Substack even existed. The Skimm, Morning Brew, The Hustle got massive… But for the most part, growing was a grind.

That’s changing. There has been a proliferation of tools that has made it unbelievably easy to grow a newsletter. I see people launching newsletters and getting to 10k+ subscribers in weeks.

But what I worry about is this ease has resulted in a house of cards within this newsletter community that could very well collapse.

A lot of it rests on the recommendation engines. Most of the major newsletter companies now offer some variation of this.

At its core, a recommendation engine is like a blogroll, which for those of us who were writing online in the aughts, was a long list of blogs we would recommend our readers to check out. You would link to me; I would link to you. In newsletter growth, we call this a cross-promo. You promote my newsletter; I promote yours.

There’s nothing wrong with that.

But it’s becoming easier to form these cross-promo relationships. It’s now got to the point where the cross-promo happens at the initial subscription. Commonly called co-registration, this is where a reader subscribes to someone’s newsletter and then they are immediately prompted to subscribe to other people’s newsletters. A user who was going to get one newsletter is suddenly getting three or four.

How many newsletters can people read?

Let’s take it one step farther, though. Some of these co-registration tools are now allowing people to put money behind them. And so, if you’re running a newsletter and are willing to pay some amount of money per subscriber, you can put that out into the world and get priority in someone’s co-registration.

You can see why this is so powerful for newsletter operators. If you were going to pay for growth anyway, why not get in front of people who obviously like content in their inboxes? And for those of us that are growing our newsletters, this becomes a new revenue stream.

For example, I could include co-registration on A Media Operator promoting any somewhat related newsletter that was willing to pay me. Bang bang, I’m making money every time someone signs up even before they become an AMO Pro member or see one of the ads I run on Tuesdays. At the same time, I could pay other newsletters to promote me.

It’s a beautiful system of performance-based growth. But you can quickly see how this turns into a house of cards. Let me explain through a number of steps:

  1. Set up a paid co-registration on your signup page where you earn $3 per newsletter subscriber
  2. Put budget onto one of these paid co-registration platforms and start driving sign ups to your site (say, $3 per sign up)
  3. Every time someone signs up for your newsletter, they are exposed to the three newsletters that will pay you $3.

If you put $900 in, you’ll get 300 subscribers out. And so long as each of those subscribers signs up to one newsletter on co-registration, you’ll make $900 (minus some fees). Your payback period on an acquired subscriber becomes 30 days, which is any CFO’s dream.

It then becomes a question of how much money you can pump into the system. Why stop at $900 when you could pay $9,000 and get 3,000 subscribers with the $9,000 hitting your bank account 30 days later.

When something is this easy, it becomes gamed. And when something becomes gamed, it inevitably fails. This is effectively a perpetual motion machine where you are getting free subscribers. If something is too good to be true, it is.

Does that mean these tools are bad? Absolutely not. I think all of them are helping newsletters grow and have filled a very big hole in the market. Creating tools for us to do easy cross-promo and, if I want, co-registration is a great thing.

But we need to be smart about these tools and be highly diligent about the quality of the subscribers. If we’re going to pay for someone, they had better be a long-term subscriber. If you acquire 100 subscribers and lose half of them every month, after three months, you’ve only got 12 subscribers. It’s hard to build enterprise value when you lose 88 of the subscribers you paid for.

But in the meantime, we are going to see a huge number of newsletters launch. We already are. How many AI newsletters are there today that are basically just saying the same thing as every other one? Many of them are going to fail because readers don’t need that much derivative content, especially since they’re being co-registered to a number of other newsletters right at launch.

That is the behavior of a bubble. And the way the bubble bursts is people stop subscribing to the co-registration opportunities as frequently. So, instead of making $3 for every $3 you pay, perhaps only one in three subscribers sign up for a co-registration opportunity, meaning you only make $3 for every $9 you pay.

For a lot of the questionable newsletter creators in this for a quick buck, they’ll wash away like all bubble participants. But for those that are smart about their acquisition—using whatever tools are at their disposal—and continuing to create great content, it won’t matter. And post bubble, many of these tools will still exist, helping operators with a long time horizon continue to grow.

Thanks for reading today’s AMO. If you have thoughts, hit reply or join the AMO Slack. I hope you have a great weekend!