Alex Lieberman and Austin Rafe on Monday, January 20, 2020 –
Nbcuniversal
Morning Brew is ready for adulthood.
What began as a carefree business bulletin for college kids by two students in their room at the University of Michigan dormitory has become a multidimensional media operation. The company’s main product, the Morning Brew daily, has surpassed 4 million subscribers after competing with 3 million just months ago, co-founder Austin Reef told CNBC in an interview.
Leveraging its popularity, Morning Brew now has more than 230 employees who create newsletters for retail, marketing, human resources and emerging technologies. Reef, 27, and co-founder Alex Lieberman, 28, are pushing for podcasts and YouTube shows to expand the brand.
Morning Brew will generate about $ 50 million in sales in 2021, Reef said, more than doubling its annual revenue of $ 20 million by 2020. Almost all revenue comes from advertising, including newsletter ads. The company has been profitable since its inception, with current margins being “double digits”, Reef said.
“We want to make business news more enjoyable to read,” Reef said. “We look at our competition like everyone else. It’s an economy of attention, so we compete with everyone. But when it comes to direct competitors, we don’t have one.”
Many newsletters were developed during the Covid pandemic as easy ways to spread information to remote, dispersed audiences. Legacy media such as The Wall Street Journal and Bloomberg have thrown resources at them to build a loyal audience and subscribers. The New York Times has more than 71 newsletters, Digiday reported last year. Smaller media companies such as Axios, Politico, Punchbowl and Puck also rely on them as ways to expand their reach.
However, there are signs that the growth of ballots has a ceiling. TheSkimm, a media company that targets professional millennial women, made headlines in 2018 with the huge 7 million subscribers to its flagship newsletter, Daily Skimm. That number has been rising since four years ago, but much more slowly, according to a person familiar with their subscribers’ numbers. A spokesman for TheSkimm declined to disclose the current subscriber numbers on the newsletter.
Business in business
Morning Brew has an unusual structure that contradicts its own growth. The co-founders sold a majority stake in Morning Brew to Insider in October 2020, valuing the company at $ 75 million. Insider itself is owned by German digital media conglomerate Axel Springer.
This is business to business creation. Reef and Lieberman work independently within Insider and Axel Springer. They have their own board of directors, both Insider and Axel Springer, including Insider founder and CEO Henry Blodget.
Rief credits the acquisition of Insider as a springboard for its recent growth. Following the announcement of the sale in late 2020, Morning Brew hired 180 of its 230 employees, leading to additional verticals and a much larger presence on TikTok, Instagram and Twitter.
The corporate headquarters of Axel Springer Publishing House in Berlin, Germany.
Sean Gallup Getty Images
Reef said his company is on the hunt to acquire other media companies to expand further.
“We want to do more than what we are doing now,” he said. “We want verticals aimed at new industries and more creators on the platform who talk about money, professional life and business news.
Reef declined to comment on any specific goals Morning Brew identified, although he said the deal was not inevitable.
Growing the audience
One potential partner could be theSkimm. Co-founders Daniel Weisberg and Carly Zakin have had “dozens of talks” with merger partners and potential acquirers over the past three years, according to a person familiar with the matter. Unlike Morning Brew, which did not take any money from venture capital firms, theSkimm has taken about $ 28 million in venture capital funding, according to Crunchbase. These investors want a return on their capital. A representative of theSkimm declined to comment to M&A.
Carly Zakin and Daniel Weisberg launched theSkimm in 2012, a daily bulletin aimed at millennials.
Source: theSkimm
Both companies purposefully share a light tone with a separate goal of training. Reef says the goal is to be “witty,” but not “funny in the name of being funny.”
As Lieberman and Reef get older, Morning Brew’s coverage follows their life circumstances, first targeting students interested in business and then speaking directly to young professionals. Today, the average age of a Morning Brew newsletter subscriber is 30. The wider target audience is 25 to 40, Reef said.
Reef and Lieberman have already made millions from the sale of a majority stake in Morning Brew. This has reduced the pressure to expand the company’s valuation by switching to subscription products. Evaluation rates for advertising-based new media companies are typically one to three times the annual revenue, while subscription products – such as The Athletic – may require estimates of five to eight times the annual revenue.
However, Reef said he was open to a subscription-based product after feeling the company was reliably producing content that special audiences would pay for. Morning Brew, meanwhile, has launched an educational product that includes weekly virtual classes on topics including audience building, storytelling, finance and leadership. Programs typically cost between $ 500 and $ 2,000, depending on the length.
Morning Brew has also launched a business with events related to specific areas of coverage, such as Emerging Tech Brew and Marketing Brew, and a retail site that sells branded coffee cups, clothing and other whimsical business-oriented goods, such as a pair of Elon Musk socks with hearts on them.
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