Latest / The Newsletter Podcast with Fexingo: Substack, Beehiiv, and Email Newsletter Business / How Newsletters Use Sponsored Content to Build Revenue
Transcript
- Lucas: There's a moment every newsletter writer hits where they look at their open rates, they look at their subscriber count, and they think, okay, I have an audience. How do I turn this into actual revenue without selling out? Luna: And sponsored content is usually the first answer. But it's also the one that feels the riskiest, right? You don't want to lose your readers' trust. Lucas: Exactly. And there's a really instructive case here: The Hustle, before HubSpot acquired it. They were one of the earliest newsletters to build a serious sponsored content engine. By 2020, they were reportedly generating seven figures annually from sponsorships alone. Luna: And they did it without running banner ads. It was all native — sponsored deep dives that looked and felt like their regular editorial. Lucas: Right. And the key insight they had was that their readers were smart, time-pressed professionals. If an ad was going to interrupt them, it needed to be as useful as the rest of the newsletter. So they sold sponsorships as 'brought to you by' sections, often with a custom write-up from the sponsor, but always clearly labeled. Luna: Clear labeling is huge. I've seen newsletters tank their credibility when sponsorships feel sneaky. Like, if I can't tell the difference between an ad and an article, I'm out. Lucas: Totally. And that's the line The Hustle walked well. They had a style guide for sponsors — no misleading claims, no hard-sell language. The sponsor got a dedicated section, often with a custom graphic, but the newsletter's voice stayed consistent. Luna: So what's the pricing model? How do you even set a rate for a sponsored slot? Lucas: It varies wildly, but a common starting point is cost per thousand subscribers, or CPM. For a newsletter with a hundred thousand subscribers, a sponsored slot might go for anywhere from two to ten thousand dollars. But the real premium comes from engagement metrics — open rates, click-through rates, not just list size. Luna: Morning Brew was famous for that. They had insane open rates, like over 40 percent, and they used that to command higher CPMs. Advertisers knew the audience was actually reading. Lucas: Right. And Morning Brew scaled that model to the point where they were doing multiple sponsors per issue. But there's a danger there. Too many sponsors and the newsletter starts to feel like an ad circular. You have to balance revenue with reader experience. Luna: So what's the sweet spot? One sponsor per issue? Two? Lucas: A lot of successful newsletters cap it at one main sponsor per issue. Some do a 'presented by' at the top and a secondary slot later. The key is making sure the sponsored content is still valuable. If it's just a press release rewritten, readers will tune out. Luna: That's where the deep dive format comes in. I've seen some newsletters offer sponsors a full 500-word custom article, written by the newsletter team, about a topic the sponsor cares about. It's almost like advertorial, but done well. Lucas: Exactly. And that's where the editorial integrity really matters. The newsletter writer has to retain veto power. If the sponsor wants to say something that's not true or that doesn't fit the tone, you have to be willing to walk away. Luna: Has that happened? A writer turning down a big check because the sponsor wanted something sketchy? Lucas: Absolutely. There's a famous story from the early days of Stratechery, Ben Thompson's tech analysis newsletter. He's said he turned down sponsorship offers that would have required him to change his editorial stance. He'd rather keep the newsletter pure than take the money. Luna: And that probably built more trust long-term. Readers know that if Stratechery recommends something, it's because Ben actually believes in it. Lucas: Exactly. And trust is the currency of the newsletter business. Without it, you're just another spammer. So the smart play is to treat sponsors as partners, not paychecks. Luna: Let's talk about disclosure. What's the best practice? A simple 'sponsored' tag? Lucas: FTC guidelines require clear and conspicuous disclosure. So a 'sponsored' tag at the top of the section is the minimum. Some newsletters use a different background color or a border. The important thing is that it's not buried in fine print. Luna: I've also seen some use a line like 'This section is brought to you by ' right before the content. That feels honest. Lucas: Yeah, that's a good approach. And it's consistent with what The Hustle did. They would say 'Today's deep dive is sponsored by ' and then run the content. No confusion. Luna: So if I'm a new newsletter writer with 5,000 subscribers, is sponsored content even viable? Or should I focus on something else first? Lucas: At 5,000, you probably can't command premium rates. But you can start building relationships. Some writers offer free sponsorships to small businesses in exchange for testimonials or referrals. Or they do barter deals — a free slot in exchange for the sponsor promoting the newsletter to their audience. Luna: That's smart. It's like building a portfolio of sponsor work before you have the numbers to charge. Lucas: Exactly. And as your list grows, you can start charging. The key is to track your metrics religiously — not just subscribers, but open rates, click rates, and even conversion data if you can get it. Sponsors want to know ROI. Luna: Speaking of ROI, I've noticed a trend where newsletters are offering sponsors data-rich reports after a campaign. Like, here's how many people opened, clicked, and what they did afterward. Lucas: That's becoming table stakes. If you can show a sponsor that their sponsored content drove actual sales or sign-ups, you can charge a premium. And it builds a case for repeat business. Luna: It's almost like you're selling an audience, not just ad space. Lucas: Right. And that's the fundamental shift. A newsletter is not a billboard. It's a relationship. Sponsors are paying to be introduced to that relationship in a respectful way. Luna: You know, I think it's worth noting that this kind of podcast — where we dig into the nuts and bolts of newsletter marketing — only exists because some listeners support it directly. Lucas: Yeah, that's a good point. We don't run ads on this show, and that's intentional. It lets us talk about sponsored content without any conflict of interest. Luna: Exactly. And the way it works is, a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. That's literally what funds making episodes like this one. Lucas: And it keeps the whole thing ad-free. So if these conversations have sparked something you've actually used — whether it's a sponsorship strategy or just a better subject line — that's the engine that keeps it going. Luna: Alright, back to the topic. One thing we haven't talked about is the risk of sponsor fatigue. If you feature the same sponsor too often, readers might start ignoring it. Lucas: That's real. Some newsletters rotate sponsors on a weekly or monthly basis. Others limit repeat sponsors to once a quarter. The goal is to keep the content fresh and avoid the sense that the newsletter is just a vehicle for ads. Luna: And what about measuring success beyond the sponsor's ROI? How do you know if your sponsored content strategy is working for your newsletter? Lucas: Look at your unsubscribe rate after sponsored issues. If it spikes, something's off. Also, track engagement on non-sponsored days versus sponsored days. If open rates drop significantly on sponsor days, you may be overdoing it. Luna: That's a great leading indicator. If people are still opening and clicking, you're probably doing it right. Lucas: Exactly. And remember, the best sponsored content often teaches the reader something. It's not just a pitch. It's a mini lesson that happens to be funded by a company. That's the sweet spot. Luna: So to wrap it up: be transparent, keep your voice, and treat sponsors as partners. And always, always track your numbers. Lucas: Well said. And if you're a newsletter writer thinking about sponsorships, start small, build those relationships, and never compromise your readers' trust. That's the asset that makes everything else possible.