Why your audience is worth MORE than your business
In fact, it's worth exponentially more than your business.
EDITED TRANSCRIPT:
Here's a crazy idea for you.
It's simply this.
It's that if you have a subscription business or a media business, that your audience, your audience, is worth more than your business.
Let me say that again, yes, your audience is worth more than your business, right?
It sounds crazy.
How could that be?
Think about this.
For one, your audience spends money on a lot of things.
The total consumer spending of your customer, readership, and viewership base is off the charts compared to how much money they actually spend with you.
You only get like this tiny sliver of what they spend on.
There is exponentially more value in your audience than in your business.
Second, your business only captures a fraction of your audience’s value of just within the activity the customer engages with you on.
If you sell trader education products you are only getting a sliver the audience spend within the trading value chain.
They spend with your competitors, on trading books, on trading signals, on brokerage fees, and on value transfers with other market participants.
The highest value transfer in investing and trading is the actual money invested or traded. So, if you’re recommending stocks, then the greatest value of your audience who acts on your advice goes to either the company issuing shares or the entity on the other side of the trade.
Your newsletter business only captures a small slice of the value inside your own recommendations.
Your audience basically has the ability to fund more than just your business.
In fact, your audience is literally funding multiple businesses in multiple different ways with it’s consumer spending.
They are just not all your business.
Think of audience attention like fractional banking.
If you think about fractional banking, a bank takes in a dollar and then it loans out $10.
And funds 10 different things with that same dollar that it has.
And because of that it has this great multiplying effect on the economy.
It's one of those great financial innovations that really transformed modern finance.
Functionally your audience has this same potential.
It's actually a bigger potential than a bank.
Because you're not looking at $1 that comes into you as.
That audience that pays you a dollar, it's not just worth $10 in additional services, it's worth a hundred or more.
And that might seem a little nuts to think your existing audience has 100-times more revenue in it than you’re extracting.
It’s hard to believe that value is sitting there in your audience but it is.
I know somebody whose business does $2 million in revenue and, while he didn't get a hundred times from the fractional nature of his audience, he did add 50 times more.
He had a $2 million revenue business and because he understood the power of his fractionalized audience he was able to add another a hundred million dollars in a year completely separate business.
Without incurring additional acquisition costs.
I won’t name him because he likes to keep a closed door on exactly how successful he’s been leveraging his audience.
The funny thing is he realizes he hasn’t even come close to fully capturing the value of that audience.
So your audience is more valuable than your business.
Your business model is just the tool you use to extract value from your audience.
Obviously, the reality is none of the potential value of your audience can be realized until you put a business model on the attention you’re getting.
The business is how you extract value from that audience.
Your monetization model and your business model defines both how you monetize the audience.
And defines the potential you have to monetize your audience.
Not all models extract the same amount of value from a business.
In my keynotes at the Financial Marketing Summit over the last few years, and in the virtual and in-person events I do for the financial publishing community, I keep bringing up a great example of this reality.
Two colleagues of mine, Steve Fishman and Jeff Greenberg, marketed a wealth management company to a newsletter list of about 100,000 readers.
The list was built for a subscription investment newsletter.
It was an e-letter list for a newsletter product. And on that a 100K email list they found 650 wealth advisor customers.
650 people who wanted to join the Wealth advisor product & business they launched to that email list.
Combined that group put in 500 million in assets under management into the wealth advisor.
It was the same audience, different business, different revenue stream.
It was additive revenue - not the incremental revenue from growing the subscription side of the business.
When you marketing your subscription newsletter or your trader education course you're only ever getting a small percentage of your total list to buy.
Only a small percentage of total number of people who come through your list will ever buy anything.
In other words, most of your audience remains unmonetized.
Most of the prospect attention you get remains unmonetized and will never be monetized with your current business model.
And part of the reason for that is something that a lot of us in marketing world don't think about.
Not everyone buys the same product format.
Not everybody wants to manage their own money.
They might be interested in reading about financial markets.
That doesn't mean that they wanna be actively spending money on subscription products in order to invest on their own.
Or maybe they do invest on their own but they think there's enough free information out there so they don't have to pay for it anymore.
Or they just don't want to buy a subscription for any other number of reasons.
And so you have all these unmonetized audience sub segments you will never actually monetize.
That's very much true for trader education and investment newsletters.
It’s true for all direct response businesses - all of them operate on converting fractions of their audience and they're tiny percentages.
And then the rest of your audience consumes your content never buys anything.
They never get monetized.
But that attention is still very valuable.
And, yes, you could monetize it in many additional ways - other advertising sources, affiliate offers, adding more products to your existing business.
Those are great ways to add additional revenue.
There are always pros & cons on any other model.
For example, the advertising business could take away from your own marketing inventory.
And advertising is fundamentally by it’s nature a value transfer activity.
The core concept of advertising is that you have valuable audience attention and you're going to transfer it for less than its value, value to somebody else who can then further monetize it.
So you're transferring a lot of that value in that model.
That's different than saying, “hey, I'm gonna launch a new business.”
Which is something else you can do with your audience.
And you of course, there are a lot of reasons you might not choose to do that.
Maybe you don't want to add staff, or distract yourself.
There's all these reasons why you don't want to add a new business unit or a new thing, but you could add new ventures through partnerships or joint ventures.
And I think it's really instructive to look at the numbers from that wealth advisor launched off of a newsletter business.
They found 650 customers.
The average account size was $850k.
So they raised about $500 million in AUM.
The 1% management fee was about $8,500 a year.
Or about $5.5 million a year in fees.
With a 90% annual renewal rate, right?
If they never launched a wealth advisor to that list then that money would have stayed latent in the list.
Or just gone to another business.
The subscription model would never have extracted that value.
But they fueled a profitable new business.
And it only took a staff of 4-5 to manage.
Since it was instantly profitable they were able to use that revenue to acquire more customers and eventually grew it to $1.5+ billion in AUM.
The group already owned the audience.
They were already monetizing it with subscription newsletters.
They used the audience attention to birth to another business that could then grow.
And so that, that's the power of the engaged audience.
Your engaged audience is the golden goose.
That’s why I compare audience to fractional banking.
The same audience can be used to generate multiple companies leveraging multiple revenue models.
I've done a five forces analysis of financial publishing industry at several events over the years. (You can see a short version here in my last keynote).
I bring it up because the size of the industry itself is bounded by what we call the threat of substitution.
You have this total audience of people who have a desire or need to invest or trade. As customers they have different product & service formats to choose from to serve their need.
They could solve that problem of by saying, “Hey, I need to invest my money through a wealth advisor” … or “I’m just going invest directly investing in exchange funds, ETFs.”
They don't have to buy a newsletter in order to find stock picks.
They don't have to learn to trade by going to A trader education site.
There's lots of other ways for them to solve that problem.
But the subscription newsletter industry itself gets shaped by how many of the people in that total audience with a need to invest or trade solve their decision making problems by buying products from the financial publishing industry.
The threat of substitution then is all the other industries that serve the same need using an entirely different product model.
This is one of the reasons the Motley Fool did such a great job expanding.
They grew their business in the direction of that line of substitution. They had an advertising business, then added a newsletter business and then added a wealth advisory business, and an asset management business.
This aspect of the financial media and publishing industries is going to pick up speed.
We’re seeing this transformation in the financial world as a whole into a media first environment.
Once you're business lives in the digital environment then media becomes the tip of the spear for everything you do.
The value of engaged investor audiences is on the rise.
You're going to see an exponential increase in the opportunities for you as an entrepreneur and a marketer to monetize your audience in ancillary ways.
You may find yourself using the paid courses, subscription, or even and advertising model to create audiences just to further monetize with an secondary model.
In the short term, if you’re just thinking about selling advertising (maybe because you watched my video on the $10 billion annual increase in financial services ad spend), then realize how big the market is.
Your audience is valuable to industries beyond the one your in.
If you sell to investors and traders then businesses across the entire value chain of what the customer does are interested in your audience.
Brokerages will spend a lot of ad money if you can actually fill accounts. Wealth advisors will pay for leads.
You can also go to places like asset managers and fund managers and start to sell branded content sponsorships. A branded content sponsorship is an entire type of advertising business that I think we could talk a lot about.
For today's purposes think of is as branded content is paid content similar to what you use to engage your audience but you create it specifically to serve your advertiser.
And so it's a really valuable type of sponsorship and so you have a big enough audience like you can, you can charge a lot more for that.
For example, I think Vice, at one point someone told me, had around $800 million in revenue, and the vast majority of it was through branded sponsorship things that they did where they would even create shows and stuff.
So you can go create e letters for people out of your audience, and they pay for the e-letter. Or shows. Or editorial pieces.
Or whatever.
The point is there are a lot of opportunities in just that one idea.
And then of course, you can go partner with folks like Jeff and Steve. They're happy to work with people and launch their own wealth advisory groups. You could do it yourself if you were motivated.
You’re obviously going to be doing affiliate deals and things like that to, to monetize your audience.
My point here is to help you think about the fact you have this fractional audience.
You had the fractional potential of your audience to build additional businesses.
And that opens up all types of joint venture deals that you could do in partnership deals that you could do both inside the industry and outside the industry.
For example, going to FinTech groups who need audience that you have and are trying to find ways to work with them.
I think that there's an enormous amount of just new opportunity that is available.
The questions to ask yourself are:
Is the business model you’re currently using the highest value extraction model available to you right now?
Which other business models are available to you to extract additional value from your business?
Which of those additive models are directly within your reach? And which could be done in a joint venture?
What I'm trying to do here with Content and Capital is start to shape the conversation about where financial media and publishing groups fit within the larger changes happening in financial services and capital markets
And then to start bringing you both the strategies to implement, and share things I see working, and to bring you into conversation with the people who you could do partnerships with.
You’ve put a lot of blood, sweat, tears, and cash into building your audience. And your current business model only monetizes it to a certain degree.
It’s time to start thinking about ways to further monetize that audience.
There's a lot more money sitting there. And so if this idea is interesting to you and you want to keep exploring this with me, just make sure you're subscribed to Content and Capital.
This idea of the fractional power of your audience to launch new businesses is one of those foundational concepts to keep in mind as we go through one of the biggest transformations of financial markets in our lifetimes.
And that's part of this exploration that we're gonna have here in Content and Capital.
So make sure you're subscribed.