What Sells Online? Unsexy Newsletters

They're not the newest fad, but these daily digests sent via e-mail can generate some much needed ad revenue when there's not much of it to go around

By Sarah Lacy

We San Franciscans think New York isn't quite as Web savvy are we are. No offense to my BusinessWeek overlords and Silicon Alley pals, but we're convinced that the smartest, most innovative ideas for using the Internet emanate from this coast, not yours. Heard of Google (GOOG), anyone?

Here's the shocker. As the ad recession deepens, it's a handful of Silicon Alley Web companies that are getting one thing right that many Bay Area companies abandoned years ago: the e-mail newsletter. That's right. The East Coast is leading the way in showing how to make money from those electronic digests of a site's content, delivered regularly to your already cluttered in-box.

Daily Candy's Toothsome Morsel

The most noted success story is DailyCandy.com, purchased by Comcast (CMCSA) just before all hell broke loose in the economy last fall. Reportedly, it fetched $125 million. Not exactly a home run in Web terms, but a big win nonetheless.

DailyCandy.com has done well enough that its investors at Pilot Group Ventures in Boston have backed several companies that also use e-mail newsletters, among them the newsletter-for-dudes-who-read-newsletters Thrillist, which is launching in its 10th city, Philadelphia, this month. The company says it is profitable on annual sales of $5 million to $10 million. That's saying a lot in this economy.

Wake up and smell the CPMs, Silicon Valley. Of course, we're all waiting on companies like YouTube, Facebook, Slide,, and Twitter to come up with the next great Google-esque plan to make money from social media. Meantime, why not reap some low-hanging fruit with a newsletter? No, it's not likely to make your company a billion-dollar Web powerhouse. But it just might help you eke a few more months—if not quarters—from your dwindling venture capital dollars.

Dogster Takes the Lead

Ted Rheingold, founder and chief executive officer of Dogster, is one Bay Area denizen who's gotten the newsletter religion. But Rheingold's attempts to spread its gospel don't make much headway in Silicon Valley. Rheingold is particularly critical of the increasingly popular tendency for Web 2.0 companies to let ad network middlemen handle advertising sales.

In 2003, when his social network for dog lovers become more business than pet—I couldn't resist—project, Rheingold weighed all the options for generating revenue, from placing ads on his site through Google's AdSense program to working with an ad network, from building his own sales force to distributing a newsletter. He discovered that AdSense would yield about 28¢ per 1,000 times the ad is seen (for a CPM of 28¢, in industry parlance). Glam Media, one of the highest-paying ad networks, would deliver a floor CPM of $2. But that was still leaving a good amount of revenue on the table, especially considering an ad network takes half the gross.