How TheSkimm Makes Money

One of the latest email newsletters to meet with widespread success, theSkimm generates revenue through directed and targeted advertisements, as well as a paid subscription service through a mobile app. The company's co-founders have also released a book and are engaging in a related promotional tour as well. Email newsletters can generate advertising revenue based on numbers of subscribers, open rates, and other factors.

Danielle Weisberg and Carly Zakin founded theSkimm in 2012 after leaving their jobs as news producers for NBC. Just four years later, the company raised $8 million in Series B funds in order to launch a video component called Skimm Studios, per Bloomberg. In 2018, the company raised an additional $12 million in funding, just months before theSkimm announced that it had roughly seven million subscribers.

Financial information for theSkimm, aside from funding figures provided above, is not readily available to the public.

TheSkimm's Business Model

TheSkimm is a daily news digest newsletter that is dispatched via email early each weekday morning and contains a digest of five to six news stories, along with short commentaries. These brief news/commentary digests are referred to as skimms. The skimms contain hyperlinks that readers can click on to read more about a story or topic if they wish. The newsletter's website offers a connection to theSkimm's blog site, archives of previous issues, and Skimm Guides, which are 500 to 800-word articles that explain current, ongoing news topics such as "The Greek Debt Crisis" and "Iran Nuclear Talks."

TheSkimm has been a success story almost from the beginning, obtaining 100,000 plus subscribers its first year of operation and expanding its mailing list to over 1.5 million barely 18 months later. The newsletter and its two main editors have impressed venture capital firms with their revenue potential. The company used the money earned through two fundraising rounds to establish an office, as the two producers started the business working out of their apartment, and to hire additional writers, editors, and support staff. Part of the venture capital obtained has been dedicated to marketing.

TheSkimm makes money primarily through three avenues: targeted advertisements, a paid subscription service, and through additional branded products, such as "How to Skimm Your Life," a book written by the company's co-founders.

TheSkimm's Advertising Business

A company that publishes an email newsletter or has a blog site monetizes its products primarily through advertising revenues. This is a proven business model for newsletters, both print published and email.

A premium ad space in a newsletter typically pays the publisher something between $20 to $100 cost per thousand impressions, or CPM. Assuming theSkimm is mailed daily to seven million subscribers, with TheSkimm's approximately 50% email open rate well above the email newsletter average of 10-15%, which potentially translates to approximately $70,000 to $350,000 per newsletter send.

Newsletter publishers can obtain advertisers by negotiating deals directly with individual advertisers or by using an ad network to supply ads appropriate for their readership. Ad network revenues are substantially lower than what direct advertising deals make; however, publishers often use them on days when they do not have arrangements to run any directly negotiated ads.

Dedicated Email Advertising

Dedicated emails fetch even higher CPM rates. Dedicated emails are basically an email ad for one product or company mailed to a newsletter's subscribers, usually consisting of a one-page note that contains a special offer and an endorsement from the newsletter publisher of the product or company being advertised. While dedicated emails bring higher ad revenues, they can only be done on a limited basis, perhaps once or twice a month.

Otherwise, the newsletter publisher risks alienating its audience by constantly bombarding it with ads.

The advertising rates that newsletter publishers can command are affected by a number of factors, including numbers of subscribers, the demographics of the readership, and the open rate, or the percentage of subscribers who actually open and look at the email. TheSkimm has distinguished itself from competing newsletters by managing an open rate nearly four times higher than average.

The publishers of TheSkimm have found some creative ways to put together advertising efforts beyond just the traditional ad-inserted-into-newsletter format. This enabled them to develop significant deals with clients such as the NBA and ABC television network. To publicize the NBA Finals and All-Star Game, they arranged for NBA players to write skimms.

TheSkimm's Subscription Service

In 2016, theSkimm launched Skimm Ahead, a paid subscription service available through its mobile app. Skimm Ahead provides users with advance notice of events and stories related to categories of interest. Users can specify a focus on a given topic, such as sports or politics. Skimm Ahead includes a calendar that can be synced to a user's Google (GOOGL) or Apple (AAPL) calendars, audio episodes, and more. Currently, Skimm Ahead is available for $2.99 per month, or $29.99 for a year-long subscription, and theSkimm also offers a free trial for users wishing to test out the app service before committing.

TheSkimm's Additional Businesses

In June of 2019, co-founders Weisberg and Zakin released a self-help book called "How to Skimm Your Life." The book is currently listed for sale on Amazon.com (AMZN) for $27. Weisberg and Zakin launched a promotional tour called "Night Out" in support of the book release, covering 10 cities across the U.S. in just over two weeks. In addition to revenue earned from book sales, theSkimm also earns revenue from ticket sales for these events.

Key Challenges

One of the primary challenges facing theSkimm is the continued engagement of its user base. In order to remain attractive to advertisers and investors, theSkimm must be able to prove that it has a growing base of interested subscribers who are likely to click on ad links and, hopefully, to purchase products with partner companies as a result. TheSkimm draws in users with an engaging, easy-to-read digest of news stories and other topics of interest. The company must continue to meet its users' evolving tastes in order to maintain success.

Future Plans

Newsletter publishers or blog sites may eventually generate additional revenues by creating a brand associated with the newsletter and marketing their own products, such as coffee mugs or T-shirts. TheSkimm's editors have already done this, offering "swag" to so-called "Skimm-bassadors," subscribers who refer a specified number of new users to the site and service.

The Bottom Line

Given theSkimm's recent venture into other media, it's likely that the company will continue to leverage its popularity and growing user base into additional product development.