How TheSkimm Works and Makes Money

TheSkimm's business model for generating revenue is the same as that for most email newsletters: through advertising. Email newsletters can generate advertising revenue based on numbers of subscribers, open rates and other factors. In the future, TheSkimm may seek to expand revenues by developing itself as a brand and marketing its own products.

TheSkimm is a daily, news digest newsletter that was founded in 2012 by two former NBC news producers, Danielle Weisberg and Carly Zakin. It is dispatched by 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 in 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 sufficiently to garner two rounds of funding totaling over $7 million. The company used the money to establish an office, as the two producers started the business working out of their apartment, and hire additional writers, editors and support staff. Part of the venture capital obtained has been dedicated to marketing.

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 1.5 million subscribers, with TheSkimm's approximately 50% email open rate well above the email newsletter average of 10-15%, that potentially translates to approximately $15,000 to $75,000 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 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.

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 hinted they see TheSkimm as representing a "lifestyle," so they may well be considering establishing a brand and offering Skimm products for sale.