The Curious Beginnings of Morning Brew
From college dorm room to $75 million acquisition.
Morning Brew began as a writing list in 2014, originally called “Market Corner.” At the time, Alex Lieberman — a senior at the University of Michigan — identified a problem: established media outlets like the Wall Street Journal were publishing dry and dense news stories that he and his fellow classmates didn’t have time to read cover to cover. His solution was to create conversational but informative summaries of important business stories with the goal of empowering and educating young business professionals. As he was fielding interest from others, Alex met his co-founder Alex Reif, who saw potential in the idea and dedicated his winter break and early spring preparing to launch their first newsletter in March 2015.
What began as a list of 500 quickly grew to thousands of readers. The growing success of the business encouraged Alex to quit his job at Morgan Stanley in 2016 and work on the newsletter full-time. He discusses the circumstances and his thought process in this episode of Founder’s Journal (~14 minutes). Austin began working on the newsletter full-time upon graduating in May of 2017, the same year that they raised a small convertible note of $750,000 from family and friends to fund and grow their venture. In 2017, they also hired their first two employees (a writer and a generalist), eventually growing to a team of around 25 in 2018.
Between 2018 and 2019, Morning Brew began receiving several offers to sell their business as they grew their readership from 160,000 to a million. One of those offers was from Axel Springer, the $12 billion media powerhouse that also owns Business Insider (now called Insider). They had no intention of selling but this offer became increasingly attractive as states began mandating lockdowns with the onset of the Covid-19 pandemic. The founders openly acknowledged that their budding business was vulnerable to an economic recession which would wreak havoc on their dominant source of revenue: paid advertising. In fact, there was 72-hour period when nearly all their ad revenue vanished early in the pandemic. Perhaps this is party the reason that Morning Brew announced the potential acquisition by Insider in October 2020. The company was far from desperate, however. The announcement came a few months after they reached a major milestone of 1 million opens. Nonetheless, the $75 million deal was finalized by the end of the month.
Since the acquisition, Alex Lieberman has stepped down as CEO and assumed the role of Executive Chairman. He remains active in company decisions and frequently appears in public interviews.
Business Model
Advertising
Morning Brew’s foundational model hasn’t strayed very far from its original underpinnings. The company continues to offer bite-sized summaries of major new stories through a free daily newsletters. Their revenue is primarily driven by advertising and sponsorships. Morning Brew has an in-house sales team that is dedicated to growing these partnerships. In 2020, around 75% of their business was direct and 25% was with agencies. The company had 180 advertising partners across all three newsletters in 2019 which was double the number of partnerships they had in 2018. Alex attributed this growth to their new head of brand partnerships and integrated marketing, Jason Schulweis.
Morning Brew’s daily newsletter accounted for 95% of overall revenue in early 2019. At the time, the daily newsletter had around 1.8 million subscribers with an impressive open rate of 42%. For context, the average open rate for newsletters is between 19–26%, depending on the industry. The proportion of total ad revenue generated by the daily newsletter has since declined after diversifying their products and launching Retail Brew and Emerging Tech Brew. Alex reported in March 2020 that Retail Brew had 105,000 subscribers with an open rate of 50% and Emerging Tech had 165,000 subscribers with an open rate of 55%. The two newsletters accounted for around 10% of revenue at that time. Their podcast, Business Casual, accounted for another 1% of revenue. As of this writing, Morning Brew has a total of 7 newsletters specializing in different topics. They also released a second podcast called Founder’s Journal which is a short audio diary created and hosted by Alex.
The decision to forego subscriptions and focus on advertising revenue (at least for now) has largely worked out in the company’s favor. Morning Brew grew their revenue from $3 million in 2018 to $13 million in 2019 with only 33 employees. At the time of their acquisition, the company expected to bring in over $20 million in revenue and $6 million in profit.
Strategy
Morning Brew is a data-driven business. The company developed metrics to rank subscriber’s engagement levels and they actively gather insights to improve user experiences. The company also rigorously A/B tests their subject lines and closely monitors email open rates. Repeat readers are verified on a daily basis in order spot fake email addresses and keep subscriber lists up-to-date. Clean and accurate data on user-related metrics is critical for advertising partnerships and reducing customer acquisition costs (CAC).
Another way that the company reduces CAC is through their referral program, which they launched in 2017 after discovering the value of ambassador programs. Over 10% of Morning Brew’s growth is driven by their referral program. During the early years of the company, the referral program accounted for nearly 30% of their growth, helping to grow their audience from 100,000 subscribers to 1.5 million within 18 months. The rest of Morning Brew’s growth is driven by paid advertising. For example, on they built a lookalike audience resembling readers that have successfully referred subscribers on Facebook Ads. This strategy enabled the company to grow their subscriber base from 500,000 to 2.5 million. Morning Brew also diversifies their ad spending. The company reported that they spend less than 35% of their ad budget on any one channel. Fakebook Ads accounted for less than 15% of their budget in August 2020. In 2020, Morning Brew spent anywhere in the low- to mid-six figure range on paid marketing, which is among the top two costs for the business.
Future Direction
Morning Brew is moving toward more original content and into the B2B space with the launch of new products like Marketing Brew and HR Brew. However, Austin reported that the company will stay true to its roots and largely remain in the curation and distribution space.
References and Additional Resources:
Barber, Kayleigh. “How Morning Brew grew to $13m in revenue with 33 employees.” Digiday. February 6, 2020. https://digiday.com/media/morning-brew-grew-13m-revenue-33-employees/.
Cahoon, Sam. “Email Open Rates By Industry (& Other Top Email Benchmarks).” HubSpot. https://blog.hubspot.com/sales/average-email-open-rate-benchmark.
Denk, Tyler. “How Morning Brew’s referral program built an audience of 1.5 million subscribers.” Missin.org. August 19, 2019. https://medium.com/the-mission/how-morning-brews-referral-program-built-an-audience-of-1-5-million-subscribers-3315482c1aa5.
Dunning, Mark. “How Morning Brew drives 95% of revenue from email monetization.” LiveIntent. January 12, 2021. https://blog.liveintent.com/how-morning-brew-drives-95-of-revenue-from-email-monetization/.
Fischer, Sara. “Exclusive: Insider Inc. buys majority stake in Morning Brew in all-cash deal.” Axios. October 29, 2020. https://www.axios.com/insider-inc-buys-majority-stake-morning-brew-e6ec0673-4354-4bc7-9feb-e0b149508c9a.html.
Forst, Kelly. “How to Split Test Subject Lines Like a Newsletter with 2.5 Million Subscribers.” AWeber. April 20, 2021. https://blog.aweber.com/email-marketing/split-test-subject-lines-like-morning-brew.htm.
Honstantinovic, Danny. “Austin Rief: How Morning Brew went from college newsletter to $75 million in 5 years.” The Business of Business. March 18, 2021. https://www.businessofbusiness.com/videos/austin-rief-how-morning-brew-went-from-college-newsletter-to-75-million/.
Horvath, Hanna. “Ask a Genius: How Alex Lieberman broke the business news industry.” Policygenius. July 17, 2019. https://www.policygenius.com/blog/alex-lieberman-broke-the-business-news-industry/.
Kafka, Peter. “Morning Brew, the business newsletter publisher for millennials, is in talks to sell itself to Business Insider.” Vox Recode. October 13, 2020. https://www.vox.com/recode/2020/10/13/21515418/morning-brew-business-insider-deal-acquisition.
Lieberman, Alex. “Former CEO of Morning Brew.” Founder’s Journal. April 23, 2021. https://foundersjournal.morningbrew.com/former-ceo-of-morning-brew/.
Lieberman, Alex. “How I Quit My Job.” Founder’s Journal. June 30, 2021. https://foundersjournal.morningbrew.com/how-i-quit-my-job/.
Lieberman, Alex. “How Morning Brew Exited in an 8-Figure Deal.” Founder’s Journal. October 22, 2021. https://foundersjournal.morningbrew.com/how-morning-brew-exited-for-8-figures/.
Lieberman, Alex. (@businessbarista). “I have exciting news to share. Effective this week, I am moving from my role as CEO of Morning Brew to the role of Executive Chairman. Austin, my co-founder of 6 years, will be moving from his role as COO to CEO. Time for a quick reflection.” Twitter. April 23, 2021, 11:27 a.m. https://twitter.com/businessbarista/status/1385646461820542981?lang=en.
Lockerbie, Trey. “TIP344: A Deep Dive Into Morning Brew’s $75M Valuation W/ Alex Lieberman.” We Study Billionaires. April 10, 2021. https://www.theinvestorspodcast.com/episodes/tip344-a-deep-dive-into-morning-brews-75m-valuation-w-alex-lieberman/.
Morning Brew. “About.” https://www.morningbrew.com/about.
Reif, Austin. “Morning Brew Turns 5, Hits 2 Million Subscribers.” Morning Brew. April 13, 2020. https://www.morningbrew.com/daily/stories/2020/04/13/morning-brew-turns-5-hits-2-million-subscribers.
Rothenberg, Jenny. “Engagement beats scale: Inside Morning Brew’s approach to subscriber growth.” Entrepreneur’s Handbook. October 26, 2020. https://entrepreneurshandbook.co/engagement-beats-scale-inside-morning-brews-approach-to-subscriber-growth-60444bfaa9a3.
Sternberg, Josh. “The Morning Brew newsletter will bring in $20 million in revenue this year.” The Media Nut. July 23, 2020. https://medianut.substack.com/p/the-morning-brew-newsletter-will.
Suis, Sarah. “Morning Brew: A Media Startup Growing Outside The VC Bubble.” AdExchanger. March 11, 2020. https://www.adexchanger.com/the-sell-sider/morning-brew-a-media-startup-growing-outside-the-vc-bubble/.
Whiteman, Lou. “Here’s How Alex Lieberman Grew Morning Brew Into a $75 Million Company.” The Motley Fool. January 23, 2021. https://www.fool.com/investing/2021/01/23/heres-how-alex-lieberman-grew-morning-brew-into-a/.
Zaidi, Bilal. “Alex Lieberman, Morning Brew // Building A Digital Media Empire, Growth Playbook + A $75mil Sale.” Creator Lab. March 24, 2021. https://www.youtube.com/watch?v=12KYBLPvEIg.
