For those of that aren't premium members, you aren't used to getting a piece from me on Fridays. I wanted to open up today's piece to everyone because I think it talks about something all operators are thinking about. If you want to become a premium member and never miss a future Friday issue, sign up today.

When I ever write a book about media, I think one of the chapters will have to be dedicated to constant debate between advertising and subscriptions. I won't be overly verbose because I've said it before, but the best operators know this is all dumb and that the right answer is to do both.

But it has been very exciting to see young media companies—those that got their launch during the heavy subscription-only days of 2020—realizing that there is money to be made in advertising.

Look at Punchbowl, for example. According to The Wall Street Journal, it's making $10 million in revenue this year off 100,000 subscribers. Axios took it one step farther and said that about $1 million comes from subscriptions, which means it only has about 3,000 paying subscribers. It earns the rest on—shocking—ads and events. For some reason, this was controversial, according to this story in Defector.

Something interesting has happened over the past week. On more than one occasion, I've run into someone who was exclusively focused on building a subscription product. A year ago, when I would ask, "why not run ads," I would get the same answer that so many people were saying on repeat: ads are bad. Or, "subscriptions better align me to the reader."

This time, in both instances, I didn't get that response. One operator told me that he had sold a large ad deal which was like getting a non-dilutive round of investment. So I asked him, "how many people complained about it?" And he said, "not a single person."

Ads aren't bad. Bad ads are bad. Good ads can actually be helpful.

I then talked to another operator who had decided he was going to start running advertisements. He had been building a subscription-only business and was actually doing pretty well. He's now pivoting his business, generating advertising revenue, but will do something that I think is smart: monetize the community.

In essence, he's looking at his content as a way to bring as many people to his site as possible and then he'll try and get the paid subscription using the exceptional community he's building. For what he is trying to build, this makes so much sense.

This isn't how many operators think about subscriptions, though. Too often, the debate is focused on monetizing stories. The metered paywalls track how many stories you've read and then hit you with a paywall if it's too many. And look, it's a perfectly fine business. I'm not someone who is going to shy away from monetizing what we have available to us.

If we really think about it, subscriptions are about one thing: predictable and renewable revenue. You have a lot of individuals paying smaller amounts of money. Even with churn, it's pretty predictable and renewable. Compare that to advertising, which requires a constant sell. When the ad agreement expires, you have to sell that client again. They could walk.

But are there other ways to get that predictable reader revenue that doesn't require gating the primary product? Let's explore a few examples...

Consider The Hustle before it was acquired by Hubspot early this year. Prior to the deal (and Covid), it had three main products: newsletter, event, and Trends. Rather than trying to force a subscription on the newsletter, they recognized that it was better to build the newsletter as large as possible and then monetize down funnel.

It launched Trends in 2019, charging $299 a year, which got you access to premium content and a community. I've never surveyed the Trends audience, but my money says that the community matters a lot more than the content.

The Hustle was able to generate that reader revenue, but not on the primary product. Instead, it kept that funnel as large as possible and then pushed more of those users down to Trends.

Another good example is CoinDesk. I spent four years there working on the events and advertising businesses. Before I left, I wrote the strategy for how CoinDesk could launch a subscription product, but my guess is they'll never launch one. Why? Its major monetizable opportunity is its event business. It'll be in Austin in June hosting a festival for 10,000+ crypto enthusiasts.

Rather than cutting off traffic—especially at a time like this where the markets are incredibly hot—it can, instead, focus on acquiring as many users as possible and then find down funnel opportunities to generate reader revenue.

Let's look at the mother of all examples: Politico.

For years, while The Washington Post and The New York Times built large subscription businesses dependent heavily on political coverage, Politico remained a free site. It could have easily thrown up a paywall, gated its content, and probably built a solid revenue generating opportunity.

But instead, it decided to chase a different business and went hardcore B2B. Politico is free. However, for the incredibly dense information in Politico Pro that only a small audience could understand, users can expect to pay a sizeable five figures. Politico opted to use the entire general product as a marketing campaign to then acquire users to introduce them to Politico Pro.

What do all three of these examples share?

First, they found ways to generate reader revenue that didn't require closing off their top of funnel opportunities. And second, they appreciated the cardinal rule of media: diversification. The Hustle, CoinDesk, and Politico all had thriving advertising businesses on the free product. This gave them the ability to eat their cake and have it too.

I'm not saying that paywalls and subscriptions are bad products. I run one here on A Media Operator where the content is behind a wall. The Information is a profitable media company that has gone exclusively subscription for most of its existence (it's now running newsletter ads). Subscriptions are totally fine and good products to have. What I am saying, though, is that there are other ways to monetize to get a similar effect as the paywall.

Most times I interview a candidate to join my team at Morning Brew, I'm asked about adding a paywall. And I say the same thing every time. "It's not in my strategy for the foreseeable future." When they ask why, the answer is always the same. "Our ad business is strong and I'd rather find ways to directly monetize down funnel, allowing me to build as large an audience as possible." You'll see more of that in the coming years.

I encourage operators to look and see how each piece of the business can provide value. In some areas, the content is actually a great tool for acquiring users, but only monetizing with ads. Instead, push people down a funnel to other opportunities. It's a healthy model and it gives you a lot to work with.

Thanks for reading today's piece. If you have thoughts, please hit reply. Otherwise, become a premium member and join our Slack community. Thanks and have a great day!