1. Your Email Delivery Experts
The 11 Most Successful Business
Models Used in Email Marketing
And which ones can be the most successful for your newsletter
by Andrew Lutts, CEO
2. The 11 Most Successful Business
Models Used in Email Marketing
And which ones can be the most successful for your newsletter.
Table of Contents:
1. Paid Newsletter Subscription Model pg 3
2. Advertiser-Supported Email Newsletter pg 4
3. Affiliate Model, Revenue Share & Pay for Performance pg 5
4. Free Loss-Leader Email Newsletter with Free Content pg 6
5. Brokerage Newsletter Model, Matching Buyers and Sellers pg 7
6. Infomediary Co-Registration Model pg 8
7. Merchant Model, pg 9
8. Manufacturer Direct to Consumer pg 10
9. Pay Per Access Revenue Model pg 11
10. Non-Profit Fundraising & Advocacy pg 12
11. Open Source Model pg 13
3. 1. Paid Newsletter
Do people really pay for email newsletters when so Use this model for your newsletter if:
much information is free online? Absolutely! In fact, a
• You are migrating customers from paid postal
well-conceived, focused, and well-written newsletter
mail to paid email.
can generate plenty of business for the creator. There
• Your content can be reliably delivered on a
will always be a good demand for valuable email
newsletters, and people will pay for them.
• You have a unique offering.
The paid subscription model is probably the
Key aspects of successful paid newsletters:
strongest business models for publishers. Of course
with this business model, content is key. Publishers 1. Premium content that people will pay for.
prefer this email business model because they save 2. Reliable and timely delivery.
lots of money in delivery costs (paper and postage). 3. Information that will give recipients an edge over
Subscribers like email newsletters because they competitors and others.
receive the information in a very timely fashion. 4. Advice, support, consulting.
Paid newsletters are great for things like stock trading, Examples of paid email newsletters:
finance and investment and other time-sensitive
• London Financial Times (www.ft.com)
information. They can also be good for things like
• Wall Street Journal (www.wsj.com)
coaching, advice, eLearning, support networks,
sports, news and other advice and reminders. People
will readily buy valuable information especially when
it includes unique knowledge, the very latest trends,
or a fresh perspective and viewpoint on a topic not
available elsewhere. When written with a compelling
personality and voice, success is the result.
4. 2. Advertiser-Supported
Rooted in traditional media broadcast (TV, Advertisements are sometimes served up by the site
magazines, radio), this business model sells space owners own ad server or more commonly through a
in newsletters and web sites. Typically, a newsletter third-party ad network service such as ValueClick or
using this model provides their own original content Google AdSense.
mixed in with advertiser’s messages. Advertiser
Use this model for your newsletter if:
supported newsletters, because they are free, usually
have the highest number of subscribers and the • You have a good newsletter, but people are not
largest distribution compared to other newsletters. likely to pay money to get it.
• You can grow your list to over 10,000 subscribers.
If you produce a good quality, well-distributed email
• Your newsletter addresses a highly targeted,
newsletter to a focused targeted audience, you can
highly focused audience.
make very good money by including advertisements
in your newsletter. Depending on various factors, Key aspects of a successful supported newsletter:
newsletter owners can charge advertisers several
1. Help your advertisers succeed in selling to your
thousand dollars per issue (every day!) for a
subscribers. When they succeed in selling to your
newsletter that is distributed to tens of thousands
subscribers they will be repeat advertisers for you.
of people or more. The money ads up fast. Also,
2. Develop a rate card with approved ad
depending on your newsletter, you can take many
dimensions, flash/no flash policy, frequency
ads from different advertisers in each issue.
discounts, CPM rates (cost per thousand), and
One key here is to have a large list and a focused other standards that advertisers will expect to
readership. For example, Kim Komando see, when evaluating your newsletter.
(www.komando.com), the syndicated radio talk show 3. Find advertisers with products and services that
host known as “America’s digital goddess”, reaches align with your editorial content.
listeners on 400 radio stations. Komando sends 4. Show your new subscribers sample newsletters
emails to her 9 million email newsletter subscribers which show the types of ads they will likely see.
each week with helpful computer advice and tips. 5. Consider an outside ad network such as Burst
This targeted readership is perfect for advertisers of Media (www.burstmedia.com) or ValueClick
products like spyware detection, antivirus software, (www.valueclick.com).
parental controls, registry cleaners, computer
Examples of advertiser-supported newsletters:
gadgets, books, computer training, and more.
You don’t need 9 million subscribers to make money
with this business model. A quality list (high open and
click-through rates) and a fairly targeted readership
can bring profitable results for your advertisers.
5. 3. Affiliate Model, Revenue Share
The Affiliate business model offers purchase Use the affiliate model for your newsletter if:
opportunities through financial incentives. With
• You have a large number of newsletter
an affiliate model, the email newsletter publisher
subscribers and / or a high traffic web site.
promotes products and services for another company
• You believe you can effectively target interesting
using various methods (banners, newsletter links,
offers to your readers.
solo ads, etc.) and benefits from every sale made from
• You are able to segment and target offers to
the clickthrough from their email newsletter or web
various decision makers and buyers.
site. This model can take a bit of time to set up, and
• The readership to your newsletter is engaged and
yet it can be one of the most lucrative when running
active, and will respond to offers.
Key aspects of a successful affiliate model:
Although many internet businesses attempt to
generate sales from their own main web site, the 1. Partner with reputable companies with positive
affiliate model reaches out to people wherever long-term histories.
they may be online (like at the web property of 2. Create relevant partnerships (with similar target
an affiliate). By offering financial incentives (in the markets).
form of a percentage of revenue) the affiliates are 3. Use reliable tracking methods to be sure
incentivized to provide clickthroughs to the merchant payments are accurate.
web site to place an order. 4. Use an agency or intermediary if needed, such as:
Commission Junction (www.cj.com),
Unlike the typical advertiser model, which generates
LinkShare (www.linkshare.com), or
revenue for the email newsletter owner whether
the ad works or not, the affiliate model is a pay-for-
performance model. If an affiliate does not generate A successful affilliate marketer is:
sales, there is no cost to the merchant.
• SelfGrowth (www.selfgrowth.com)
For example, if a newsletter subscriber clicks on a
link in an email newsletter or web site that takes
them to Amazon.com where they buy a book,
Amazon will pay the affiliate 5% of the cover price as
a commission. This is sometimes also called Cost Per
Acquisition (CPA) or Revenue Sharing.
6. 4. Free Loss Leader Email
Newsletter with Free Content
With this business model, the publisher initially gives Key aspects of a successful loss leader campaign:
away free newsletter content with the hopes of later
1. Always continue to grow your free subscriber
selling the subscriber paid content.
list. You might even want to pay for new free
Free (for a while) email newsletters are an subscribers! Why? This is the pond you will be
increasingly-popular business model for sending fishing from, and the bigger the better.
out email newsletters with valuable content that 2. Keep a reliable frequency of free content. If you
users will hopefully ultimately pay for. It can feel are delivering value in a reliable and professional
frustrating at times to give out your best content and way, it instills confidence in what you do.
information, but when the money starts rolling in you 3. Test your model to find the ideal time to convert
will clearly see how this model can work for you. the free subscribers to paid ones. Some services
may require a quick purchase, other solutions
How it works: Send your free newsletter out for a
may take longer to make the conversion.
period of time at no charge to your list of non-paying
4. Experiment with different conversion offers.
subscribers. Give them high quality information, but
A low-dollar offer can get them started and
not everything. You want to get the reader hooked,
accustomed to paying for your information.
then reel them in like an expert fisherman.
Upsell them later as confidence and trust is built.
Of course you need content that is valuable enough 5. For those who do not buy from you after many
to make your subscriber money, prevent them from attempts to convert, remove them from your list
losing money, make them or their business more and make them re-request a free subscription.
successful, or any number of things. Part of this Make them work in order to receive free content.
equation also includes your offer to get them to reach
Examples of successful, loss-leader campaigns
for their wallet. Unfortunately, if you get any one of
these elements wrong, the model might not work. • Forbes Magazine (www.forbes.com)
But done right, this model can work surprisingly well. • Boston Business Journal (www.bbj.com)
• General Nutrition Centers (www.gnc.com)
Use the loss-leader business model if:
Note: The loss-leader business model is similar to the
• You are confident people will have a desire for
“freemium” business model, in which basic services
and pay for your contet when you shut them off.
are offered for free, while advanced or special features
• You produce a lot of content and it is easy for you
are charged for. The freemium business model has
to give some of it away.
gained popularity with Web 2.0 companies. According
• There are few other competitors or places online
to the New York Times, freemium is becoming the most
that generate the same content as you.
popular business model among web start-ups.
• You offer a personal, genuine and compelling
voice or personality that readers respond to.
7. 5. Brokerage Newsletter Model,
Matching Buyers & Sellers
This model brings buyers and sellers together. Many Key aspects of a brokerage newsletter:
brokers use email marketing to either initiate or
1. Use email, SMS or other push technologies to
maintain a relationship with a potential buyer of a
keep buyers interested.
product or service. By matching the buyer and seller,
2. Present the objects for sale in a clear, easy to read
a broker will normally receive a commission as their
and purchase way.
revenue model. Other models also ask sellers to pay a
3. Add value through knowledge, ideas and
strategy in your outbound communication
For example, there are real estate brokers, business emails.
transaction brokers, auction brokers, recruitment
Examples of brokerage business models are:
brokers, and more. With the brokerage business
model, once a certain critical mass of traffic is • www.isoldmyhouse.com
reached, the marketplace becomes even more • www.travelocity.com
efficient and better for both buyer and seller. • www.ebay.com
Use the brokerage business model if:
• Your business model is one that includes a
network of buyers and sellers.
• You have the momentum to grow the service year
• You are able to communicate regularly about
updates, changes, and new offerings.
8. 6. Infomediary
This model is characterized by the compiling and/ Use the infomediary business model if:
or sharing of information. When a company collects
• You collect a lot of visitor data.
subscriber data as a result of customer loyalty
• Your data is well segmented with specific
programs, redeemable points, or online coupons,
demographics of possible buyers.
this data is sold for targeted advertising by an
infomediary (sometimes called an aggregator). Key aspects of a successful infomediary model:
How it works: an infomediary, often through the 1. Be sure to establish a large network of others to
use of email newsletters, web sites, coregistration exchange information and leads with.
partners, or ad networks, collects subscriber and 2. Establish multiple distribution models and media
visitor data, and then sells this information. This outposts.
information is sold for pennies or several dollars per 3. Collect visitor information at every chance in
lead (up to $25 or more for high-quality and B2B multiple locations.
leads). These leads and prospects are then normally
Examples of infomediary companies are:
solicited with email newsletters and promotional
offers, which, if highly-focused and relevant, can • Nielsen (www.nielsen.com)
generate high response rates. • Doubleclick (www.doubleclick.com)
• Business trade publications:
Consumer data can be valuable, especially when
used to sell prospects with targeted email offers.
Additionally, consumers themselves will often use
comparative data (professional or peer ratings) made
possible by aggregators about products and services
to help them make purchase decisions.
Infomediaries collect data about consumers and business
prospects and help vendors reach them through various
messaging strategies and online properties.
9. 7. Virtual Merchant, Catalog,
or Click & Mortar Vendor
This model is essentially an electronic version of Use the merchant business model if:
a traditional “bricks and mortar” store. The online
• You won’t alienate an existing dealer network
merchant model makes it easier and more convenient
who already does a lot of selling for you
for consumers to shop. It also saves the merchant
• You are selling something that does not need to
significant overhead when the merchant has a virtual
be physically seen or tested before purchase
• The price point is in a range that people will feel
Whichever type of merchant selling is done, email comfortable making an online purchase
plays a critical role in keeping the shopper engaged • It is an advantage to offer a wide variety of
and coming back. In fact, some studies show that shapes, sizes, colors or options only available
50% - 60% of online purchases are made as a result of online
an email notification, reminder, or newsletter. • The sales cycle and process can be achieved with
one or a series of many email messages which
Here are four kinds of merchants:
move the buyer along in the purchasing process.
• Virtual Web Only Merchant – an online
Tips to succeed with merchant newsletter selling:
merchant that sells exclusively on the
web (Zappos.com, Newegg.com, Ice.com, 1. Make good use of coupons and promotions.
Bodybuilding.com) 2. Use seasons to trigger an email (summer sale!).
• Catalog / Call Center Merchant – a company 3. Be sure to send reminders when new products
that offers both traditional catalog mail order become available.
services and also has a web site catalog with call 4. Use intelligent suggestions tools and best-seller
center (LandsEnd.com) lists to show what other customers are buying
• Click and Mortar – a company that offers both and thus suggest additional purchases.
online web catalog and physical retail stores 5. Review your web traffic and analytics for
(Staples.com, Sears.com, BestBuy.com) successful trends and to plan future campaigns.
• Bit Vendor – a company that sells only digital 6. Carefully plan the best time and day to send your
products and services that are normally email messages to generate the highest number
downloaded instantly after purchase (Apple and sales volume of online purchases.
iTunes Music Store,McAfee.com)
Examples of successful Merchants are:
10. 8. Manufacturer Direct
A type of disintermediation or “cutting out the Use the direct to consumer business model if:
middleman”, this model allows a manufacturer
• You plan to sell on volume.
to reach buyers directly. With the direct model,
• You have the capacity to succeed with
oftentimes there is no traditional outbound sales
operational excellence as a differentiator.
force employed. There is normally no store. Instead,
• You have a just-in-time distribution model.
sales are generated with online order forms, web
• You can keep your advertising costs low or
sites, virtual demos, video, flash and other technology
showcasing the product or service, and generating
the sale as a result of a consumer self-service Tips to succeed with ths model:
1. Compete with aggressive pricing since there is no
Dell Computer is one of the most successful middleman.
companies to use a direct to consumer business 2. Offer a clear value and benefit such as
model. Email newsletters showcasing pictures of customization, price or delivery.
fresh new computers are hard to resist when your old 3. Automate as much as possible to keep
computer is giving you problems or starts looking efficiencies high and costs low.
tired. To succeed, it is critical that the direct to
Examples of direct to consumer manufacturers:
consumer manufacturer make use of the efficiencies
involved with email marketing, online self-service • www.dell.com
ordering, and efficient delivery systems to gain a • www.vistaprint.com
competitive advantage. • www.irobot.com
The direct to consumer model is a popular and effective use
of email marketing. It allows manufacturers to bypass retail
channels and gain mindshare with their end users.
11. 9. Pay Per Access
Use the pay per access revenue model if:
With this model payment occurs for single access
• Your product or service can be delivered digitally.
to a downloadable product such as a document,
• You can control your content with some kind of
research report, video, stock photo set, or music clip.
The product sold may or may not be protected with a
• Your product offers a clear value that can be
password or with Digital Rights Management.
For example, some research organizations like
Tips to succeed with the pay per access model:
Gomez, Gartner Group, Yankee Group and Forrester
Research sell high-quality specialized and often 1. Be sure your content / product can be delivered
customized research reports on a pay per view access. immediately after ordering.
Many digital services such as ebooks, music, movies, 2. Price your product attractively knowing that your
software are also sold on a pay per view model. distribution costs are very low.
3. Consider using affiliates and others to help
With this model, make full use of email news and
promote your offering.
notices to alert your subscribers of new CD releases,
4. Control the pipeline to ensure that various
reports just published and ready for download, books
sources are tracked and the user experience is
ready to be read on your Kindle reader, software
upgrades available for purchase, and new special
5. Bundle products with other best sellers and
reports available now. The fact that something can
complementary products in order to increase the
be purchased, downloaded and enjoyed immediately
total spend from the buyer.
can be a dynamic driver of new sales for the “I want it
now” mindset. Examples of pay per access sellers are:
• Stock photos (www.fotosearch.com)
• Amazon Kindle Books (www.kindle.com)
• On Demand Movies (www.netflix.com)
12. 10. Non-Profit Fundraising
The non-profit organization’s business model for Tips to succeed with this model:
email marketing is one of fundraising and advocacy.
1. Go slow and steady, don’t push too hard.
When email marketing is combined with advocacy,
2. Combine fundraising messaging with other
lobbying, and legislative updates, email messaging
information and updates.
can also be effectively combined for fundraising
3. Use a professional, reserved and conservative
campaigns. As with any email campaign, but
message style in your writing.
especially with fundraising, email marketing must
be done with care when reaching out to a non-profit Examples of non-profits using this strategy are:
target demographic. Asking for money is a sensitive
• Habitat for Humanity (www.habitat.org)
subject matter, especially by email.
• American Red Cross (www.redcross.org)
Use the non-profit business model if: • Amnesty International (www.amnesty.org)
• United Nations Children’s Fund (UNICEF)
• You want to build advocacy for your positions
• You expect that people will be receptive to your
invitations for support.
• You already have established some kind of
relationship with your subscribers.
• You are on a limited budget.
• You have lots of built-up goodwill.
Non-Profit Organizations use email for outreach and
communications programs that keep their members up to date
about events and fundraising efforts.
13. 11. Open Source
In general, open source refers to any program whose Use the open source business model if:
source code is made available for use or modification
• You are best at programming, creation, and
as users or other developers see fit. Open source
development rather than selling.
describes practices in production and development
• You embrace the concept for some or all of your
that promote access to the end product’s source code.
company or products.
In terms of the business models used in open source, • There is little or no budget to manufacture, market
these often focus around support services (Red Hat), and sell the product.
hardware support (VA Linux), proprietary components • You feel like your ideas are excellent and will
(Virtual Iron and XenSource), dual licensing (MySql), succeed in the open source market.
and Advertising (software default settings favoring
Tips to succeed with the open source model:
advertisers, such as Firefox defaulting to Google
search). Email and the internet have provided an 1. Make use of efficient delivery systems (software
ideal vehicle for the creation and distribution of open downloads).
source, since the download distribution method for 2. Be sure to gather contact information for follow-up
software is very inexpensive for the creator. at a later date (upsells and conversions).
3. Realize making money with this model can be
One key strategy with open source is to be sure to
difficult and odds are against overnight success.
capture the visitor information for those people who
4. Enter the space fully realizing that it may be a long-
visit, download or use the open source code. Email can
be used to continue communicating and advocating for
5. Ask your users to help promote your solution.
development, but also to upsell to premium services
or similar. Examples of open source businesses are:
Success stories like Linux, Netscape/Firefox, Open • Ubuntu Linux (www.ubuntu.com)
Office and others have met with great success using • Mozilla Firefox(www.firefox.com)
the open source model. • Drupal (www.drupal.com)
The number and types of business models used in again, that industry is now changing as many people
email marketing and online selling normally fall into now use online services like Hulu.com or Fancast.com
one of these eleven categories. In general, these for instant movie downloads and viewing rather than
models don’t change much from year to year. wait for a physical DVD in postal mail.
However, what sometimes does change is everything Additionally, every year traditional retailers attempt
else around the business model. These business new and efficient online ordering and fulfillment
models become blurred when innovative new models, as well as new technology-based buying
ideas, companies or technologies redefine markets, options to help differentiate themselves in the buying
delivery systems or revenue models. The changes can process and gain a competitive advantage.
sometimes be dramatic.
See if your product or service can use one or more
For example, Blockbuster Video lost its dominance of these email marketing business models and
in the DVD movie rental business when when Netflix strategies to help you better sell in your marketplace.
used the internet to allow customers to request and You may find that certain minor changes can provide
manage their movie rentals online and by mail. Once you with major competitive advantages.
About Net Atlantic
Founded in 1995, Net Atlantic, Inc. is a global email service provider (ESP) offering email marketing solutions,
branded reseller programs and dedicated email marketing servers. Net Atlantic’s goal is to help businesses
maximize ROI with email tools like segmentation, behavioral targeting, A/B/N split testing, triggered and
sequential mailings, custom surveys, click streaming, spam analysis tools, open database connectivity, and an
open API (application program interface for even further customization). Net Atlantic was one of the first email
Visit www.netatlantic.com, or contact an account executive toll-free at 877-263-8285.