🍦Why 6AM City bought Good Daily

Today’s Life of Scoop Plus edition is an 8 minute read.

So. 6AM City bought Good Daily. What can we learn from this? Let’s meet our characters.

6AM is a local newsletter OG. They actually inspired me to start Naptown Scoop. Two guys also named Ryan started it in Greenville, SC in 2016. Co-founder and CEO Ryan Johnston’s family was already in the local publishing game (mostly print). It actually started as a project at the family company. That’s how they sold half a million dollars worth of ads before sending a single email.

The Ryans later spun 6AM out into its own company.

Their bread and butter is a curated (i.e. mostly aggregated) conversational email with a city’s local news, events, and civic information. No crime. No politics.

Before the acquisition, they had about 1.4 million subscribers in 31 markets.

Good Daily (who I’ll called GD), is relatively new to the local newsletter game. Matthew Henderson (whose X bio says he’s launched over 50 products or businesses since 2017) started it about 18 months ago. He used AI to scrape for content and produce newsletters. Before the acquisition, GD had 600,000 subscribers in 350 markets.

Nieman Lab, part of Harvard’s Journalism School, put GD on the map this January. They also called into question the integrity of the subscribers which Henderson denied, claiming the subscriber base grew organically. Like Nieman Lab, I doubt that, but it’s not important to our story.

Our third character is the $3 billion broadcast TV and digital media company that spun out of Gannett (the US’ largest newspaper publisher) in 2015. 6AM has raised about $22 million and the biggest chunk – a $10 million Series A closed in February 2024 – was led by Tegna.

That’s all for now. More about Tegna later.

For context (more on these points later):

Whatever 6AM paid for GD, it was almost certainly a smart move. Not for added subscribers or markets, but for the tech and Matthew Henderson’s brain.

Henderson is now 6AM’s VP of Engineering and is clearly talented with automation and AI. Building a company without these is like losing weight without a personal trainer. You can do it, but it’s a heck of a lot harder.

More importantly, it drastically reduces 6AM’s cost to launch new markets. Their original method – starting with editorial and sales staff and running a ton of Facebook ads – cost up to $250,000 per city.

They didn’t give a cost for the post-acquisition method – ”seeding new markets with AI-powered newsletters that require minimal human involvement until those markets mature” – but I suspect it’s about 1/10th of their old method.

That said, I’m still not betting on 6AM.

6AM started out monetizing the same way I do: selling local newsletter ads to local businesses. Their early newsletters promoted local wineries, apartment developments, music venues, art museums and theaters, the state fair, and even personal shoppers. All very local.

Scroll through today’s newsletters and you’ll find:

Most ads were spread across the entire 6AM network of newsletters. There were some local ads, but not many. And mostly around South Carolina where 6AM’s roots lie.

This is a clear shift from 2023 6AM who took pride in the “vast majority” of revenue coming from local business advertising instead of big, national brands. (Axios)

Here’s why that’s bad: they’re getting crushed on rates. Consider the following.

Scenario 1: You advertise for Smallville companies in your Smallville local newsletter. You’re providing a service not many companies offer. Maybe even no other companies. You even allow some advertisers to be industry-exclusive for an upcharge. You are probably the biggest and most important line item in your clients’ marketing budget.

Scenario 2: You advertise for MegaCorp in your large network of local newsletters that includes Smallville and dozens of towns like it. MegaCorp is buying lots of ads and their Penn educated CMO wants a steep discount because of that. He also has a crack team of Facebook ad geniuses where he could spend his budget, which leads you to discount even further to make the sale. You are a flea on the elephant that is MegaCorp’s marketing budget.

This isn’t hypothetical. Naptown Scoop is the newsletter in scenario 1. 6AM is the large network in scenario 2. It’s why we earn $12 per subscriber and they earn $7.50.

6AM’s advertising strategy is like owning a giant Napa Valley vineyard and selling the grapes to Welch’s. Meanwhile the tiny vineyard on the other side of the mountain is selling bottles for $700 each.

Why did 6AM do this? Because it’s easier. They sign one contract and boom, ad slots across the entire network are filled. Scenario 1 requires much more work. But it also leads to much higher revenue per subscriber.

And any good business knows one thing: it’s much easier to increase the value of your current customers than to add new ones.

Lesson: Local newsletters monetize best when they sell local ads to local businesses. If you plan to start more than one, I urge you to keep this in mind.

Individual local newsletters can’t monetize well with affiliate marketing. Naptown Scoop’s made about $2,000 from it in the last 5 years, mostly through a well-ranked article about Annapolis’ best Airbnbs before Airbnb killed their affiliate program. Very sad.

Affiliate marketing only makes real money at scale because conversion rates are so low. Go back to the hat. Clothes earn 4% commission on Amazon. The hat costs $23 so 6AM makes just under a buck for every hat sold. I’d need to convert 554 purchases from 22,500 readers to earn what I earn selling that ad to a local realtor instead. Not gonna happen.

Not only that, but affiliate marketing makes local newsletters look bad (i.e. less local). 6AM’s readers aren’t subscribed to hear 15 Amazon Prime Day deals to add to your cart – a real The Buy story 6AM published two weeks ago. They’re there to see the 15 best happy hours in their town. That’s why they signed up for a local newsletter.

When Naptown Scoop’s readers open up a Wednesday edition, they see the best realtor in Annapolis every time. He bought all of our Wednesdays for a year. It’s fantastic exposure for him. It makes us look good (because he’s the best in town). And it just makes sense. Most of the time he’s promoting a listing and people love clicking on his listings.

If they opened a Scoop and saw us promoting a solar-powered hat, there’d be no advertiser-content fit. We’d look like we’d sold our soul for a quick buck.

But most importantly, we’d make way less money.

Lesson: Affiliate marketing is a terrible way to monetize local newsletters.

Dedicated email blasts are when you email your audience nothing but an ad. No content they actually signed up for (like local news and events). Just an ad. They suck and I don’t know anyone who likes them.

6AM’s founders have said that they hate and avoid dedicated email blasts but that’s simply not true. Here’s one from Tuesday of this week.

Another sign of desperation is departing from your core business. 6AM exists to create and publish local newsletters. But at the Newsletter Marketing Summit last February, Ryan Heafy (6AM COO) said 6AM was going into NaaS. Four months earlier, 6AM had set up newsletters for every NBA team for the Locked On Podcast Network.

To be clear, I have nothing against NaaS. I actually offer NaaS. Anytime I talk about Columbia Scoop, that’s NaaS. But I’m not a venture-backed company trying to revolutionize local news. I’m a solo entrepreneur who wants to help other people build a good business like Naptown Scoop that puts food on the table without a dreaded job.

For 6AM, NaaS is a distraction. It’s not like Axios investing money into software to productize Smart Brevity©️. The main difference? Axios was profitable and headed for a massive outcome. And even then, the software wasn’t included when Axios sold to Cox.

Oh, and guess who owns Locked On. That would be Tegna.

Lesson: Stay in your lane. I don’t sell anything except newsletter ads for Naptown Scoop because it’s what I’m good at and we haven’t reached the limit yet. It’s incredibly tempting to try the things Michael Kauffman (Catskill Crew) is crushing it with. But it’s not my lane, so I don’t let it mess with my core business.

It wasn’t about growing the audience; although it added 600,000 subscribers to their network.

It wasn’t about revenue; nothing indicates that GD was making bank.

It was all about tech and talent.

GD’s founder and sole employee, Matthew Henderson, is now 6AM’s VP of Engineering. He’s clearly very talented with AI and automations and will be making 6AM much more efficient.

His tech also gives 6AM a cheaper way to launch new markets. They’ve stated that launching a new market costs up to $250k. Now, I’m guessing they can launch markets for a tenth of that. All dollars would go to audience growth. Content will be handled by AI.

Here’s their newly reimagined strategy.

If there ever was a year for 6AM’s profitability promises to actually come true, this might be it thanks to Henderson’s tech.

The most likely outcome for 6AM is that Tegna acquires it. Co-founder Ryan Heafy confirmed this was a possibility to Jacob Donnelly (A Media Operator) in February 2024.

It won’t be an eye-popping outcome – probably not much more than they raised. The founders will remain onboard to run the show. And independent local newsletters like Naptown Scoop will continue to crush it for people like me who just want a good lifestyle business.

Lesson: One local newsletter is awesome. Tread very carefully trying to start more.