How Defector generated $3.8 million in its second year

Transcript of full conversation:

(Audio was transcribed using an automated service. Please excuse mistakes and typos.)

Jasper Wang 1:31
defector was started by 19 people 18 of whom previously worked at Deadspin, which was the sports imprint under the Gawker Media enterprise, Gawker, Gizmodo geo media, in mid 2019, Univision sold Gizmodo media over to a small private equity firm. Those folks put in leadership that immediately ran into conflict with the various editorial teams, with Deadspin being sort of the most prominent one. And in October of 2019, things truly fell apart where every single staffer at Deadspin quit. And, you know, it was a big media story and a big labor story over there. In the ensuing months after that 18 of those writers and editors, and myself as an outside business person, got together and eventually launched defector media, which is a subscription based sports and culture website. But by and large, very much a blog as you would traditionally think about it. We announced the project in July of 2020, and started publishing on September 10 2020. So yes, we are two years and two weeks into defector media.

Jack Marshall 3:07
A year ago, you published a pretty detailed annual report, sort of unpacking your first year in business. And you know, you were pretty transparent about your progress, your revenue numbers and the subscriber numbers. So how are things progressing in year two versus year one? I think you said in in year one you did, I think it was 3.2 million revenue. 36,000 active subscribers. I think you said you had at the time. 95% of your revenue, I think you said came from subscriptions. So how was that sort of evolved in year two?

Jasper Wang 3:38
Yeah, I’ll give the high levels. And then Sean, who is our head of subscription strategy, can dive into the specifics on the subscription numbers. For us, I mean, your to was very successful. You know, we sort of keep our goals are pretty modest. But the top line numbers are we went from something like $3.2 million in year one to something like $3.8 million. In year two, we’re still looking at the renewal numbers. For for going into year three, those are still coming in. But Shawn can give us a quick readout on that. And, you know, overall, we saw what was effectively slow and steady growth, with most months, just you know, sort of seeing a couple 100 new subscribers. You know, some months we were net down, meaning we you know, saw more turn than we saw new subscribers. But if you look at the month by month, it’s sort of just like a slow and steady climb from September to September. Of course, we have something like 20,000 of our paid annual subscribers renewing in early September every year. So that’s always sort of a very precarious moment. But we’ve come out the other side, relatively unscathed at this point.

Sean Kuhn 5:00
Yep into Ken sharp and a little bit of the, you know, the renewal performance at the the year three cliff, we had something like 28,000, folks faced a renewal decision in the month of September, and we’re just a hair under 90% of those people made a successful renewal payment. And like Jasper said, that’s still developing in a favorable direction where, you know, credit card failures are being rebuilt or retried, and those are still trickling in. So they’re like, we’re gonna land at about about 90% for our or youth renewal cliff, which is about what we’ve modeled, and we feel pretty good about it.

Jack Marshall 5:35
Yeah, that’s strong. Okay, so are you relatively flat in terms of active subscribers, and you’re just sort of eking a little bit more revenue out? Or are you up on that? A few 1000? Where do you stand?

Jasper Wang 5:45
Yeah, so as of this morning, we’re right about at 38,000. Okay, that active subscribers. And so yeah, I mean, if you think about the cycle of the year for us, we, as of late September 2021, we were at something more like 36,000. And then again, month by month, you we climb up. So as of August 31 2022, so 11 months later, we were at something like 40 and a half 1000 net active subscribers, and then you hit the cliff, you lose, you know, two and a half to 3000 of those folks, and then you sort of start climbing again. So we’re right about at 38,000. Now, so, you know, year over year, that is, you know, something like five or six or 7%, more than we were last year, but you know, it sort of is a, we are more so the most subscription businesses, we have a, you know, this this very specific cyclical moment, in the year, but net year over year, we’re we’re in a stronger place, but you know, again, that’s not a, this is not a business that we’re trying to grow, you know, 20%, you know, 50% 100% it is a slow and steady battle for us. You know, we spent very little on paid advertising this past year, you know, we can talk a little bit about the levers available to us. But you know, ultimately it is, we try to keep it pretty simple and streamlined. And ultimately, the best marketing is just a good product. And, you know, that’s what our editorial team puts out day after day.

Jack Marshall 7:34
So for you as a business, are you comfortable at that, say 40,000 subscriber mark, I mean, again, sort of with the the genesis of the publication in the business, I think, you know, the ethos was very much writer owned. And, you know, the goal, as you said, wasn’t necessarily to sort of build a huge sort of scaled media business, but you know, a nice little sustaining subscription based business. So, there cliffs, which you get to where you think, you know, this will enable us to sort of grow in a different direction, or bring on new staffers, or are you kind of comfortable at that sort of size?

Jasper Wang 8:07
Um, you know, I think if you asked every single person on staff, you might see some range of, you know, what they would say is, is ideal growth year over a year. But I think it’s a pretty relatively narrow band, actually. So, you know, in this past year, we added a staff writer, we added Shawn as our head of subscription strategy, we hired a full time summer intern for the first time. And so that brought our total headcount to 24 and a half people, let’s say, across the year, and that feels like roughly where we want to go, I think, you know, when you grow, it is, for us as much cultural as it is, you know, revenue driven, let’s say, you know, how many people can we bring on, at a time without sort of losing the special sauce? That is the factor. So there’s that part that is slow and steady. The, the business side and the revenue side, and the budgetary side is sort of a bit of a complicated question, because, you know, every person on staff is an owner in the business. And as such, our compensation model includes, you know, some number of, you know, profit share bonuses, and, you know, sort of like dependent upon the state of the business every quarter. And so, in some ways investments just require, you know, a super majority of people saying, this is worthwhile, and well pay off, you know, further down the line or is a worthwhile editorial endeavor. And so, you know, we can make that investment and, you know, take a little bit Uh, out of the bonus pool for the next quarter. And so, you know, we have already seen that pay off. We did podcasts, we did two new podcasts for the first time, one of them has become sort of an overnight hit. And, you know, if you think about that early investment, it’s earmarking. 10 $15,000 To get the first seasons out of the two podcasts. And so, you know, like you, like, add that order of magnitude, it’s easy enough to make room for in the budget. Yeah, again, if you asked across the staff and said, Where would you want to be in three years? I think there are people who would say, Yeah, I’d like to be called out, you know, 20 30% bigger. But there’s nobody here who thinks that, you know, the right answer is, you know, overnight trying to double the staff or, you know, makes sharp pivots into significantly more podcasts or video content, or what have you.

Jack Marshall 11:02
So when you launched in 2020, you said at the time that the site would run sort of primarily on revenue from reader subscriptions. So why was sort of the subscriber first or subscription first model, right for what you were trying to do and build at the time? And is it still the best model? Today?

Jasper Wang 11:21
The short answer is yes, I think it is very much still the best model, you know, for us. If we play back, you know, two years ago, 2730 months ago. What did we actually know, were our assets at that time. There were not many, what we had was a very strong, loyal audience. And we didn’t know if that number was, you know, 50,000 100,000 300,000. But you know, there was some 10s of 1000s of folks who were spending all day reading Deadspin reading, the writers that we had, ready to jump into this new company. And so if you want to play in AD game, you would have to commit to scale, right, like at that level of readership, it’s not clear that you can get premium ads, and it’s not clear that it was a good idea to invest in, you know, heavy duty ad tech. And so, you know, I said, we didn’t have many assets, but we had, what we did have was incredibly strong, you know, reader loyalty, and audience, I don’t want to understate that. I mean, that’s, that’s, that’s sort of the name of the game for everybody playing in media, although, you know, we are a bit more niche than than others, we knew those folks would be there. So the fastest, easiest, most straightforward way to monetize was to put a subscription product out there. And, you know, I think, again, there, there was a lot of anxiety about what that would actually look like. And if we would fall flat on our faces, but within 24 hours, we felt really good. within 24 hours of our announcement, we had 10,000 paid subscribers. And so in some ways, that was the fundraising. And because more than 80% of them paid annually, upfront, we had more cash in the bank, and gave us some flexibility and some ability to, you know, start forecasting and start planning ahead, you know, in a way that, you know, in slightly different scenarios, we would have been thinking more like this is a month, month to month endeavor, it’s pretty touch and go. You know, as we now look at year three, we just continue to, you know, believe that that community of readers is is our greatest asset. And, you know, there’s a lot of trust that they have put in us with their their money and their time. And, you know, we continue to repay them in trying to put the best product out there. And so, you know, I think right now we’re at 95%, subscription revenue still, year one and year two, that was basically the case. I think there is a world in which we are various outside investments, various outside revenue streams gets that too. I don’t know 90%, subscription revenue, 85%, subscription revenue, anything beyond that, I think, means we’re doing incredibly well or incredibly badly. Either we have, you know, found some other golden goose, or this main subscription revenue stream, for whatever reason, has taken a major downturn and we’ve had to, you know, open ourselves to taking more money in other places. So, we’re very happy to be where we are and still continue to rely on our subscribers first.

Jack Marshall 14:59
How interesting is advertising to you as a revenue line? I mean, I know you’ve talked previously about struggling to find alignment with advertisers. But then again, you know, you’ve launched with with a sponsor, I believe Warby Parker, and you know, you’ve had other sponsors on the site. So how are you kind of thinking about that heading into year three.

Jasper Wang 16:28
So, you know, we do get meaningful advertising revenue, not from the site, necessarily, but from the podcast, and you know, YouTube and Twitch. And so, there is a good amount of, you know, advertising dollars coming in. Regarding the on site sponsorships? Yes. You know, we have we launched with Warby Parker, Warby Parker as our launch sponsor, and we have had a handful of other sponsors on the site, you know, I think we’re still continuing to, to see a mismatch, not just in what sponsors are looking for and what we offer, but also, frankly, in the return on our time, and effort. You know, Shawn, and I are not salespeople, either by experience, or by, let’s call it sort of, you know, natural demeanor. And so, you know, that is, that is like a different job. And that’s a different skill set. And you know, it, everyone will say it, right, like your sales cycles, can’t be longer, they can be fickle, you know, it’s a numbers game, you have to put in the elbow grease, and, you know, frankly, we just haven’t been able to find enough bandwidth to really make that a repeatable process for ourselves. And so, you know, I think there is a version of this where we, we invest, you know, our own time we hire outside, and we, you know, really make it a bigger piece of the business strategy. But I don’t think that will be the case, in year three, in part, because I think that we actually still have plenty to gain in optimizing the subscription strategy. You know, I think, again, all credit to our editorial staff, I really do think most of what we do so far is a little bit of window dressing, compared to just the day to day high quality content. They would hate for me to use the word content, the high quality writing and blogs that is on the site. And you know, for the most part, it’s just like, here’s the paywall. here’s the here’s the blogs, you want to read more blogs, you gotta give us money to get around the paywall. But, you know, like many people do, there’s lots of, of, you know, nuts and bolts to make that more effective. Yeah, I mean, Shawn, did talk talk a little bit about, you know, what is on our roadmap, and none of its revolutionary, but you know, it’s just stuff that we got to be a little bit more focused on.

Jack Marshall 18:52
Yeah, sure. Maybe just kind of give us an overview as well. For those who aren’t familiar, you know, what sort of are the subscription offering some sort of what is that paywall strategy currently, so I think, you know, essentially, it’s a metered model. So your audience, anonymous audience can read sort of X number of posts before registering, and then a few more posts before being asked to pay. And then you have sort of three tiers Rita Powell and accomplice, which are brilliant names, by the way. And then each tier sort of grants unlimited access to content, that sort of the the premium tiers include some sort of member exclusive benefits as well is Is that accurate? And I guess kind of talk us through how people move through the through the funnel.

Sean Kuhn 19:30
Yeah, that’s basically exactly right. The other benefits that come with the $120 a year Peltier subscription, are you get access to the daily newsletter that goes out? And then commenting is the you know, the big privilege that we bestow upon you for for that level of access? The I would say that the thing that you’re missing, which is kind of has been the engine or one of the major engines of our YouTube growth, is that there are now two normal gossip centric subscription offerings, normal gossip for being the the overnight hit podcasts that Jasper referenced earlier, there are two tiers of subscription there that get you kind of structured similarly to the way that our reader and our pal products work where there’s a friend of a friend tier, which is $5 a month, or $50 annually, that gets you access to some subscriber only episodes that Kelsey and the team put out. And then also access to like a meter number of defects or other defects or blogs that are written in a given month. And then there’s a a friend tear subscription, which is at that same pal price point, which is essentially a reskin of the PAL subscription. So again, it’s $120 a year access to the bonus episodes, some other specific promo gossip goodies, and then full commenting access to the defector site. On that note, that’s a go immediately to far afield, I’ve been really happy and impressed. And I think we’ve all you know, I’m in charge of like running the monitoring for the normal gossip subscription products. And I’ve refreshed that a couple of times a week at this point. And every time I refresh, it just makes me feel good. Because the the count of subscribers that we we’ve added just keeps going up and up. And as sort of exceeded. quite significantly exceeded where we modelled that coming into year two, year three. And that’s been kind of a real difference for us. So we’re up to something like 2500 folks have subscribed at either the friend of a friend or friends tear to the normal gossip products. And it’s been a kind of a big tailwind for us going into year two,

Jack Marshall 21:23
have you been surprised at all by the demand or the market for subscriber only audio? I think that’s something we haven’t seen a lot of publishers doing. I mean, we’ve seen a few dipping a toe here and there. And I know it’s been sort of difficult on the technology side, but how have you sort of seen the reception,

Jasper Wang 21:40
we are not a podcast company. And I did go to the hot pod conference in Brooklyn in February, just as normal gossip had launched and it was starting to take off. And one of my takeaways was you can be most podcasts use, you know, Patreon, you know, other other spiritual platforms, you can put relatively little behind a audio paywall and podcast listeners are willing to pay $5, like three $5 a month, there’s not necessarily doesn’t have to be extremely robust subscription benefits there. You know, I think for us, it’s been interesting because it’s a completely different audience. In some ways, there are many people who listen to normal gossip, who do not know what defector media is, do not know the origin story do not know what we cover day to day, you know, ultimately, that’s totally fine. And we’re happy to be reaching other other people. And so for us, there is a just added benefit of bringing them into the defector fold kind of onto the mothership, right? And we’re saying, here’s a bunch of benefits that you can get because normal gossip is already affiliated with this worker owned media company. Our host writes blogs every week, and you know, you can be a part of this community. I don’t know that we have done a great job yet of truly integrating them. But just because we already had this tech stack of you know, how do we you know, reach people put him behind a paywall? How do we, you know, reach them by email, the processes are already there. So it was a very natural fit. But I sort of also hesitate to extrapolate and bring any lessons to that, you know, I think we captured lightning in a bottle with this podcast were relatively quickly, you know, 10s of 1000s of people were listening to each episode. And so we sort of had that opportunity to say, how do we how do we make this this work? I don’t know, you know, I know, there are podcasts companies that are a subscription first model and you know, have pretty hard paywalls. So, you know, then you have to think about building your audience and getting people excited about giving you $5 A month without necessarily, you know, giving it away for free first or, you know, otherwise having other standalone subscription products that you can point to and say, you know, this is, trust us the contents gonna be good, and you know, it’s gonna be worth it for you. So, you know, I think we capitalized on the opportunity that was in front of us and, you know, we continue to try to figure out how to align those communities and, you know, make it make it worthwhile for the new group of listeners and turn them into readers of the site as well. But I don’t I don’t know to what extent I would say, oh, that that is a that is a thing that, you know, other companies should strategically make an investment into, because, you know, I I think it’s listening audiences are perhaps even more fickle than writing audiences. And so, you know, again, we’re we’re General operators were not particularly strong marketers, so to talk about to talk about our reading audience already feels like we’re, you know, pontificating too much. So talking about a listening audience, that is that is too far afield.

Jack Marshall 25:13
So you just have to capture lightning in a bottle nine or 10 more times, and you’ll be good to go.

Jasper Wang 25:19
Yeah, that’s easy. I mean, look, I think I think this is the subscription product for normal gossip. This is that’s a place where, you know, it’s sort of, it’s sort of clear to an outside observer, that we, you know, made a choice and, you know, made some amount of, you know, investment in figuring it out. But there’s, there’s lots of other stuff that, you know, frankly, other media companies might say, Well, it’s obvious, you should have been doing that the whole time. But, you know, we we have not been because when we do things, we want to do them well, otherwise, we’re not going to do them at all. So, you know, even just like, an email cadence around people who have failed credit cards, right, like, how do you how do you meet them at that point, and try to resolve that in a voice that is not just a, you know, Stripe, automated email that says you have a credit card failure? Yeah, I mean, there’s, you know, a couple other other items there that are on our to do list. for year three, that, again, many media companies would say, well, that’s that’s a no brainer. And we just, you know, I think for us, that’s a good thing. Like there is still low hanging fruit for us to be tackling

Jack Marshall 26:29
What has moved the needle for you in terms of conversions. I mean, I would guess, sort of top line traffic is a big one, just getting people through that funnel, you know, collecting email addresses, getting them hitting paywalls. But have you found sort of breakout success posts? Or is it more just kind of that slow burn being there every day? How does that kind of look like for you guys in terms of conversions?

Jasper Wang 26:52
Yeah, so just in terms of the funnel process, we have a metered paywall, so you get a handful of free articles a month free and clear. At some point, you hit the soft paywall, and it says, Give us your email address, and you get a couple more articles. And now we have, we both have your email address, which is the most important thing, but we also can start seeing your reading habits and understand you know, where on our site, you’re engaging. And so, you know, we have something like 150,000 emails of people who have given us their email address because they hit the paywall, but who are not yet paid subscribers. And so yeah, you know, you reach them in different ways. I think one is, you know, they’re just like, on our email list, and some of the just run of the mill, like, here’s the best blogs of the week that we send out to everybody, you now receive that, you know, we send intermittent subscription appeals, written in the voices of different writers and editors on the site, you know, sort of hitting different angles, sometimes they’re funny, sometimes they’re heartfelt, you know, sometimes they’re about the journalism, sometimes they’re about, you know, the worker owned structure, you know, we hope that eventually one of these things will convince you and that is the case that, you know, people people will pay and then tweet and say, Hey, you have, you know, finally convinced me, or guilted me, or, you know, made me laugh via this email that I finally, subscribe. I think there is absolutely a degree to which specific pieces of good journalism, drive conversion. And this is I mean, I’m trying to like there are other companies out there and much bigger ones, much smaller ones who have seen the same thing I’m thinking of, maybe it was the verge a couple years ago, where they first put up their paywall, where they said, you know, really is the, the bangers as a word, the ones that go very viral, and you know, cause a conversation that, that drive a lot of paid subscribers, Casey Newton, who runs platformer on substack, who started write about around the same time that we started defector, um, he just came out with his two year anniversary post. And similarly, that, you know, it is sort of like, the ones where he’s breaking news and, you know, really proving the work to be essential that, you know, brings people into the fold of paid subscribers and we see, we do see that as well. There’s also an extra piece for us that is because we are so focused on sports, it is also cyclical by the sports calendar. So you know, the NFL, like the NFL is the biggest sports league in America. And during NFL season, we see a burst in readership and paid subscribers and you know, sort of like longtime conversions, meaning you know, you have given us your email address many months ago and but now this is the moment where you find yourself on the site, and it’s worth, you know, paying for it

Jack Marshall 29:55
Do you have sort of a sense of how long that sales process is? I I mean, maybe taking sort of the, you know, the NFL seasonality out of it, but for the average, sort of read it, once I give you my email address, for example, you know, how long is that sort of sales process for you guys? Do you know? Because I mean, some publishers, I speak to that 912 18 months, and they’re confident that once you’re in that funnel, you know that gonna get you out the other side? Or is it still too, sort of early for you guys to put numbers on that?

Jasper Wang 30:24
I mean, the thing that we talk about often is, how successful are we, at bringing in readers who do not know the defector origin story? Who did not know that, you know, Drew McGarry and David Roth, and you know, all of our other writers quit in a in a, you know, you know, a big, you know, sort of a celebrated Labor move in October of 2019. And, you know, followed us and, you know, waited for us to have a website and then immediately came in, give us a credit card, how successful are we, in just putting out good content for new readers? I don’t know, any of that background. And, you know, I think increasingly, that number continues to tick up. I don’t think that we are confident that, you know, like, here is the interquartile range of how quickly we will convert. Also, by the way, there’s like 150,000 people, there are absolutely 10s of 1000s of people, maybe 100,000 People who are never going to give us any money. And some of those are fake email addresses. And you know, so I shouldn’t I certainly don’t want to make any, you know, over overstate that. But I mean, Shawn, you just pulled the number on. The I forget exactly what the metric is, it’s just people who paid us money subsequent to the day that they gave us their email address.

Sean Kuhn 31:45
And I think there’s like an important important to segment this group into two groups of people. So we have our normal gossip subscribers, that’s the 2500 audio first folks. And I’m, I’ll kind of put them in a box, it’s something like 90 95% of them register and subscribe on the same day, that’s sort of like a one off thing. And those people behave in a very certain specific way. If you look at the kind of the regular business folks, I was sort of surprised by this. And I think, you know, I’m not gonna like proclaim that this is actually what is like, you know, the true story here, right, I think it’s like a function of not having visibility into everything that I want to be able to see. But those regular business folks, it’s something like 70% of them, sign up and subscribe on the same day. So that’s like a very short candidate turnaround time relative to, you know, the 12 month 18 months stuff that you’re talking about there. And part of that’s like, you know, we have kind of a sensor data set, right. So I don’t know how many of these people will convert a year from today or something, right. So those metrics are still developing. But what I what I think this tells me is that, at least what we’ve seen in 2022, the kind of that turnaround time from between registration and subscription is pretty short. And what I think that probably tells me is that there’s a good amount of engagement that is happening, kind of in that anonymous user phase, where people are reading the site before they decide to give us their email. So there’s like maybe less of a distinction to these folks between, like signing up, and then also subscribing those are like, more closely linked to them than, you know, it might seem to somebody who’s trying to operate the business. So maybe what that tells me is like, the ideal way to understand the subscriber funnel would be to like, you know, if I am somebody who is one of these anonymous users, I subscribe on September 27, ideally, like, you know, I would be able to look back at that person’s, you know, all of the article read or site open events associated with that person’s devices or cookies and construct everything that was happening in that anonymous space before the signup and the membership site actually happens. So we are not sophisticated enough to do that, that is very much on the you know, understand that and then understand what we can do with the information that we can think that sort of study. Yeah,

Jack Marshall 33:57
It’s a process. So just talk a bit more about your tech stack as well. So I think I’m writing saying, you know, you’re using WordPress, Pico, MailChimp, you know, has that proved a good setup for you? What sort of mistakes do you think you made early on that you might do differently now? What’s your experience been on the tech side?

Jasper Wang 34:16
Yeah, so our tech setup is led by lead by Ally, which is the platform that Colorado Sun Chicago block hub, Minnesota racket, Hellgate NYC, we’re all on the same platform there. So they they run the WordPress front end and they, you know, sort of are the full stack integrator in some ways. What sits on top of that is pico which is the subscription management platform so you know, they are the paywall provider and give us the back end CRM. Then stripe is the payment processor. And then we use MailChimp for or the gas for emails, and, you know, whatever went off other things, but those are those are the main platforms there. We keep no tech in house, we have no tech resourcing in house, I do not have any manner of a tech background. You know, Shawn has a data science background. But you know, that that doesn’t extend to, you know, the front end of what a website looks like, certainly. And so it’s sort of hard to imagine, having done this journey, without ally, lead by ally as our technical partners. You know, I think the trade off there is that we don’t dictate exactly what improvements, whatever, what what the product roadmap looks like, you know, it’s a platform agreement. So you know, they, they, they improve their platform as they see fit. And we continue to use that platform. So but we get a lot of input into it. You know, we absolutely informed their product roadmap, and they have the right channels and forums for us to give that input. But now we, you know, we can’t say, Well, you know, x the fifth, our next quarters most important goal is x, and therefore, you must, you know, jump to attention and do X. But frankly, that’s that’s maybe in some cases better, because we don’t know what we don’t know, right? It would sort of seem ridiculous to me actually, to say, you know, the future of our browsing experience is this, and therefore, you know, the technologists should go and implement that, like, Well, what do I know, I’m just, you know, one guy operating one small business, right, so So we rely on them for their expertise as much as for their, you know, technical, the actual implementation. I think they along with those other partners, I mean, you know, not striping, and MailChimp, those are, those are big, behemoth companies that do not really care what we have to say. But certainly, you know, ally in their roles, our integrator is doing their best to improve the experience every day for us on the back end, and for readers on on the front end. And, you know, I don’t want to speak out of turn, but I think by the end of this year, they will have made some some meaningful changes to the platform that will be obvious to our readers and to any outside observers. And, and, you know, we’re very excited for the next version of that.

Jack Marshall 37:27
So what are some of the big takeaways for you guys? In year two, verse year one? I mean, what have you sort of learned in the second year, do you think that’s evolved your understanding of subscriptions, and I guess, just running, you know, a publishing business, whether challenges or hurdles that you ran into or

Sean Kuhn 37:45
so we, my background is in kind of like the interaction between, like pricing changes, and then like business outcomes. So it was sort of like a natural fit for the kind of the big problem that we were working on throughout the course of the summer, which is like, what do we do if anything with pricing at the year two to year three, Cliff? Yeah, if this like very rich opportunity, where 30,000 people face a renewal decision, if we feel like we want or need to grab more revenue, going into year three, then a an easy way to do that a little effort way to do that would be to increase prices, and then you know, kind of bet on renewal elasticity being inelastic, and then that change that price increase working out in our favor. Over the course of this summer, through the work of our growth committee, we went through kind of a bunch of financial modeling exercises, which were price increases of various size and segmented to various groups of people. And we landed on one price increase plan that we considered very closely, which was like a small increase on our pal to subscribers, those are the ones at $120 a year and for commenting access are the ones that have come into access. We ultimately decided against doing that we bet that are we expected from the modeling work that the price increase would have, you know, non trivially increased revenue, because those folks are very sticky. And there’s a high willingness to pay within that group of folks. But for some combination of like a normative reasons where we didn’t, you know, just sort of want to needlessly in misery people, and, you know, take money from our loyal subs that we didn’t need and be some other tailwinds. Right, like normal gossip was kind of had smashed our expectations and was like a nice tailwind. And there were some other like platform costs sorts of things that were kind of breaking in our favor at that time, we decided against the price increase. But that left us with this very strong hypothesis that there is kind of slack in the line between what our subscribers are paying and then what they’re actually latently willing to pay. And so we were kind of out in search of a way to capture some of that surplus customer surplus that’s out there that we’re not capturing because we’re not taking the price increase and we landed on this. This like goofy and earnest and pretty much everything that I love about defector scheme where we are kind of running a contribution drive where, you know, for those folks who see their defector subscription as being worth more than $80 a year or $120 a year to them, they can contribute to this fund that we’re using to kind of subsidize growth by offering, you know, discounted subscriptions to people in financial, dire financial straits, or to students, or whatever people can contribute to this fund. And in exchange for contributing to this fun, they get a chance to have David Roth, one of our editors show up at their house with the famous David Roth cut out in a Publishers Clearing House sort of way. So we we’ve we’ve managed to strike this balance, where we are capturing some of that excess consumer surplus that’s out there without increasing prices on those who wouldn’t tolerate or can’t tolerate a price increase. And I’ve been blown away by the contribution. So far, we’re up to like 1000 folks have donated to this on our, you know, our base of 37,000 subscribers at this point. So it’s like, it’s nice, there’s like a kind of a third way here, where it’s not, you know, squeezing people to maximize revenue, but we’re not leaving all of that surplus on the table. So it just, it feels really good, very much like, what defector ought to be doing,

Jack Marshall 41:09
There’s been a lot of talk in recent months about the viability of subscription models and subscription fatigue, and consumers are sort of reining in their spending, obviously, a bit more. Have you sort of seen the effects of that for your business over say, the last three to six months?

Jasper Wang 41:24
I mean, I think people people do ask us this. And I think, on the order of magnitude of size that we are on, we really don’t see that. I, I don’t doubt that there are people who, you know, feel their budget constraint, and they’re saying, you know, do I want to cut Disney plus, or cut the factor, I don’t doubt that, you know, that person does exist. But, you know, it’s not the sort of thing that really shows up in our data. You know, it’s just like, we play at 10s of 1000s, you know, those folks are playing at, you know, hundreds of millions, like, macro trends just don’t, don’t affect us in the same way. That being said, you know, we do run surveys for people who stopped subscribing and get there is a trigger something like 40 to 50% of people say they stopped because they could no longer afford it. So, you know, that absolutely informs the decision not to raise prices, and uninformed how we think about our subscriber base, and, you know, like, we don’t want to be pricing people out, we want our community to, you know, be more expansive, and, you know, more socioeconomically inclusive. And so, that’s important to us to keep them in the fold. So, that’s all a long way of saying, not really, we don’t really worry about that. But you know, on the margin, certainly, it’s, it’s important to keep that in mind as as sort of an archetype of our subscriber,

Jack Marshall 42:57
one of the question I had, you know, you guys, as I mentioned, had been very transparent. And, you know, a lot of people talk about sort of building in public these days. So, to what degree has that helped you achieve what you’re trying to achieve? And are there areas that it’s sort of hindered your progress? Do you think?

Jasper Wang 43:12
It’s a great question, I think it is in line with the overall ethos of the company in a way that is net very positive, I think, you know, we started as a worker, cooperative, and I think that resonated with with people on, you know, the type of enterprise they would be supporting, I do think there is some number of our subscribers, there are some number of our subscribers who maybe don’t even come to the site, you know, once a month, but, you know, remember that story and are happy to have their dollars go to supporting us. And I think, you know, being transparent with them, is a natural extension of that. So this is not, you know, a big company with, you know, whatever sense of, you know, bureaucracy or, you know, shareholders to answer to, you know, we sort of just have that direct relationship with our readers.

Jack Marshall 44:09
What do you think looking forward to your kind of priorities and goals? And I guess, expectations are for your third year? Are there specific things that you’re looking to achieve or specific priorities that, you know, you’re going to be biting off in the next few months?

Jasper Wang 44:22
So, you know, if I weren’t sort of giving revenue guidance here at a at a, you know, a quarterly call, I would say, I don’t expect we will grow subscription revenue at the same pace as we did from year one to year two, I think that will likely slow a bit if we can hit double digit growth in that I would be thrilled, but I’m not sure if that is in the cards, both from just the decision not to raise prices and, and just again, you know, a little bit of, you know, economic headwinds there, and just, you know, the nature of like, You already got your most enthusiastic readers and so each subsequent 1000 and readers is is harder to convert than the previous 1000. That being said, I think we will see our revenue diversify a little bit, because normal gossip, this podcast has been a hit. And you know, we’re trying to figure out how to be sort of, you know, a best in class business side for running a hit podcast as well, and, you know, monetize accordingly. Yeah, I mean, I think that that is what I would be willing to say now, I mean, again, to the sort of like nuts and bolts, there’s, there are things we want to accomplish in the operating of the subscription business. We don’t have any number of sort of, like Winback campaigns, right, we don’t, you know, people who have have turned, we don’t really treat them as a as a, an audience that is, you know, high potential, I would like to do that, I would like us to get a little bit deeper on customization, for outreach. Right now, we’re pretty forced wide swath, you know, we wrote this marketing message, everybody is going to get this marketing message, I would like us to get, you know, one degree, more specific about, you know, what your engagement pattern is, what topics you are particularly interested in reading, you know, how we can sort of, you know, just just be a little bit more custom for, you know, getting the message and, and the marketing price in front of you. And, yeah, so that very much goes along with just like the tightening of, of some of those low hanging fruit. That’s a very mixed metaphor. But, you know, we again, we there’s, there’s lots of stuff that, you know, we know, we have to do, and we can finally get to it in the next couple months.

Jack Marshall 46:38
Yeah. I mean, you’ve alluded to this earlier, do you think there is sort of a bigger opportunity on the advertising side, if growth on the subscription side is maybe going to slow? Slightly? I mean, is that something that’s on the table?

Jasper Wang 46:49
It’s not off the table, but I don’t expect that will really show up in your three? I mean, you know, I answer all inbound messages. So if any marketers are listening to this and might be interested, please do reach out to me. But otherwise, I don’t know that that is where we’re going to invest our time.

Jack Marshall 47:09
Okay. What’s, from your perspective, sort of a myth or piece of conventional wisdom about subscription models or businesses that, you know, to be false or or disagree with?

Jasper Wang 47:20
That’s an interesting question. I mean, Shawn, you work at multiple publishers, unlike me, I don’t know if anything comes to mind for you.

Sean Kuhn 47:31
Like my the risk of like, you know, blowing up my own job, I’m just like, pessimistic about the role of like data or analytics or whatever in this sort of space. I think maybe the way Jasper said it is a, a softer or better way to present it. But it very much feels like the case that anything that I do is very much like window dressing for, you know, the strength of the product itself. Like if you have money to spend as a media operator, I would say that you should spend it on the product and the writers themselves and not on, I don’t know, somebody that makes these like retention as a function of engagement charts, or something like there’s much more much more ROI on the former

Jack Marshall 48:09
I do think that’s interesting, because I think a lot of especially smaller and quote unquote, medium sized publishers, you know, they look at the New York Times, or a massive publisher with teams of data scientists. And I think, personally, for the vast majority of publishers, that’s just not where their money is best spent to your point, you might be able to sort of optimize your way to another percent or two of growth, but hiring two more writers would probably do three or 4%. So no, that’s interesting. I’m indeed sort of agree with that. I feel like we see a lot of people fall into that trap. Yeah, and

Sean Kuhn 48:38
maybe maybe to put like, a little bit more specificity to that. If I if I refer back to those retention as a function of engagement deciles that I talked about before. It’s like thinking about how much work it would take to like make somebody a more active reader of defector and then how much benefit you get out of making somebody a more active reader defector. So if you take somebody from like, decile six, this is kind of like the average reader, this is somebody that reads the site on 191 days a year, to graduate them to the next bucket means that you have to boost their time reading, so you need to like add 40 days, so you’re basically adding a day of week and engagement to those people. And for all of that work. I mean, that’s on I don’t even know where you would start trying to get somebody to read the site once more per week. That’s, you know, whenever you think about like a successful product effort, it’s like, you know, small single digit percentage points that you’re picking up in terms of marginal engagement. For all that work for adding this 40 days per year of engagement. You pick up like, quite literally one percentage point and retention back on the back end. So you’ve made yourself and congratulations each time you do that. You’ve made yourself like 80 cents or something. So yeah, and you probably have to email them three times a day to get right yeah, to me to get like 2% of the way there or something. So I guess

Jasper Wang 49:51
the only thing I would say here is I think you can tell by by Shana my general disposition is but it’s not as though there is just some a right answer. And we figured it out. And like that is the answer like that is the path to go. I personally am a big believer in, you know, culture and execution really coming in front of strategy, especially, again, as a small player here where it’s not like, we care that much about macro economic trends. So in my mind, even when I go into a meeting, and I feel like 100% I know what this right answer is, it matters way more to me that the team is aligned on an answer that everybody finds compelling. And maybe that’s only, you know, 75% aligned to what I thought was the right answer. And like, that’s, that’s great, we can all run in the same direction and execute and, you know, feel good about what we’re doing here. And ultimately, that is, I don’t know if it, you know, again, somebody who hears that might say, Well, if you did 100%, right answer, you’d be even more successful. But you know, I don’t know that we don’t live in that counterfactual state. And I can tell you would be a much less pleasant job to do if, you know, we were felt like people were at odds on the direction to go. And so in some ways, the most rewarding part of this is is the worker cooperative, you know, ownership model part of this, but, you know, everybody can can stand to, I think, be a little bit more inclusive and how they think about running a company.