Acquisition Deep Dive: AI Newsletter

Today, we finalized the acquisition of an AI Newsletter, I won’t disclose the specific name of the newsletter today, however, I will show you the full details and the growth plans for this.

First… AI is hot and I don’t think it’s going anywhere any time soon. However, I do think it’s going to evolve a lot.

We have many rollups inside of The Wisdom Group and one of those is an AI rollup that will combine education, media, and software for A.I under a singular placement inside of The Wisdom Group.

About 6 weeks ago, I had someone approach me to become an investor in their newsletter— as a note, we prefer to purchase outright our media companies, or at least majority, however, I’ve learnt… entertain everything.

It started like this…

They wanted to sell 25% of the newsletter and I didn’t like the numbers… I told them what I was willing to do and my style?

I tell you what I’m willing to give, upfront and unless the deal terms change, that’s my final offer.

Eventually it went from being an investor to them wanting to sell it in full… I gave them an offer… and a few days later…

The problem is… having a simple newsletter… isn’t really much of a business, unless it has a moat or it is tied into a larger business, I gave a final offer… however, as we got more into the nitty gritty… It simply felt like it wasn’t worth it and I could just go and buy another one or build one for the money.

I passed on the deal.

Then, a little while longer, it seems as if they started talking to others and realized that, in the process of wanting to sell this, they were pretty burnt out from running it.

From the time that they sent this to closing, it took 72 hours and 5 days before the deadline.

Now… the first important lesson here is simple: If you’re going to buy a business, being completely unattached and know that “miracle” deals almost never occur…

The best deals occur when you aren’t attached… In this case, there are plenty of AI newsletters and further this business didn’t have a moat, but it did have momentum which created some level of potential return.

Speaking of numbers… what did this business look like?

While the purchase price is under non-disclosure, what I can tell you is the following:

• The email list size is 22,000, and of that audience, over 15,000 have opened in the past 30 days, it has an open rate of about 40% and CTR of about 6%.

• The cost to obtain a subscriber at the moment is below $1.40 on Facebook Ads, which is a decent level of high-end targeting (US, Age, Gender, Interest of AI/Productivity/Business).

• They are generating a 3X return on ad spend using Sparkloop at the very front of the funnel.

• They’ve been able to sell $2K of sponsorships inside of the newsletter with almost zero effort in the first month of attempting to do so (in May).

• There is no product, just the newsletter that is written on a daily basis.

Here’s the thing… if I wasn’t building a rollup on newsletters, this wouldn’t be very worthwhile to purchase.

If you don’t have a team or infrastructure, this is a terrible business to buy, considering you need to spend hours a day just writing a daily newsletter.

However, that’s what I’ve spent the last year building. Infrastructure :) .

However, the potential growth of this newsletter inside of a collection of other businesses is massive…

Having ads dialed in at sub <$2, while having revenue (but no product) available at $2> is an amazing advantage.

Since purchasing and having control of the business on Friday, we’ve started our media buying process… and so far, I’m pretty happy with it…

While Spark loop is giving us…

From the start, we’re in a great place to scale, however, there is a massive risk on this… well, a few major risks.

1. FB Ad accounts can get shut down and we have no idea at what level of scale we have until our costs will shoot up.

2. Sparkloop works now, however, we can’t control the revenue source.

3. There is no moat, the content isn’t exclusive and the content strategy is impression based.

4. There is no product or way to generate revenue, on this business as a whole.

5. Email is the only source of actual traffic.

So… as soon as we purchased, I built our 90 day plan, I pulled in an operator, found 2 writers that I believe will help and built a full 7-page process for building this…

The high level plan?

1. Use FB Ads + Sparkloop as much as we can, as fast as we can. For this, we’re connecting it to a no-limits AMEX card, with a 45 day float time, realizing that Sparkloop is delayed by 30 days.

2. Expanding our traffic sources to other mediums such as TikTok and Twitter to attempt to find lower cost mediums.

3. Expanding our traffic with partnerships, with AI tools and other AI based things that could potentially put our costs even lower.

4. We’re taking our AI education business and building a segment of that product that will be included inside of this funnel, allowing for more revenue upfront.

5. We’re taking our sponsorships team and being able to build this into what we’re currently selling.

6. We’re changing the approach to content, and while we want to keep this daily, we will have multiple contributors, which will be focused on multiple things.

7. We’re building a community and a podcast to allow for a higher level of emotional connection.

In my mind… this can go a lot of different ways… However, there is limited downside, which I believe is important.

If ads stop working… we can grow other ways…

If Sparkloop stops working… we can use other things inside of the portfolio or simply use this to grow our other related newsletters…

If this hits a wall, we can include it inside of our newsletter rollups or the A.I rollup and are able to sell it for a higher return…

Or… a dozen other scenarios… However, it has a limited amount of downside.

Which when I’m buying any business (even more so a business with high levels of risk) I’m always looking for…

I never want to lose my shirt on a business… and in this case, I think it’ll generate enough revenue, profit and growth to help grow our portfolio and itself… maybe even enough to buy me a couple of new shirts 🙂 

That’s all for this time…

- Scott

PS. Questions that you had that I didn’t answer? Reply back… I’d love to know what you were more interested in.