After expanding to an extra 16 cities last summer, 6-year-old hyper-local newsletter publisher 6AM City has seen exponential subscriber growth, this week reaching one million newsletter subscribers. They are also on track to exceed $10 million in revenue in 2022.
So what’s behind this vast growth? Co-Founder and COO Ryan Heafy spoke to us about their time spent developing a highly scalable blueprint for profitable local media, and how this is paying off for the company.
Since launching in 2016, 6AM City has expanded to 24 cities with its free newsletter model. But the past year has seen the most significant growth. The size of the business has tripled, and they are targeting double the number of subscribers by the end of the year.
Heafy credits the growth to the time initially dedicated to getting the process right. “We spent a lot of time in the first few years perfecting process: how do we do this? What does it look like? How can we scale and replicate this over and over again?,” he explained. They used lockdowns as an opportunity to hone that further, pausing market expansions and reflecting on their progress.
“When we knew we were in a good place, in July of last year, we pulled the trigger on launching in sixteen new cities,” he said. “So we went from eight to 24 [markets] in the past six or seven months.”
The expansion has reaped rewards. Since summer 2021, 6AM City has gone from 300,000 newsletter subscribers to just crossing the one million mark. They are also finding that scaling brands is faster, with numbers growing for newer brands more rapidly than a few years ago.
“Greenville, South Carolina was our first city, and it took us almost two years to go from zero to 50,000 subscribers,” Heafy outlined. “Today, we’ve really honed our craft. We put more funding and resources into growing our audience faster, we’ve identified channels to help expedite that. So in some of our new cities, witch might be three months old, and have 50,000 subscribers.”
“We’re seeing significantly rapid increases in audience development in all of our markets: more markets faster, faster growing audiences, faster revenue on day one. It used to take us six months to get business. Now we’re generating revenue on day zero.”
The pace of growth puts 1.5 to 2 million subscribers by the end of the year within the publisher’s reach. Now they have the playbook together, launching in new cities can be done within 60 days, with Heafy stating they can get editorial staff up to speed in two weeks. The company uses a training platform called Trainuel to document their processes, archive training materials and onboard new staff, which eliminates the training burden on the rest of the team.
“We built a playbook from day one on exactly how we scale the business,” Heafy said. “If we decide that we’re going to launch [in a city], we turn on several different pre-launch content strategies, audience development strategies, the hiring of the staff.”
The structure is based on a hub and spoke model. Each region has top-level editorial, branded content and creative support, and each city then has two editorial staff. There is also for most cities one sales executive and a paid intern. “The overhead is very low,” noted Heafy. “For each of the markets, we operate with about 3.4 headcount per city, with all the overhead included. But each city can relatively quickly exceed a million dollars in revenue.”
While the publisher is on track to make more than $10 million in revenue this year, most of that is predicated on the more mature newsletters as the 16 new markets are just in their first year. “It costs about $250-300k to launch a new city in year one, which nets out at zero,” Heafy said. “In year two, it’s maybe 50% profit margin. In year three, it’s 75% profit margin to a north of a million.”
“So our trajectory on revenue here, 2023 looks to be pretty awesome, and very sustainable. That’s really what we designed for is to have a profitable, sustainable media company that will allow us to scale and continue to serve these markets in a self-sufficient manner, so we can provide a better free product and additional value to our readers.”
A careful curation of content
Unusually for a local publication, 6AM City intentionally avoids topics like crime and politics. “We’re designed to be a marketing engine for the cities,” Heafy explained. “We curate the best of what’s going on there about how you can become a better, more engaged and involved citizen, whether that means telling you quickly how you can join boards, nonprofits, participate in charity events, or where to go have a cocktail on a patio in downtown. It’s more of that lifestyle approach.”
By staying away from homicides, car accidents, politics and divisive topics, 6AM City is able to attract a much larger audience. They have subscribers from both sides of the political spectrum, and the team are measured on how neutral they can be in the content creation. “That keeps us with a larger addressable market, and allows us to open up people’s eyes more effectively on how to be better citizens in the communities that they live in,” Heafy noted.
This might at first glance look like a cop-out. The audience is going to be wide if there are no stances on particular issues. But 6AM City is trying to overcome a different obstacle: filter bubbles. With social media algorithms, people are often exposed to a limited number of stories and interests. By remaining politically neutral and focusing on bringing in a wide diversity of content from across their markets, 6AM’s newsletters are exposing people to a variety of opportunities.
“I have friends that love food and wine festivals, but they’re not part of the Hispanic community, so they never see the Hispanic Food Festival in their preference set” Heafy illustrated. “By not filtering the content down so much, we are opening up people’s eyes on how they can join other elements of their community. And we’re seeing great reward in that, and economic impact locally.”
A crucial element of this is user-generated content like social media posts. “Sometimes, user-generated content about a local development is better and gets more eyeballs than what the newspaper creates and is behind a paywall,” said Heafy. “There was a gap in the local marketplace really on distribution of content in a concise, consumable manner. So we saw the opportunity to fill that void.”
Balancing local and national advertisers
The majority of 6AM City’s revenue is content-based advertising, rather than banners. This can be content elements within the newsletter product, from text-only ads to header images and links. They have also introduced classifieds and digital listings, which allow a lower price point at around $250. This is made up of local events, small business deals, home listings and job listings, and is integrated into the newsletter.
“That makes it rewarding for smaller local businesses and organisations to participate at a different price point, and it’s very automated” said Heafy. “We can do more white glove service with our higher end clients, and automate stuff with folks who are at a lower price point.”
Lowering the barrier to entry in advertising is important in getting the balance right for readers. “It’s important in a local community to make sure you’re supporting the local community effectively,” Heafy emphasised. “Our readers don’t like a lot of national advertising, unless it connects truly with them on a local level effectively.”
As well as the variable price points, they also have a cap on the number of national ads allowed; roughly a 70/30 split of local to national. “We would rather operate and almost limit our revenue potential by focusing more on local,” he added.
The 6AM City team will be taking a moment to celebrate the milestone, but for the next few months, they will be focused on building subscribers and revenue for their newer markets. The short-term goal is to get each newsletter to 50,000 subscribers and a quarter of a million dollar run rate “as soon as possible”.
Expansion is also on the horizon. They are just about to launch an RFP process to allow any US city to submit a proposal for 6AM City to bring a newsletter to their market. In addition to opening that process, Heafy has a further six cities in mind to launch in this year; at what he calls a ‘steady pace’ of two a month.
But it is 2023 that he sees as being a year of substantial expansion. “We’ve identified probably 150 cities that we could be in,” he surmised. “We want to get ourselves up to 50 total cities as soon as possible, then continue to drive that up to 100 or more.”
Aside from the viability of reaching a threshold of 50,000 newsletter subscribers, 6AM City has another important metric that they use to assess a city, which they call ‘pride of place’. The metric looks at inflows and outflows of people, retail spend, charitable giving, demographics, and more. It also includes a close look at social media sentiment around new businesses launching.
“It’s really finding the pride in place; what cities are excited about themselves, that are going to pick up our content, they’re going to share it, they’re going to help us grow organically as fast as possible,” Heafy said. “We’ve honed our craft into this mid- to upper-market size that is fitting really well. And we’re seeing exponential growth.”
Listen to the full episode with 6AM City COO Ryan Heafy here (interview starts at 16:00):