#69 The Ballketing Letter
Learning from The Athletic´s growth machine, a "Web3 & Sports" crash course, setting goals scientifically, marketers & VCs, B2B influencers, category creation & much more!
Hey there Ballketers,
Welcome to post #69! Fun fact, 69 is actually the highest number of points that Michael Jordan scored in a game in his career.
This week:
The Athletic was sold to The New York Times earlier this month but, how did they become a relevant player that actually helped changed the sports media industry? What was their model for growth and what can your sport business learn from them? Read on to find out!
A special section to understand better how web3 will change the sports industry with insights from several experts.
More business related content that will hopefully help you take your sport or fitness brand to the next level.
Let´s get down to business!
“Every day is an opportunity for a living masterpiece.”
Dr. Michael Gervais
Back in 2017, Tim Ferriss hosted Michael Gervais (from the Finding Mastery Podcast) and they had an awesome conversation on overcoming fear, mindfulness applied to one´s life, some team dynamics behind the Seattle Seahawks, how to overcome defeat, prepare for big games and much more!
But we also we want to highlight a story from Platon´s photoshoot with Kobe Bryant that he shared on Proof:
Platon asked him where his sense of invincibility and self-believe came from. Kobe answered that when he was a kid, he looked at himself in the mirror when facing adversity and said to himself: “Somebody´s got to win, it might as well be me”.
Check out the episode because it is full of life & leadership lessons from Kobe, Muhammad Ali, Obama and many other people he has photographed.
How The Athletic achieved initial growth & what sport clubs can learn from them
In one of the most notorious M&A operations of the media landscape in recent times, The New York Times announced the acquisition of The Athletic, the subscription based journal for sport fans, for a reported $550 million.
Even if their story ended up in being purchased by an industry giant, it is unquestionable that The Athletic changed the traditional media business as it was one of the first publications to base its revenue model on subscriptions rather than on advertising. Founded in 2016, it was able to scale up to 1.2 million paying subscribers by the time of the deal with NYT.
In this week´s brief, we wanted to recap the main growth lessons that sport brands can learn from The Athletic´s example and apply to their own organizations.
Origins & key metrics
The Athletic was born under the following premise: “provide smarter coverage for die-hard fans.”
At the time, the general business model for media companies was based on generating revenue via advertising but this lead, as we all probably know, to clickbait practices, which put in motion a terrible flywheel for media companies.
In essence, it lowered the quality of the content, readers fled, advertising revenue fell and unemployment across the industry rose dramatically...
The Athletic identified a window of opportunity and decided to opt for a “subscription” based revenue model in exchange for quality (in-depth) content. This was key to generate predictable revenue and hire top talent.
From the beginning, The Athletic niched down both by “market” and “sport.”
As Joe Pompliano shares in his newsletter: “The Athletic launched its coverage in Chicago, grew to more than 20 markets across the US and Canada by year two.” Before being sold, The Athletic had raised $140 million in venture capital, hired 450 journalists and expanded to 50 markets in just five years: During the same period, it had acquired 1.2 million paying subscribers while achieving an 80% customer retention rate.
Looking at the numbers, the acquisition boils down to $460 per subscriber and, theoretically, will help NYT improve LTV with potential bundles it can offer to customers from now on.
Major factors behind The Athletic´s growth
So, what were the elements that enabled those remarkable levels of “scale” The Athletic reached since being founded in 2016?
Creating “niches within a niche”
On one hand, their focus was on “die hard” fans and if you think about it, where are most die-hard fans located? In local cities for the most part with a minor fraction located outside those citites.
For example, the majority of a sport team´s fans are located in their local cities (Madrid, Barcelona, Liverpool, Munich or Amsterdam to name a few). The Athletic understood this same dynamic as pointed out in this article on Privacy´s blog: “In a city like Chicago, there are 100,000 die-hard fans,” co-founder Alex Mather said. “That is a very lucrative subscription business. There are over 100,000 die-hard fans of Chicago teams outside of Chicago.”
This was a key ingredient to generate word of mouth among a given teams fans, and, consequently, each subsequent market became easier to launch.
The key lesson here if you are a sport brand is to focus first on understanding you local customer deeply and then identify where your content or product resonates most outside of your local area after existing customers start talking about it .
The other aspect to understand is that the business started by focusing only on the NFL & MLB. Going too broad in sports coverage would have implied a loss of focus.
The Athletic was effectively creating a “niche within niches,” an interesting concept explained by the INMA in this article. By focusing on die hard fans of the MLB in the Chicago area they were combining niches, which enabled them to create their Minimum Viable Audience (a concept evangelized by Seth Godin) and implement personalization strategies more effectively. From there, organic growth was more feasable.
To put an example for sport clubs: Who is your fan´s favorite player in your local city? And in other cities? Can you create content or even advertising around that player targeted at that audience to drive conversion?
The same goes for fitness businesses: What is the favorite workout for people in your local area? Can you segment that info by different groups of interest?
Going back to one of our favorite frameworks developed by Category Pirates, The Athletic framed, named and claimed the category. They set out to own the “sports media subscription business” category. As such, they became the benchmark of emerging businesses and even for other industry giants looking to shift from an advertising to a subscription lead model.
A deep focus on quality products, word of mouth and a “pinch” of paid advertising to drive growth:
Alex Mather explained in Techcrunch: “We gain new subscribers by hiring writers (mostly local) who have a following already and by word of mouth from existing subscribers. Then like any direct-to-consumer brand, we are acquiring subscribers through Google, Facebook and Twitter.”
The Athletic gives subscribers in-depth breakdowns of athlete deals, playoff projections, data, and more in-depth content that it is hard to find in other media businesses.
Quality content was the initial fuel for The Athletic´s powerful growth flywheel. The second step was choosing the pieces that engaged most with the third step involving putting paid advertising behind it to acquire more customers. Finally, their data analytics process was action oriented; it fueled ideas for new pieces of content that would start the process again.
Track the metrics that matter
Looking at their acquisition drivers, 70% of new subscribers are acquired organically vs 30% that sign up thanks to paid campaigns.
Before their rise as a challenger brand, it could be argued that CTR was the relevant metric in the online media industry. However, by changing the business model, The Athletic needed to change the metrics that proved the success of the business.
Mather had this to say on the topic: “We look at whether articles drive new subscribers, drive deep engagement, drive comments, etc. We don’t use pageviews, but we certainly use metrics.”
In 2018, it was calculated that 90% current subscribers are active on a weekly basis.
80% of first-year subscribers renew for the year two, and 95% of those stay to the year three.
Similarly, the INMA attempted to calculate their LTV in 2018: “Considering annual subscription price of US$59.99 and an average cost of acquisition with performance ads of US$60, I (the author of the article) roughly estimate the three-year lifetime value of an The Athletic subscriber at US$136.”
Why did The Athletic fail?
With all these great metrics, the question is: Why did they need to sell the business?
As Joe Pompliano reported:
“The financials aren’t as pretty. The Athletic lost $54 million in 2019. They lost $41 million in 2020 and another $55 million in 2021. That’s a combined loss of $150 million over the last three years alone. Even worse, the company doesn’t expect to be profitable until 2025.”
At the end of the day, The Athletic became a thriving force that pushed a new business model into the industry but they had difficulties managing the costs of running the business.
Now that they have been purchased by The New York Times, the question is if they will be able to return to profitability by lowering CAC (access to the NYT customer base) and, hopefully, extend LTV. Given the success The New York Times has had in generating suscriptions (despite a “flattish” past few years) it would not be surprising to see that turnaround happen sooner than later.
A “Sport in Web3” crash course
Where are we in the relationship between Web3 & sport?
An interesting conversation on The Unofficial Partner on how web3 could land in the world of sports. A few examples they cover are:
The possibility of how sponsorship activation could imply rewarding the fans that engage with the activation through smart contracts.
How DAOs could disrupt club ownership or creators could monetize their content.
The thing is that so far, the conversation is more about opportunity rather than reality. However, they do recommend reading, learning and starting to test to get ahead.
Where are we in the relationship between Web3 & sport?
This episode of “Are you not entertained”? is the first of a series that will cover how Sport will be impacted by Web 3. On this one they go from covering basic concepts like web3, blockchain, NFTs or the metaverse to practical applications in the world of sport including DAOS, monetizing content, utility NFTs, gaming, how the metaverse and the physical world could combine and much more.
How the biggest brands are playing on the metaverse
eMarketer publishes this episode where they give a brief overview of who is currently winning on web 3. They focus on “the big tech” companies on one hand and on the brand / content production on the other. They include how brands like Nike or live events, sports included, are among the ones who can benefit most from the opportunities that lie ahead.
The fan controlled football league goes web3
The Milk Road newsletter shares the awesome example of the Fan Controlled Football League going to web3. As they explain, considering that fans already vote on everything that happens during a given game, embracing web3 makes sense as a next step. This will imply:
Teams owned by NFT owners and communities
Tokenizing the League
And then, this episode of The Joe Pomp Show host its co-founder and they cover the future of the sport in web3, tokens in sport and even how they currently make money:
Sponsorship
Right fees
Merchandising
Utilty NFTs
Betting
Play to earn
Master your marketing game
What marketers can expect from working with VCs
Useful episode for marketers working at companies looking to raise VC capital on the Inbound Success Podcast. There are 3 main things to look out for:
Deep rigor of metrics & goals that will take them to the next level
Drive improvements in the tech stack
The alignment between strategy, the brand narrative and how it translates into GTM dynamics.
Get ready to embrace B2B influencer marketing to drive more revenue
B2B influencer marketing is called to be one of the most relevant trends to drive revenue in 2022. This is a complete different ballgame since B2B influencer marketing is not so much “performance” as much as it is “credibility” driven. Therefore, the quality / metrics around the leads changes dramatically.
This episode of Social Marketing Pros will help you understand why your sport business could consider embracing B2B influencer , how to do so, the red flags to avoid and how it could even help align marketing and sales teams further.
Particularly relevant is their framework towards the end to identify the success of a B2B influencer: Reach, Relevance, Resemblence, Resonance (engagement), Reference.
How to win in creating new categories
The How to Win podcasts covers lessons from one of the most disruptive SaaS around, Drift, on creating new categories. There are many valuable lessons on this episode but we will highlight 3:
If the market conditions are true (a change in the world) and the timing is right are the two factors that will determine if you have an opportunity to create a new category.
You need to create mental availability.
Creating a category is about a “market problem” not a “your business problem;” you need to have a maniacal focus on the customer.
Become a “better you”
The science behind goal setting
This episode of the Huberman Lab could be a life / career changer if you dedicate the time to listen to it as it goes deep into the science behind goal setting. While you have the full set of notes we took in our resource center, the summary is:
Set challenging but achievable goals (not too big).
Plan concretely
Foreshadow failure (vs visualizing success) to have better chances of achieving your goals
Focus on visual points of attention
A detail coverage of the role of the dopamine system to drive motivation towards achieving goals
Adopting tiny habits to drive major change.
Another remarkable conversation on Guy´s podcast on mastering tiny new habits: The framework involves breaking it down to the simplest form, finding a place for it in your normal routine and nurturing /rewarding the habit.
Free Google Ad tools for you PPC campaigns
If your sport or fitness business uses Google Ads to drive traffic, this article with 10 free Google Ad tools you can use to monitor performance can surely be of value. From templates, keyword planner or dashboards, we believe there is something for any marketing / sales team out there.
The trends that may shape 2022
Wunderman Thompson shares an awesome (and very long) report with 100 trends to watch out for during 2022. They cover topics like the increasing importance of female sport, the role of the metaverse across industries or details on crypto and NFTs
Mastering your brand strategy game
“A brand moat is a culmination of a deep understanding of the customer, living out brand values, and creating a culture that deepens the connection with the brand”.
This article on CXL will show you practical steps and examples that will help you develop a robust brand marketing strategy. It includes details on understanding your customer, having a clear purpose, finding gaps in the market and building a cultural movement (through communities, employee advocacy, or even personal branding).
And that does it for The Ballketing Letter #69! If you have any feedback, please reach out and, if you believe someone will enjoy or benefit from reading The Ballketing Letter, do not hesitate to send it over to them!
Remember you can access our resource center, where we share every useful content we find over time, through the following link:
Thank you if you made it to the end of the post and we hope to see you again next week.
Keep safe.