When you’re incorporating ads into your newsletters, it’s smart to think about the financials first.
One important metric is CPM, which means “cost per 1,000 impressions.” It’s what many advertisers use to judge how much they’re willing to pay for a sponsorship.
To calculate how many thousand impressions are in your list, divide the total number of subscribers by 1,000.
For example, if you send a newsletter to ten thousand people, you have ten thousand impressions (10,000⁄100 = 10). Your total sponsorship fee divided by the number of ten thousand impressions you have is your CPM.
Email CPM comes in two flavors:
- •Fixed Sponsorship CPM:
Here, you charge based on the total number of subscribers you have, and get paid upfront. It’s straightforward but not always accurate because it doesn’t account for how many people actually read the email. - •Programmatic CPM:
With this method, payment comes after your email has been sent, based on the actual number of views. If your emails are usually a hit with readers, this method can be more rewarding than fixed sponsorship pricing.
How much is a typical newsletter’s CPM?
A CPM for a healthy newsletter is somewhere between $10 and $30. Some newsletters with excellent brand awareness or a highly sought-after audience can charge more than this.
But there’s a major flaw in looking at the CPM alone if you want to set your prices accurately.
A good newsletter will have stats of at least:
- •An open rate ranging above 25%
- •A click-through rate (CTR) above 2%
- •Unsubscribes around or under 0.3%
- •Spam complaint rates under .1%
Mailchimp has a great guide for newsletter stats across multiple industries. Just remember that all industry stats include businesses as well as community/interest-driven newsletters. A good newsletter should outperform industry stats by a few percentage points.
Note: All subscribers must be opted in to receive emails. If they didn’t, they can’t be counted as a subscriber, open, or click.
Why you shouldn’t use a fixed CPM to set newsletter advertising rates
Unfortunately, a fixed CPM doesn't account for your newsletter performance or all that hard-won community engagement.
Using a performance-based pricing structure requires a little more work, but it pays off in the long run.
Let’s take a look at two example newsletters, Abacus Weekly and Bartimus Times. Both charge $10 per CPM and have 10k subscribers. Based on fixed CPM, their total sponsorship fee is $100.
But they have totally different performance. Check out the table below.
| Open Rate | CTR | |
|---|---|---|
| Abacus Weekly | 25% | 4% |
| Bartimus Times | 40% | 5% |
Which newsletter is more ‘worth it’ to advertisers?
| Open Rate | Total views/impressions | CTR | Total clicks | |
|---|---|---|---|---|
| Abacus Weekly | 25% | 2,500 | 4% | 100 clicks |
| Bartimus Times | 40% | 4,000 | 5% | 200 clicks |
With twice the chance of an ad click Bartimus Times is the clear winner. Bartimus Times should definitely charge more than Abacus Weekly.
Note: Interested in offering flexible rates on inventory? Check out Paved's new Smart Pricing feature.
A better option for newsletter advertising rates: calculating by open and click
Fixed CPM is popular because tracking actual views in emails can be tricky. It relies on unique opens to avoid counting someone more than once. However, even if that person shares the email with 100 friends, it’s still counted as just one open.
That’s why Paved calculates by combining the total number of opens AND the total number of clicks (also known as Ad CTR).
We break this up into two groups depending on the newsletter and the type of advertiser they attract.
Type 1: Brand awareness-based pricing
Newsletters that get the highest open rates can earn higher fees.
If this applies to your newsletter, you can charge on a cost-per-open basis. For an average audience, $0.05 per open is a good benchmark to use.
| Open Rate | Total views/impressions | Cost per view | Total sponsorship fee | |
|---|---|---|---|---|
| Abacus Weekly | 25% | 2,500 | $0.05 | $125 |
| Bartimus Times | 40% | 4,000 | $0.05 | $200 |
Type 2: Performance-based pricing
All newsletters typically consider the click-through rate (CTR) to be the total number of clicks an email gets. However, the actual number of clicks an ad gets (also known as the Ad CTR) will vary considerably.
At Paved we use the Total CTR as a general indicator of list performance. Then, we use the Ad CTR to judge the value of a sponsorship or ad.
Factors that influence clicks are:
- •Positioning of ad
- •Number of other links in the email
- •Number of other advertisers in the email
- •Quality of the ad copy and creative
| Total clicks | Number of other links | Ad Clicks | Ad CTR | |
|---|---|---|---|---|
| Abacus Weekly | 100 clicks | 5 links | 20 ad clicks | 20% |
| Bartimus Times | 200 clicks | 8 links | 25 ad clicks | 12.5% |
With Ad CTR in mind, Abacus Weekly and Bartimus Times more accurately reflect the real traffic they generate for advertisers.
How much to charge per click on newsletters?
Pricing newsletter sponsorships typically ranges from $1 to $5 per click, but actual costs can vary.
For instance, while Facebook’s average cost-per-click is about $0.97, our experience shows it can rise above $2. LinkedIn’s average is $5.26, yet we’ve seen rates as high as $25, even $33 for sought-after audiences.
But clicks tell only part of the story. Think about conversion rates, too.
If a newsletter ad yields a 75% purchase rate from clicks versus Facebook’s average of 25%, then each newsletter click holds significantly more value for advertisers.
How to work out your sponsorship fee based on performance
Here’s the formula:
Open Rate⁄100 * Number of subscribers = Total opens
Total opens * Cost per impression + Number of clicks * cost per click = Sponsorship Fee
Let’s say a click was worth $4 due to a valuable audience, and an impression was worth $0.01 since we're focused on performance.
Abacus Weekly' sponsorship fee
25⁄100* 10000 * 0.01 + (20*4) = $105
Bartimus Times' sponsorship fee
40⁄100 * 10000 * 0.01 + (25*4) = $140
Sponsorships based on performance and audience value rather than a fixed CPM work out in the publisher’s favor. Especially if you have good stats and engagement.
Tip: Try our calculator to set your sponsorship prices:
Learn more:
Once I set my newsletter advertising rates, how do I find sponsorships?
There are plenty of ways for newsletters to find sponsorships. Check out our blog series My First Ad to read stories from real publishers:
- •My First Ad: Tedium by Ernie Smith
- •My First Ad: Good Good Good by Branden Harvey
- •My First Ad: Growth Currency by Dylan Redekop
- •My First Ad: Industry Slice by William Knight
You can also sign up to Paved’s Marketplace and Ad Network to monetize your newsletter immediately.
