How ConvertKit Built a Million-Dollar Monthly Newsletter Tool
ConvertKit is a company that offers newsletter services.
Public project dataPlatforms in China making newslettertools should take a look)
Current public data shows monthly revenue of $2.5 million, 64 employees, 50% of profits shared among all staff annually, 90% gross margin, 30% in commission payouts, 0.8% monthly revenue growth rate, about $62 in revenue per user per month, and currently around 42,000 users.
The main business model is SaaS, with a paid tier for the premium version starting at $29 per month.
At first, they tried to make money by selling digital products, then used MailChimp to sell their own eBooks, earning tens of thousands.
After making some money, they wanted to build better tools for people like themselves, and publicly launched a challenge to create such a tool. The goal was to reach $5,000 in monthly revenue within six months, but after six months, revenue only hit $2,000. Even though it was doing reasonably well, friends recommended shutting it down. The founder didn't listen and persisted for another year. In total, they worked on it for 22 months, with revenue dropping from $2,000 to $1,300.
At this point, they made a decision to put their last $50,000 in savings behind the project and hire an employee to work on it full time.
To acquire customers, they tried many things. For cold starts, the most effective approach was emailing bloggers to explain how the product works (they finally realized their users were bloggers with audiences) and what problems it could solve. They got some responses from bloggers saying that switching platforms was too inconvenient, so the founder identified the switching cost as the key barrier and started manually helping customers migrate. Within six months, revenue rose to $5,000. Once revenue hit $20,000, they launched a referral program (affiliate marketing). Many bloggers joined in to earn passive income. (The affiliate program pays 30% of the first two years of referred user subscriptions.)
In the early days, the gross margin was only 30%. As most of the referring bloggers' two-year periods expired, growth became organic. (Including profits, the overall gross margin eventually rose above 80%.)