Several years ago, I was working on a second bottle of wine with a prominent sales pro. He blurted out something about “the formula” that Bill Ziff (of Ziff Davis fame) used to generate a billion-dollar publishing empire. I was new to advertising, and the notion of a “secret formula” for generating sales with a publication was intriguing (to say the least). So I scoured the Internet for days to learn everything I could about it.”

Eventually I learned how to apply “the formula.” And as a result, I generated more than $6 million in advertising sales for several print and e-mail publishers. The “formula” is described in a great book called “Amazing Formulas That Guarantee Advertising Sales.” The book became an underground best-seller of sorts.

Basically, Ziff developed a way to make a free publication attractive to advertisers by mastering the art of “controlled circulation” – the notion that only “qualified subscribers in a particular job or industry” would receive it. This is one way to make money by publishing an e-mail newsletter.

There are actually three ways:

1. You can publish a free e-mail publication – one that is supported by advertisers. (And with Bill Ziff’s formula, you could make it very profitable.) A good example of this is Mel Strocen’s SiteProNews, which is devoted to helping webmasters and eBusiness site owners improve their websites. The publication was started as a simple idea (at a home office table) and it now reaches more than 500,000 opt-in subscribers.

2. You can publish a fee-based e-mail publication – one that is supported by charging a fee for the subscription. Forbes, for example, publishes several fee-based newsletters, including Forbes Growth Investor, which has an annual subscription fee of $197. 3. You can launch a direct-marketing e-mail publication that sells your products and services directly to your readers. One company that does this very successfully is Agora Publishing. You can also combine the three. That’s what Weiss Ratings Inc. does. (And many other publishers do the same thing.)

One way to do that is to launch a free (advertiser-supported) e-mail publication and dovetail it into a fee-based product. A direct-marketing publication could be e-mailed to your subscribers too. All three of these approaches require an audience of people who have given you permission to send your newsletter to them – either by subscribing to it or by “opting in” to receive it. (You can get into trouble for sending e-mail to people who haven’t done this.)

But how do you decide which approach is right for you? Here are some of the pluses and minuses of each approach.

1. Free opt-in e-mail publications

It’s easier to build an opt-in subscriber base for a free e-mail publication that is supported by advertisers than it is to build a base of subscribers to a fee-based publication. Publishing schedules are usually not as rigid for free publications. If there are problems sending it one day you can send it a day or two later (unless it’s a daily publication). Content is typically easier to obtain for a free e-mail publication.

The downside of free e-mail publications: The onslaught of free e-mail publications makes it difficult to rise above “junk status” and bypass spam filters. Though things are starting to change, most of the big-time advertisers are still caught up in a mass-marketing mindset. Which means they won’t even look at your e-mail publication (or even respond to your e-mail inquiry) unless you have “impressive” subscriber numbers. However, almost all advertisers are open to the “controlled circulation” or “qualified audience” angle, regardless of how many subscribers you have. Many Internet Service Providers shy away from sending free e-mail publications for fear of appearing to support spammers.

2. Fee-based e-mail publications

Some publishers like the paid-subscription model best because it’s “clean” and the recurring billing can be done easily and automatically online. It allows you to concentrate on the content rather than on spending your time attracting advertisers (and collecting the money for their ads). Fee-based publications can be as profitable as advertiser-supported publications – sometimes even more so if you have the right topic/audience. (And often with fewer spam problems.) The downside of fee-based e-mail publications: It’s harder to obtain subscribers for a fee-based publication than for a free publication that is supported by advertisers. More effort is required to market and “sell” your publication’s benefits. Because there is so much free information available online, people are hesitant to pay for content. However, subscribers who are satisfied with your content will tend to re-subscribe without hesitation.

3. Direct-marketing e-mail publications

These enable you to profit by selling not only your own products and services but also those of people you have reciprocal agreements with. Multiple backend products are easier to develop and test when you already have a satisfied, targeted customer list. Last year, direct marketing – including the marketing of products and services done in e-mail publications – generated more than $2.3 trillion in U.S. sales.

The downside to direct-marketing e-mail publications: They have a tendency to be associated with spam. When you test your products and services, you run the risk of losing readers. The content tends to be sales-oriented rather than providing useful information. The one thing I haven’t mentioned is how satisfying e-mail publishing can be. I’ve published an e-mail newsletter on the Great Bear Market every week since 1997, because I enjoy learning and writing about market trends and profitable investing ideas. It’s been a labor of love – and profitable since day one.

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