Newsletters sponsorships are simply another marketing channel and you should price them as such. This means that you should consider 3 main factors when calculating your sponsorship rates as a newsletter owner: cost per thousand impressions (CPM), click through rates (CTR), as well as cost per click (CPC). You will want to determine the floor rate (i.e. the minimum rate) of your sponsorship placements as a combination of these 3 metrics. You can then use this figure as a baseline when negotiating with the sponsor.
Firstly, you need to calculate the average number of impressions per month. You can use a trailing average of 3 to 6 months. For a growing newsletter, opt for a shorter trailing average, while a mature newsletter should use a longer trailing average. Using an average helps to smooth out the figures and account for abnormal events. The impressions can be calculated from the number of subscribers, the open rates, as well as the sending frequency.
For example, as an average over the past 3 months, John has five thousand subscribers, with an average open rate of 50 percent and a sending frequency of four times a month. He will thus have ten thousand impressions per month.
The average number of impressions, generalized, is simply:
Avg Impressions = No. of Subscribers x Open Rate x Sending Frequency
Secondly, you will need to obtain benchmark CPM and CPC figures from large social networks. In this article, I use Twitter as an example, but you should opt for other social networks that are aligned with your type of newsletter content.
Considering that Twitter’s average CPM is US$6, you’re looking at around US$60 considering impressions. Factoring in Twitter’s average CPC of US$0.4 with an assumed CTR of 2%, we will be getting 2% x 10k x US$0.4 = US$80
Generalizing the price into different cost segments, we get:
CPM segment = Avg Impressions x 3rd Party CPM CPC segment = Avg Impressions x 3rd Party CPC x Your CTR
Thirdly, we need to consider niche focus “multipliers”. This is because your audience is already targeted for the sponsor, and they don’t have to do any additional work, such as A/B testing, besides providing their content (for example, the sponsor blurb). A conservative estimate would be to have a 2x multiplier for targeting if you’re in a very general niche, but I would not be surprised with a 4x multiplier or more, depending on how specific your niche is. Furthermore, if you have consistent growth rates in your impressions, you could add that in as an additional multiplier. For example, if your average trailing impressions growth rate is at 25 percent, you can add in a x(1.25)^2. As this is a forecast of growth, you should opt for more conservative figures, even if your newsletter is growing fast.
To calculate the final floor rate, you need to sum up the CPM and CPC segments and apply the multipliers:
Floor rate = (CPM segment + CPC segment) x niche multipler x growth multiplier
For example, with a 10 percent growth rate and a very general niche:
(60+80) x 2 x (1.10)^2= 339
For a more specific niche:
(60+80) x 3 x (1.10)^2= 508
During your negotiations with sponsors, always remember that there is no harm in asking for more. This only gives you a ballpark figure for you to work with. Throwing out higher asking prices will let you know how much the sponsor values your audience, and you will be able to adjust your CPC and CPM values as well as the multipliers accordingly in future calculations.