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The Ultimate Arbitrage


premfan
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The ultimate arbitrage is happening with the internet newsletter model.  First the newsletter creator needs a trusted following. Then what I have observed is a ton of overlap in content in certain newsletters.  My instinct is telling me that there is a "source" newsletter that certain people are curating enough that its not a blatant copy.  They are subscribing to the source newsletter say at 250 a year. Then reselling the curated newsletter to there followers at "X".  This is the ultimate current state arbitrage .  Insane ROI not illegal unless the "source" newsletter is copyrighted.  I respect this hustle. Any one that has a following can easily do this with a bit of marketing and the classic "X" discount until pick a date. Just find the "source" newsletter then curate it to your audience and pawn it as original content.  Respect.

 

Hypothetical example

 

Buy at 250 a "source" year newsletter.  Sell followers 99 dollars a year to join in.  Say 100 followers join.  Initial investment 250 dollars payoff 9,900 dollars.  Good year in market equates to more followers.  Then more newsletters can be sold to followers with different themes.  Just find the "source" first then curate it.  Then bundle it together to create the ultimate value prop.

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That's not really how money is made in financial newsletters.

 

I can't say a whole lot more than that except very generally.

 

Maybe it should be. Amazing business model. That said, you need to  produce free micro content until you create trusted followers across many platforms. Then this model works at a micro level.  If you don't produce trusted good content before selling this model wont work. You need trusted followers then run the arb. 

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A while back I came across somewhat similar newsletter services for small financial advisors. The people who sell and produce these use phrases like "thought leadership", a term that makes me feel ill for several reasons.

 

The service basically prepackages a bunch of extremely generic, relatively useless advice that Munger would probably refer to as twaddle. The advisor then puts the firms name on the letterhead and does not disclose that most of the "content" of the newsletter is not their own. I would say it's misleading, but does not break any laws. The individual advisors then sign their own name to the bottom of the newsletter and voila, they are "thought leaders" without ever having to think (other than making the decision to subscribe to the service). Since these letters are only sent to clients and prospective clients, the letters are unlikely to end up on the web, and people are unlikely to realize the twaddle was prepackaged twaddle.

 

Is this a good business? Well, it might be profitable, but I personally would not want to spend my time involved with an operation like this.

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I'm curious if Premfan is referring to the many Seeking Alpha newsletters, or if there's something else out there.

 

The newsletter business is fascinating to me. If you do it right, it's pretty much a license to print money. It's easy to scale, there are millions of potential customers, and advertising it online isn't terribly expensive. Each incremental subscriber becomes almost 100% profit (assuming the cost base is low, of course). It seems like the kind of business we all want to invest in.

 

I know Scott can't talk much about his experiences with the newsletter business, but can he point to anything online that would give me some insight on how the business works?

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I'm curious if Premfan is referring to the many Seeking Alpha newsletters, or if there's something else out there.

 

The newsletter business is fascinating to me. If you do it right, it's pretty much a license to print money. It's easy to scale, there are millions of potential customers, and advertising it online isn't terribly expensive. Each incremental subscriber becomes almost 100% profit (assuming the cost base is low, of course). It seems like the kind of business we all want to invest in.

 

I know Scott can't talk much about his experiences with the newsletter business, but can he point to anything online that would give me some insight on how the business works?

 

I know the newsletter business at a micro level where I gave free newsletters away when I operated a healthcare business. I had a consultant ( source) that created the content and emailed it to me monthly to give to my patients for more information. I just did a few things so it wasn't a blatant copy. That said, here is the model if you are willing to do the work of creating a trusted following.  This model will work on a micro level. Not on a macro level where there is original content like interviews.  Best to be transparent if its original content or curated with clients. Is it implicit or explicit? Don't assume just be transparent. This model takes time.  You need to give free value for years 2-4 before selling or asking for anything. Treat this as a startup business. Where you create the infrastructure first then go for the ask.

 

1.) Pick a extremely niche theme.  Micro caps, small caps, owner operated companies, finding them small holding companies that model brk, compound machines, bank companies, ben graham deep value stocks, Mongolian real estate.  You get the idea. Pick a theme you believe in. You cant sell if YOU don't believe it gives value.

 

2.) Create micro content on platforms that your future clients use.  Our attention spans are lowering and if you don't create continuous micro content people will not pay attention to you.  Twitter, forums, personal blogs,  podcasts, periscope, youtube.  Pay attention where your future clients hang out. Jump in fast in the new platforms. Create a following fast before your competitors notice. Find the whitespace platform where your future clients will be.  This is important.  Also this can work if you want to manage other peoples money.

 

3.) GIVE VALUE!  Across multiple platforms give free micro content for years.  Do guest posts, email podcasters get on there show, give give give! Do offline stuff too like conferences.  Be curious and start building relationships with people in your field.

 

4.) Run the arb.  Okay so infrastructure in place.  Find a "source" or multiple "sources" that follow your theme. Buy the source material.  Market the product six months or so before it goes live.  Then curate the content.  Be transparent and say its curated( most content is curated its just not explicit). Pricing its up to you.  Depends on your followers.  The more followers the lower price you can go.  The less followers the higher the price. 

 

You find the best source materials and package it together to give value to your clients.  This saves them time.  Since you are a net content consumer you have the ability and time to curate. Remember you save people time. The master curator is google.

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