Hey everyone, in the past you’ve all enjoyed some of my blog posts as reddit threads (15 lessons from our first $15 million and The ladders of wealth creation) so I thought I’d share my latest essay, the billion dollar blog.
This is the result of all my research in trying to build a massive company myself and I figured it’s better to share it than just keep it in my private notes. I’d love to hear what you think in the comments!
The Billion Dollar Blog
In the summer of 2010 Emily Weiss, a fashion assistant at Vogue, had the idea to start her own fashion blog. She bought a used camera, the domain intothegloss.com, and a couple months later the site was live. Into the Gloss showcased the real-world beauty routines of fashion influencers and celebrities. The blog was an immediate hit and by 2012 it received more than 200,000 visitors per month.
Eight years later, what do you think the site is worth? Millions? Tens of millions? While that would be an insane success for a blog, it’s not even close to the correct answer of $1.2 billion.
From Into the Gloss Emily created Glossier, the groundbreaking beauty brand now valued at over $1 billion. That’s the power of an audience.
At first Emily’s story seems like an incredible outlier: a billion dollar company born from a blog? How many times has that really happened? More often than you might think.
After digging deeper into the research I found example after example of creators building a traditional audience and then using it as a launching pad for a massive business.
In 2011 I started my blog, nathanbarry.com, to write about software design and development. While I didn’t have instant traction, I was earning a living from my blog in just over a year. A year later that turned into a great living from selling ebooks and courses on design. I quickly exceeded my wildest dreams, earning over $250,000 a year blogging and teaching design.
But like Emily, I wanted to turn it into something bigger. From the blog I built ConvertKit, an email marketing software company for creators, that now earns $24 million in annual revenue and is valued at over $100 million and counting. It required a ton of time, persistence, and a completely new mindset on business, but I was able to also turn an audience into a business with massive upside.
In my own quest to build a billion dollar company I’ve studied dozens of creators who have made this transition. This post is for my readers who are thinking about following a similar path.
Let’s dive in.
THE 5 RULES OF A BILLION DOLLAR AUDIENCE
RULE #1: BUILD MORE THAN A PERSONAL BRAND
When Mark Sisson started his blog, Mark’s Daily Apple, in 2006 he didn’t think he was taking the first steps towards a $200 million business. At a time when blogs were mostly considered hobbies, Mark was about to build an empire.
As his blog grew, Mark earned a great living through all the traditional methods: paid products, sponsorships, and advertising. He continued to scale with a bestselling book and more products.
Then in 2015 Mark launched Primal Kitchen, a company selling paleo-friendly mayonnaise, dressing, and other sauces. They started just online, but then were able to get distribution in Whole Foods and other retail stores. Just two years later food-giant Kraft acquired Primal Kitchen for $200 million.
Jessica Alba has more name recognition than any blogger ever will. Despite that fame, her wealth doesn’t come from her name or movies, but instead from The Honest Company, a multi-billion dollar consumer goods company she founded.
In every example I looked at I found that personal brands are great for getting started, but this next level nearly always involves moving beyond a personal brand. Creators like Michael Hyatt and Marie Forleo will always be held back by their desire to build a brand around their own name.
That doesn’t mean creators aren’t a figure-head or their name isn’t a part of it—Air Jordan or Kylie Cosmetics come to mind—but the company or product brand is #1.
The Disneyland of quilting
After nearly going bankrupt during the 2008 recession, Jenny Doan and her family moved from California to the small town of Hamilton, Missouri. Her kids set her up with a sewing machine and helped her start a quilting business. After the first year when sales were slow, they helped her turn to YouTube to create tutorials.
In the years since then Jenny turned that tiny YouTube channel into The Missouri Star Quilt Company—which turned Hamilton, Missouri into “The Disneyland of quilting” and now employs over 400 people. Seriously, they own half the town. Forbes estimated their 2019 revenue at over $40 million.
Today Jenny is still putting out a video each week and her channel has grown to 680,000 subscribers. It would have been natural for her to build her online profile under her own name, but by naming it The Missouri Star Quilt Company she pushed her entire business far bigger.
RULE #2: SELL PRODUCTS, NOT ATTENTION
Kylie Jenner was one of the least famous Kardashians, but now she’s the wealthiest. Rather than chasing more fame or influencer status she channeled what she had into Kylie Cosmetics. She was so successful that the entire entrepreneur community wasted time arguing whether or not she was actually a billionaire.
Creators are better than anyone at capturing attention. Attention has value. Brands understand this and pay the creators to redirect that attention towards their own products through advertising and sponsorships.
In a perfect market that attention is worth more than the brand is paying for it. If the brand pays a creator $10,000 for a promotion, they do it because they believe the attention will drive more than $10,000 in product sales and long-term brand value. If that additional value is worth $5,000, that is the value gap that the creator missed out on.
That doesn’t mean the creator should charge $15,000—a brand won’t do something if they don’t get value—but instead the creator should sell their own product to capture the full value.
Ryan Reynolds understands this better than anyone. He could make a ton from endorsement deals, but he realized that’s giving up too much upside. Instead he became an owner in Aviation Gin (which he just sold for $610 million) and wireless carrier Mint Mobile. Each hilarious ad he records drives more sales and builds the brand.
A common misconception
Often creators with an audience will start selling products, but rather than a full product line, it’s branded merchandise. Like Casey Neistat selling branded hoodies and shirts. While these likely sell well to his millions of subscribers, that’s not the same as building a clothing brand.
On the other hand, Candice Poole (Casey’s wife) is truly building a clothing brand with Billy!. It’s important to understand the difference: selling branded products can be a step towards another revenue stream, but it’s not the same as building a brand that can stand on its own outside of the original audience.
You should do sponsorships when it raises your profile
If you are lending your name to another brand it’s likely selling your own product would have more long-term upside. But there are some times that a brand deal raises your own brand. For example, if an up and coming photographer does a deal to be featured in an Apple marketing campaign their own profile and brand will increase significantly.
Capture all the value
None of these companies used affiliate revenue, partnerships, or sponsored posts to drive their revenue. Instead they realized that they already had the most valuable asset that traditional companies were clamoring for: attention. They redirected their loyal following from buying other people’s products (for a small fee) to buying their own products to capture all the revenue and all the brand value.
RULE #3: DRIVE HIGHER CUSTOMER VALUE THROUGH RECURRING OR REPEAT PURCHASES
Justin Jackson made the switch from selling books and courses (which are sold once per customer) to selling Transistor, a subscription software product for hosting podcasts. Like all software as a service, customers pay every month for access to the product.
Katie and Seth Spears built the massively popular blog, WellnessMama.com earning a living from affiliates, digital products, and sponsorships. Then they leveraged that audience to launch Wellnesse, a personal care product company that I believe will scale to millions in revenue (I’m an investor). Wellnesse makes money from repeat purchases as fans buy more toothpaste, shampoo, and lotions.
How often can your best customers buy from you? If it’s only once or twice, you’ll struggle to scale that company. But if you sell a product they can buy over and over again, you’ll have a much higher customer lifetime value. George Clooney did this with Casamigos Tequila: if you love it you buy more when you run out. He sold the company in 2017 for over $700 million.
ConvertKit follows a similar model where not only do our best customers pay us every month, but as they grow their email list they spend more and more with us (and are thrilled to do it!).
RULE #4: CHOOSE A BETTER BUSINESS MODEL
Vani Hari built a massive audience for her site The Food Babe, where she led a crusade for healthy food with clean ingredients. She monetized through cookbooks, meal plans, and affiliates. She then focused that audience into Truvani, her own health supplements company with Derek Halpern which is now well into 8-figures of annual revenue.
As independent creators we’ve seen the incredible value of ebooks, digital products, and courses, but the traditional business community doesn’t value them. It’s not because traditional investors are foolish or snobby, but because that’s not how companies are valued.
Companies aren’t valued based on current revenues, but instead on projected future cash flow.
A company may lose money now, but if investors believe it has the ability for high margins on significant revenue in the future, they’ll pay a premium to own a share of it now. So what product lines have the potential for the best revenues at a solid margin?
Buying higher quality revenue
Andrew Wilkinson used the profits from MetaLab, his design agency, to buy an empire of companies through his investment firm Tiny Capital. Services revenue isn’t highly valued by the broader market (because long-term cash flow is capped), so Andrew used the profits to buy and invest in businesses that are highly valued (software, communities, etc). Effectively trading up for higher quality revenue.
OptinMonster made this move when they rebuilt their popular WordPress plugin into a SaaS platform. Not only could they build a better product that’s easier to maintain, but now they exist in a category (SaaS) that is trusted to deliver great long-term returns.
When you think of how to earn more as a hip hop artist the ideas are probably scaling the audience and more endorsement deals with brands. But would you expect a rapper to create one of the most iconic hardware companies of the decade?
In 2006 Dr. Dre said to Jimmy Iovine, “Man, it’s one thing that people steal my music. It’s another thing to destroy the feeling of what I’ve worked on.” Referring to the low quality sound delivered by Apple’s basic earbuds that came with every iPod.
Two years later they debuted Beats by Dre, their own premium headphones. Through product placement and endorsement deals the headphones became iconic. In 2013 Apple purchased the company for $3 billion.
Vani, Andrew, and Dr. Dre all saw that while they could earn a great living in their current paths, they could trade money or attention for a better business model with an even higher upside.
BUILD A BUSINESS TO BE ACQUIRED
These 5 rules could all be summed up in one phrase: build a business that is desirable to acquire—even if you don’t want to sell. A powerful brand, recurring revenue, a great product line, and a quality business model will drive significant value long-term whether you sell or run the business yourself.
NOT EVERYONE MAKES IT, LET’S STUDY WHY
I just shared a ton of examples of creators who made the decision to graduate to bigger upside and pulled it off. This is insanely hard, so we can learn just as much from those who I think should have made the move or tried and failed.
THE WRONG BUSINESS MODEL
In 2015 Automattic, the makers of WordPress.com, acquired WooCommerce for “more than $30 million.” That’s a massive success and the founders never have to work again…but it’s nothing compared to what they could have built. Before Adii Pienar left WooCommerce he tried to push the other founders to build a hosted version to compete with Shopify directly. His co-founders didn’t want to. They bought him out and then later sold to Automattic.
It turns out selling themes and plugins can be a great business—earning the WooThemes/WooCommerce crew millions of dollars per year—but it can’t be a giant company. The real money is in building platforms like Shopify, BigCommerce, and WordPress.com. WP Engine did this and now earns over $100 million per year as a hosting company.
The higher leverage move for the WooCommerce team would have been to build two things:
A user-friendly, hosted competitor to Shopify
A hosting platform for the broader WordPress ecosystem
The WooThemes team turned a huge early hit into a solid exit, but it could have been two separate billion dollar companies.
ONLY SOLVING HALF THE PROBLEM
In 2015 I sat down with Pat Flynn in a San Diego coffeeshop to discuss working together on ConvertKit. Since then he’s become an invaluable advisor who helped rocket ConvertKit into what it was today. But there was another part of that conversation: I tried to convince him to turn Smart Podcast Player, a WordPress plugin that provided a beautiful podcast listening experience, into a full-fledged podcast hosting platform.
At the time Libsyn was the number one player and they had an absolutely terrible user experience. Everyone hated using them, but there wasn’t anything better out there. Pat solved 50% of the problem (the user facing side) by making the listening experience great. I was encouraging him to build it into a SaaS app and solve hosting as well. He had a ton of other great projects going at the time, so he decided not to.
While Smart Podcast Player was a great business, it doesn’t have the same trajectory as Anchor or Transistor.
In talking to Pat before publishing this article he pointed out that the biggest issue was timing. Back then he didn’t have the right team to build a full software platform. But now he does and he’s built Smart Podcast Player into a full podcast site platform called fusebox.fm.
SELLING THE WRONG PRODUCT
While I don’t know official numbers, I believe at one time Ramit Sethi was over $10 million in annual revenue with more than 50 employees. All focused on selling high-end courses.
Being in the personal finance industry there are plenty of startups or products Ramit could have created. But I think he wisely realized that creating the next Mint or Wealthfront is an insane amount of work and would require learning new skill sets. But if he wants it, the opportunity is there for him.
Marie Forleo could do the same. In fact, her audience—along with Tim Ferriss and others—was key in helping to launch Shopify’s Build a Business challenge in 2010, which they used to grow. Marie is doing amazing with her business, but if she wanted to take it to the next level she would need to pivot from selling information (her B-School course) to a traditional product for the mainstream market.
INVENTING A NEW CATEGORY
Casey Neistat leveraged his YouTube audience to provide initial traction for Beme, a new social network and video sharing app. Casey and the team worked hard, but ultimately couldn’t get traction and the company was acquired by CNN in 2016 for $25 million. The product was shut down and the team was assimilated into CNN.
While he still got his payday, Beme didn’t turn into the hundred million (or billion) dollar success that it could have been. Here’s the problem: Beme was trying to create an entirely new category. It had no competition, which also means there wasn’t built up demand. It’s a trap to think that no competition means an easy path to profits. Usually it means you’ll struggle to get initial adoption.
That said, Casey took his swing and I have a ton of respect for him in that! Interestingly, through starting Beme he actually kicked off his daily vlog which made him far more famous. As his audience grows I think Casey will continue to take big swings beyond Beme and 368 (his next venture). His massive audience will be a growing launch pad for each new idea.
TOO MANY GREAT OPPORTUNITIES
In January, 2019 Caleb Wojcik and Pat Flynn launched a Kickstarter for SwitchPod, their new tripod designed specifically for vloggers. Nearly every vlogger used the Jobi GorillaPod bent into a makeshift monopod to extend your arm and get the camera further away. The GorillaPod worked, but was clumsy and difficult to use.
The SwitchPod had great marketing and quickly raised $415,000 from over 4,000 backers. YouTubers with early access loved it. Creators like Levi Allen and Peter McKinnon recorded rave reviews. Even after launch it has continued to sell well. Caleb and Pat were able to use their audiences and relationships to launch this to initial success, but then… well, they mostly went back to their other (very successful) businesses.
I wanted Pat and Caleb to go all in—to turn SwitchPod into a camera gear company run by creators who really get the audience. I believe in this market they could beat out Gorillapod and build a company worth at least $10 million. They have other ventures that are doing really well (and there’s nothing easy about this), so I don’t fault them for choosing a different path.
THE WRONG PLATFORM
Copyblogger built a large audience through teaching content marketing. Rather than just selling courses or other content Brian Clarke partnered with Brian Gardner and others to merge together the content machine with Studiopress WordPress themes and Synthesis web hosting. It was a brilliant move to sell a higher value product to the same audience.
Later they bundled further to launch Rainmaker, an all-in-one marketing platform for bloggers. I believe this was a good move, and it was certainly an attempt to graduate to even more upside. Ultimately it failed and the company was divided up again and sold off in pieces.
It’s hard to say exactly why Rainmaker failed, but I think it was a combination of building as a bundle of WordPress plugins rather than a custom platform, the team coming from the marketing world and not building a true engineering culture, and the founders gradually losing interest.
The Copyblogger team had the right idea to use their audience to sell products with more long-term value than content, but were unable to truly execute.
We’ve learned from both the wild successes and the missed opportunities. So let’s cement our learnings with a little fun: pick your favorite creator with a massive audience. How could they make this transition? I’ll start by speculating with a few:
James Clear — James built the fastest growing single-author blog of all time writing about habits with a blend of research and storytelling. His book, Atomic Habits, has gone on to sell millions of copies and he’s running a great business. Nearly 2 years after launch Atomic Habits hit #1 on the New York Times bestseller list. James also delivers a couple keynote speeches per month for significant fees.But what if James had to build a company worth $100 million in the next 5 years? What should he build? What first comes to mind is building an app like Calm for habits. Or if James were to acquire a company I would look for what types of businesses he could double revenue immediately because of his massive audience. What would you suggest?
Taylor Swift — Taylor is one of the most popular artists of my generation and she’s earned an insane amount of money with every album. She owns two private jets and has a net worth of over $350 million. But she isn’t going to become a billionaire through albums and touring. It’s going to take smart investing (she’s got plenty of time for compound gains), brilliant endorsement deals (think Yeezys or Air Jordans), or creating a product company to bring in that extra 2/3rds of a billion.
Joel Runyon — I’ve been friends with Joel since first meeting him at The World Domination Summit in 2012. He’s built plenty of businesses weaving in his brand Impossible as the parent company for some of them. It’s been fun to see Joel start to make this transition to building Impossible into a fitness, lifestyle, and achievement brand. I imagine Impossible as the next Red Bull or Onnit.
Ben Thompson — Through Stratechery, a subscription newsletter covering all things tech, it’s estimated Ben earns more than $3 million per year. That’s absolutely incredible, but if he had to build a $100 million business, how should he do it? Software is what immediately comes to mind, but what specifically?
YOUR NEXT STEP
For those who are just getting started, the most important thing to understand is that an audience is key. If you’re looking for step one on this massive journey it’s to get good at building an audience.
If you have an audience, focus on scaling it. What will get you in front of the most people? If you want to go big it probably isn’t the time to focus on monetization, but instead creating incredible content that will really spread.
For those that already have that massive audience, it’s time to look at selling your own products and driving that attention to build a brand.
If you’re already selling your own products and building a real brand, keep at it. This will take a long time. I’ve been working on ConvertKit for 7 years. I think that it will take me at least 5 more to build ConvertKit into a company worth $1 billion.
Compound interest is the most powerful force on earth. Build a product and brand that can experience compound growth. Then work on it for a really long time.