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Exploring Ways to Incentivize Talent

It’s one thing to say that you should incentivize star talent, and it’s entirely different to actually structure it correctly. As I wrote last week, “We need to get comfortable creating incentives that align our star talent with our brands. It doesn’t have to be equity, but there needs to be some sort of upside.” What are the various ways others are paying their writers?

I spoke with Axios’ Jim VandeHei for the AMO Podcast (coming out on Monday). Obviously, Axios has franchise-like star talent like Dan Primack, Sarah Fischer, etc. So, I asked him what he thought about incentivizing them.

It’s hard because what you want to do is you want to—in an ideal world—you would incentivize them wholly based on the growth of their product. I don’t love that model for them or for us because they don’t really control the sales of the product. They don’t control the advertising buy. They don’t even control the outward selling of the product. They could be punished if, they might be producing an A+ product, but maybe the selling wasn’t right. The way we try to align it is we try to put together an aggressive package of bonuses, salary, and incentives where they’re being paid as stars. We have to be confident that there will be some reporters that make more than other reporters because they drive a hell of a lot of business because they drive value…

And I agree with many of the downsides of wholly incentivizing based on the growth of their product. For AMO, it’s easy for me to be directly aligned since I do the writing, sales, etc. But for something like Primack’s newsletter, what if the sales team just fails to sell the ads? That’d result in an unfair outcome for him.

It makes sense for them to provide broader level salaries, bonuses, etc. because Axios is also accruing value at the brand level. And so, the work that Primack does not only helps his product but also the broader Axios ecosystem.

Another model was how Every—formally known as Everything—did it. When I interviewed co-founders Dan Shipper and Nathan Baschez for the AMO podcast in 2020, they talked about how they used surveys to incentivize all of the various writers in the bundle. Essentially, when a reader signed up, they’d receive an email asking which newsletter encouraged them to subscribe, and then that writer would be compensated. According to Baschez:

The plan is, let’s say you came in because of Praxis and because of Tiago Forte, but you ended up becoming a fan of something else, and so maybe a couple of months later, you get a survey, and it’s like, “Hey, what’s your favorite newsletter within the bundle?” Then if you pick something else, then your revenue switches basically. We just keep reallocating the revenue that way, and then the additional complexity is not everyone will fill out the survey.

Each month, we take the bucket of revenue from people who didn’t fill out a survey and allocate it proportionally based on the people who did fill out the survey. If there’s like $100,000 of, I mean, I wish we had this, $100,000 of new MRR or whatever, one day we will, we would take that pie and divide it according to, let’s say, 30% of people said that, they signed up for your newsletter? Okay, you get 30% of that $100,000 of MRR if that was new from that month, if that makes sense. Then when the subscriber churns, that revenue just goes away basically.

The problem, as Shipper said to me when we spoke yesterday, is that this was an incredibly complicated model, and the vast majority of writers just didn’t understand it. And if they did understand it, perhaps they were only writing once or twice a month, so it just made sense to go back to paying per piece. As part of this, they went from a bundle of individual newsletters to a single newsletter.

But this necessitated the creation of a new framework. As Shipper explained, “If a big part of our model is that writers can come to build their careers here and can take their lists when they leave, but we only have one list, it becomes technically harder.

And so, we created Audience Equity. If you leave, anyone who signs up for Every from the time you started and the time you leave is your audience equity. And so, if you leave, you can buy that list from us in a seller-financed way. And so, if you make over $80,000 in income, you pay us 25% of your income above $80k until we’re paid back. We agreed on a $1 per email price.

It’s a unique model that basically sets the writer up to make a good living once they leave, plus incentivizes Every in the event the person leaves. The risk for the creator is that a large percentage of the users might not care about their solo newsletter and churn, thus creating an expensive liability. On the other hand, being able to leave and start with something is a nice headstart. Plus, you’re only paying if the list is monetizable.

Another way to incentivize talent would be to use a customer data platform (CDP) to track the audience. Since every article is tagged to the individual writer, you can get pretty granular. A CDP works by cookieing every anonymous user who visits the site and starts to build a profile. When that anonymous user signs up, it connects the user's behavior with the email address. So long as the user doesn’t clear their cookies, it can become a pretty deep profile.

At some point, the user is going to give you that email address. Which article got the user to sign up? What other articles did that reader engage with that might have led up to the newsletter sign-up? You can then record this as attributed to either the single writer or a collective of writers.

You would then repeat this exercise on the paid conversion. You’d track which newsletters or articles they engaged with in the lead-up to the paid conversion and assign value based on that.

Finally, as long as that user is subscribed, you’d want to understand what content keeps them around. Are the writers who acquire the subscriber perhaps different from the ones who retain that subscriber?

But here’s where this thought experiment gets complicated. Each of these data points would factor into a score, where you partially attribute points depending on the various stages of the funnel. Someone whose content gets a free subscriber might be worth less than the paid conversion. And then, whoever is keeping the subscriber from churning would get different points. At the end of the month or quarter, you calculate the total points, the percentage of points per writer, and then the revenue share and split accordingly.

But the right number of points is arbitrary. Is a free newsletter subscriber worth half a point and every article that led up to that subscription worth a tenth of a point? Or should it be worth more or less? Does this model only work for paid subscriptions; in other words, could you do this with an ad-based model?

Ultimately, you need to be able to assign an LTV to each reader. It’s an imperfect science with advertising, but it can be done. Another complication is paid acquisition. If I am a marketer and use $5 to acquire a subscriber on a writer’s piece of content, does the writer get credit? Another complicating factor is that the talent is still dependent on sales efforts, especially in an ad business. As VandeHei said, “They [talent] could be punished if maybe the selling isn’t right.”

And that’s the reality of all of this. When you’re incentivizing talent, there is no perfect solution. You have to get creative and be willing to try different things. But the most important thing is being comfortable with the fact that you will be paying certain people more. That is the future. And the media companies that figure that out will thrive in the future.

Thanks for reading today’s AMO. If you have thoughts, hit reply or join the members-only Slack channel. Have a wonderful weekend!