“We knew there was a hole in the market.” It’s a crisp Tuesday morning in mid-November, and entrepreneur Ben Lerer is explaining why he and his cofounder Adam Rich decided to launch an email newsletter three years ago. “Not only from a business perspective,” he says, “but from a consumer perspective. We wanted this to exist.” It’s a kind of royal “we,” referring to guys like Lerer — urban-dwelling, twenty-somethings seeking worthy amusements — and Thrillist was conceived to be their guide. The newsletter lists up-and-coming restaurants, nightlife, happenings, websites, and gear aimed at an all-too-familiar demographic: young, intrepid males living and working in New York City. What Lerer and Rich didn’t foresee was that this single newsletter would evolve into a multi-market independent media company, tailoring its sardonic content to appeal to half a million subscribers in seven major U.S. cities. Or that they would win over big-time national advertisers, including such household brands as American Express, Proctor & Gamble, and JetBlue, which continue to contribute to a healthy revenue stream. This accomplishment inspires a blend of marvel, shock, and downright envy from anyone with even the slightest twinge of entrepreneurial ambition. The question on all those envious minds: How did they do it?

Lerer, 27, is happy to answer that question. We’re in the SoHo office of The Huffington Post, where Thrillist shares space. He’s dressed in dark denim jeans and a chocolate sweater layered over a white dress shirt; his brown hair is trendily disheveled. The overall impression is of an appealing combination of Ivy League charmer, post-college metropolitan, and sleep-deprived entrepreneur. But sitting at the head of a table in a toothpaste green conference room, he looks more like a precocious kid, eerily professional in ways uncharacteristic of his age.

Entrepreneurship and professionalism seem to run in his family. Lerer’s father is media icon Kenneth Lerer, co-founder of The Huffington Post, and founding partner of the communications firm Robinson, Lerer & Montgomery. But Lerer the younger owes his success to his own ambitions. He grew up in Manhattan, later heading to the University of Pennsylvania in Philadelphia where he studied political science. After graduating, he returned to the city, began working for a boutique hotel company, and decided to apply to business school. Meanwhile, he and Rich fell into that market hole — where there are no guy-centric city guides — and realized they knew how to fill it.

So what exactly is a guy-centric city guide? Traditional city guides like CitySearch, New York magazine, and Zagat Survey appeal to a general audience. More often than not, their recommendations for, say, a quiet, Italian restaurant might appeal to a married couple but would not pique the interest of a young bachelor looking for a trendy Tapas lounge to impress his date. Loaded language and embellished descriptions characteristic of city guides are often misleading — an “edgy, hipster enclave” on the Lower East Side is usually a dive bar serving Pabst Blue Ribbon beer to students from the New School who are celebrating yet another 21st birthday. “Because they weren’t truly targeted to us, they weren’t really trustworthy,” Lerer says of these sorts of guides. “So we thought it would be nice to have a voice that had a similar sensibility to us, that was kind of keeping an eye on things in New York.” But it’s not just about restaurants and nightlife. Thrillist also throws in apparel stores and intriguing websites — things a guy in his twenties with a little bit of money might take an interest in. “We try not to be the stereotype of an individual guy,” Lerer says. “We’re not just that really fratty dude or that snotty, well-dressed banker type.” Instead, Thrillist addresses a less precise spectrum of users: young, well-educated guys living in big cities and bringing home decent paychecks that they spend on a wide variety of goods and services, whether at a bi-level, Southern European-Indian restaurant on Lexington Avenue, for a Swiss watch, or on the latest sex blogger pin-up calendar. Since Lerer and Rich identified with this demographic, they knew they could recommend restaurants, bars, websites, and gear that would satisfy all those interests.

The next step was deciding how best to reach users, and the email newsletter seemed to do the trick. “We do have to tip our hats to Daily Candy, which figured this out for the first time,” Lerer says. He and Rich were familiar with Dany Levy’s sample-sale obsessed newsletter for women. They understood that in a world driven by email and Blackberry, delivering content directly to the customer on a daily basis increased the likelihood for building a readership. A website, which would require the user to come to them, is less reliable. Although visitors might drop by a site to read an occasional snippet, most users won’t visit the site every day. Delivering content to the subscriber, when combined with an identifiable voice, encourages the fierce sense of brand loyalty that makes advertisers salivate, and advertisers were the key to a successful business model. But the guys knew they needed to work hard to sustain reader interest. The newsletter cultivated a consistent, sarcastic swagger in order to attract new readers and maintain old ones.

Lerer and Rich wrote the first newsletter over the course of two weeks in mid-2005. Meanwhile they sent emails to friends and family, inviting them to check out the product they planned to launch within days and received an encouraging response. “The first night, the content was all ready to rock, and we realized that we had not considered how we were actually going to send our emails,” Lerer says. The content was living on a website and couldn’t be sent through a traditional list serve. They’d overlooked the core of their entire business.

It only took three to four months for the newsletter to gain enough traction in New York that Lerer and Rich realized they were onto something. Within a year, they launched a Los Angeles edition, and it soon spread to other cities including San Francisco, Chicago, and Las Vegas; Boston and Miami launched about three months ago. Thrillist fires off six newsletters every day, sending a different edition to each city in which it operates. It also publishes newsletters for Las Vegas and a national readership once a week and will launch in new cities anytime a competent editor emerges in one. Thrillist finds potential editorial candidates via a referral system and hires those who demonstrate an intrinsic ability to sort through hundreds of pitches from public relations firms, select the most provocative content, and write about it with trademark gusto — every day of the week. “If we find someone we think is right, we’ll launch any city, any day,” Lerer says. “Even in New York, where we’ve been for three years, we grew more last month than any month previously,” he says. “So there’s clearly a lot of meat on the bone.”

Rich manages the editorial content while Lerer handles business operations. They employ a 30-person staff, including 11 editors with at least one editor stationed in each city. Rich and David Blend, Thrillist’s executive editor, finalize the content before sending it out. “The two of them take the content and put it through their filter so the voice is consistent day in, day out,” Lerer says. “Whether you’re in New York or San Francisco or Las Vegas, Thrillist still feels like Thrillist.” For example, the November 10 issue outlines the required etiquette at Beekman Bar and Books, a swank new bar in Midtown Manhattan:

“…As ordained by NYC, smoking’s backroom only (so those who wish can drown sorrows w/o adding “dry cleaning bill” to them), and patrons’ threads must now match the tony surrounds (no sneakers, jackets preferred, and generally no dressing like Survivor: Orchard Street)…”

With similar swagger, the November 19 issue describes t-shirts that read “I Can’t Afford to Heart New York”:

“From a cash-strapped Bklyn hoodie designer, these 100% cotton tees replace NY’s famous slogan with a more economically au courant sentiment. The tees are only $15 — if you can’t swing that, you can’t even afford to heart pants.”

This voice also helped Thrillist secure financial backing from investors. Bob Pittman’s The Pilot Group, a Manhattan-based investment firm that specializes in media-related ventures, was impressed by the subscription-based email model, but the firm saw more than the financials. It also appreciated the newsletter’s characteristic swagger and the way it spoke so unequivocally to a specific audience. “The editorial voice is of the highest quality. You always know that you’re reading Thrillist, no matter what city you’re in,” says Wendy Goldberg, spokesman for The Pilot Group, which is well known for buying Daily Candy for $3 million five years ago and selling it to Comcast for $125 million last August. Lerer and Rich knew about that investment and decided to approach the firm in the summer of 2005. At this point, they had been distributing their newsletters for a few months, and by the time they closed the deal that September, they had only about 1,000 subscribers. The investment firm agreed to give just under $300,000 to the start-up, enough to pay for the necessary technology, a full-time editor’s salary, and meager salaries for Lerer and Rich. But the money came with one stipulation. Not a penny could be spent on marketing. The Pilot Group recognized the importance of building a brand from the ground up, based on real — not hyped — demand. “Success is not about buying subscribers,” Goldberg says. “It’s about word of mouth. If you can reach your subscribers that way then you know you’ll have a hit on your hand.”

After securing the money, Rich quit his job and Lerer set aside his business school applications. They decided to devote their time to building the Thrillist brand. Creating a successful email newsletter means building a long list of subscribers. The guys listened to their investors about marketing and did not buy subscriber lists. Instead they focused on building the voice of the brand, and it worked. Interest in the newsletter did spread by word of mouth, and its list of subscribers began to grow. Today, nearly 1,500 new users are signing up every day.

Although building its subscriber base took some time, the biggest challenge was obtaining a daily supply of new and trendy content that readers would take seriously. At first, before they had any kind of reputation in the marketplace, Lerer and Rich didn’t have ready access to the information they wanted. “Over time we’ve built a reputation where publicists and business owners are familiar with Thrillist,” Lerer says. “They know that we can move the needle for them. They know that if we write about a restaurant, we’ll book it out. If we write about a product, we’ll sell it out, etcetera, etcetera.” Last year, Thrillist’s New York editors were among the first to write about underground dinner parties held in undisclosed locations. Recently, the five largest clubs, cumulatively known as Undergrounds Unite, began throwing one “epic dinner” each month, complete with 15-course meals, wine tastings, and cocktails from designer mixologists. As soon as Thrillist learned about the event, it alerted readers in the newsletter. “We had about 1,000 or more people email us wanting to attend the event,” a representative from Undergrounds Unite said in an email. “We’re mostly word of mouth — and too much publicity actually hurts our cause. I would say maybe 10 percent to 20 percent of guests are from Thrillist.”

Despite the newsletters’ rising popularity among readers, rising cash flows didn’t enter the picture until advertisers did. Six months after the launch, Lerer and Rich began cold-calling companies, relying on their savvy to persuade clients to buy ads on Thrillist. They began gaining traction after the subscriber list hit 100,000 a year later. Now the company’s call list includes national brands in categories like big beer, big liquor, and big auto and advertisers include Dos Equis, Jose Cuervo, and Mini Cooper. “These are obvious fits,” Lerer says. “Brands that see a lot of value in reaching young, affluent guys. Those are our best and most consistent advertisers.”

One reason the response may have been slow was that only recently did advertisers begin to focus on the email newsletter model. “Traditionally, the newsletter wasn’t an advertising-based business, it was a subscription-based business,” says Randall Rothenberg, President and CEO of the Internet Advertising Bureau (IAB). Print newsletters like Kiplinger’s made money by selling fairly expensive subscriptions and using that revenue to recoup the significant production and distribution costs that go along with a printed publication. Content usually targeted a very specific audience, like investors and Wall Street professionals in the case of Kiplinger’s. Unlike the print newsletter, however, the email newsletter requires minimal overhead and can afford to give content away, instead relying on advertising dollars to turn a profit. When a newsletter targets a specific demographic, advertisers understand exactly who is looking at their product. One metric advertisers use to measure success is the click through rate. The more users click on the ad, the more effective the ad is in reaching the customer.

For Thrillist’s advertisers, this combination of brand loyalty and sharp focus on a specific readership proved to be very powerful. “We definitely see brand loyalty,” says Kirstin Austead, manager of advertising for JetBlue. “And we had good click through rates through the banners. People are interacting with our brand through Thrillist.” The newsletter’s advertisers operate on a purely sponsorship level. “We can’t go after everybody,” Lerer says. “So the brands that we focus our attention on are generally the ones that we really like.” And it shows. Although clearly labeled “Allied Content,” the ads integrate so seamlessly on the page that you could almost miss them.

One area of significant new revenue growth comes from partnerships promoting offline events. For example, JetBlue sponsored the newsletter’s Miami launch party a few months ago, and this summer, Thrillist approached JetBlue with the idea for JetVegas, a partnership that would simultaneously promote the newsletter and the airlines’ month-old “Happy Jetting” campaign. Still, the bulk of Thrillist’s advertising happens online. And with speculations of a protracted slowdown in the ad market throughout 2009, one can’t help but wonder how this might affect the business. Lerer predicts it will have less impact on online advertising than other types. He’s confident that his company is prepared to weather the storm – its subscriber list is growing steadily and its little black book is full of trusting clients. “If we don’t have a great year, it’s 100 percent on us,” he says. “There’s really no excuse for us not to be doing great. Because we have a product that actually delivers measurable results for advertisers.”

Thrillist’s main competition for big advertising clients is The New York Times, New York magazine, and ESPN. “It’s a business with an enormous amount of competition,” Rothenberg says of online advertising. He explains that there’s more ad inventory online than there is demand. Lerer’s competitive strategy in going after advertising is to create the best product possible, and the ads will filter in. And by good product he means relevant, well-written content that provides great service and glorifies that characteristic swagger — everything Thrillist is known for. “As far as competing for consumers, I don’t even believe that there’s such a thing online,” Lerer says. “I think that every single human being that we could potentially want is online. There’s more than enough audience for us.”

The company doesn’t have plans to take it easy anytime soon. It re-launched its website in early November, sometimes keeping Lerer in the office late enough to watch the sunrise. The new design showcases the best content from all the newsletters and allows users to search for specific information — whether its a product they saw in the newsletter or a new bar to try on the weekend — from content pre-filtered to their interests and therefore relevant to their tastes. The old site, a dinosaur from Thrillist’s early days, lacked this ability. The new site is also more effective in capturing subscribers, since every page includes a description of the newsletters and a simple form that allows them to subscribe on the spot.

So just how well is the company doing now? “Generally we’re profitable,” Lerer says. “Very comfortably profitable. We’re doing millions of dollars in revenues.” Bolstered by a new sales team, which grew from one sales agent to six in 2008 alone, Lerer is ready to close new deals and has even signed a lease for a new office down the street from The Huffington Post. While the hefty sale price of Daily Candy might tempt the partners to sell, Lerer doesn’t plan to sell anytime soon. “As long as it’s still fun, I’d like to keep doing it the way we’re doing it,” he says. He recognizes that Thrillist has a lot of work ahead in becoming a household name, but moves are underway to get there. The company plans to continue expanding to other cities – perhaps Philadelphia, Washington, D.C., Atlanta, Seattle, Dallas, and maybe Austin. But the biggest challenge will be how the company will grow up without losing its edge. “That the fun of working at a really small company doesn’t become the stress of working at a big one.”

 Print This Post |  Email

BER Business Times is published by the Business & Economic Reporting Program in the Department of Journalism at NYU.

© New York University