I can't talk for startups, but I have worked with very big enterprises on email marketing and all their analysis said email was the most cost-effective over the customer lifecycle.
When you send an email newsletter, even if your customers don't read it or respond, you're getting your brand name and offer in front of them. The costs barely change as your list grows from 100 to 10 million. That's the real advantage of email compared to just about every other form of marketing.
Compare the costs and sales of pushing an ad to 10 million people who liked you versus 10 million people who bought from you or subscribed to your newsletter. The latter will nearly always give much better value for money.
We use Mailchimp and it's definitely not the case. Might be time for a change!
10 million would be $40,700/month.
These days I'd suggest buying an in-house email tool and use an SMTP server (SendGrid, Mandrill, SES, Mailgun). Pricing will obviously be more expensive but it increases much more slowly than with Facebook. To send 10 million emails on SendGrid would cost around $5K. Depending on the terms, that kind of budget would cover somewhere between 50 and 50000 users with Facebook or AdWords.
We actually use Sendgrid for transactional emails and should probably revisit for marketing. They didn't have the list manangement features when last we looked and there's a little integration dev that'll need to be done, but you've prompted me to take another look at it. May be worthwhile now. Thanks.
But, even with those guys going from 100 emails to only 4 million (highest quoted on the site), the price goes up a couple of orders of magnitude from $9.95 to over $1600. That's hardly "barely growing costs" and for a bootstrapped startup, the difference may be prohibitive. Hopefully, you've got some revenue or funding by the time you hit that subscriber base. But, don't want to gloss over the fact that you will pay significantly more as your list grows substantially, even if it's less than with other channels.
So for every SEM placement, you can send 25 newsletters. So you need SEM to convert 25x better than email to get value from it. That might be possible, depending on the quality of your list, but my experience is that all companies eventually use email marketing because it's so much cheaper with big lists.
I would question how you even got a list size of 10 million, or what you're hoping to get from direct marketing, if $10K per month is prohibitive.