![]() He added: “You can imagine writers forming federations and readers constructing bundles out of direct relationships. There’s economic potential that could be unlocked if done correctly.” “Bundle economics are still real,” he said. Chris admits that there is some limit to the number of individual publications a person will pay for, although he believes it is higher than many believe. Substack will need to expand the paying customer base. Media is a story of bundling and unbundling and rebundling. This makes moving a business off Substack easy, but it hinders Substack being able to grow its subscription universe. Ben Thompson wrote how Substack’s publisher agreements have an embedded flaw in being almost too pro-publisher by allowing writers to own their Stripe accounts. Substack is open to some form of bundling. Ads work perfectly well with subscriptions, too, enabling free access to solve for the sampling issue of paywalls. This is a no-brainer to me, considering how publishers making money off only 10% of their audience isn’t a way to run a sustainable business. We’re not cracking down on you running your own ads.” That’s an interesting philosophical question. “The place where it gets interesting is when you ask the question of whether there are ways you can do advertising without that property. “If you reduce advertising to a bargain where the audience is a commodity to be sold off, that is in opposition to the reason Substack exists in the first place,” he said. ![]() What he did say – and I’ve heard this from others who marketed an anti-advertising stance only to introduce advertising under a different guise – is that Substack would consider unobtrusive advertising. I don’t want to put words in Chris’s mouth, since he didn’t say ads are coming to Substack. Chris spoke about the perverse incentives ad models create, which is largely true as publishers and platforms see just how far they can push the envelope of the audience’s patience. Maybe I think too small, but I’d be more enthusiastic to have basic audience segmentation tools and better analytics.Ī couple important takeaways from the conversation: But as I told Chris, my selfish concern as a publisher is that this focus on taking on Twitter will distract from the basic tools needed for writers to operate successful and sustainable businesses. I’m interested in trying out Notes, the new Twitter alternative Substack is rolling out. The only flaw: It isn’t lucrative enough for a VC-backed business. The current Substack business model is admirably simple – take a 10% cut off paid subscriptions generated on the platform – and well-aligned with the goals of the company and the needs of publishers and the audience. I’m not overly obsessed about Substack’s valuation – I didn’t “invest” in its round and have a small investment in Substack alternative, Beehiiv – but I do care as a publisher how its efforts to catch up to that 2021-era valuation will change Substack’s approach and therefore my own little business.Īs Chris said a couple of times in our conversation, “Business model is destiny.” Looking at the math, Substack’s existing business model will need to evolve. Last Thursday, before the Elon Musk tantrum over Substack’s new Twitter-like product, Notes, I spoke to Substack CEO Chris Best to get a better understanding of where the company is going. You don’t need to be a financial analyst to conclude that Substack will need to find new growth paths if it hopes to justify a $590 million valuation. Substack didn’t disclose results for 2022, and in 2021 generated just $12 million in net revenue with a $22 million net loss. This being media, it is also a challenged business, as its recent crowdfunding campaign laid bare. It captures several of the macro themes of the moment: the importance of direct audience connections the shift to reader revenue and targeting niches as opposed to chasing scale. I’ve found Substack is a consequential company at this point of publishing’s evolution.
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