by

Substack & Crossroads for a Revolution

All revolutions start with a rebel, and in the world of writing, blogging and newsletters, Substack, the online newsletter platform, is Silicon Valley’s new favourite disobedient child.

High on its recent explosion in the writing community, it now finds itself at an interesting crossroads that will dictate the path for its future growth.

This is the idea that Blake Robbins proposed in a Tweet, suggesting that the company will soon have to make a choice between positioning itself as a full-on reading and writing community (think Medium), or, as Blake puts, “arm the rebels”, building itself into being the one true go-to platform for independent writers.

The choice fascinated me.

Essentially, Substack will soon have to choose its path to become either a platform, or an aggregator.

In this week’s piece, we’ll dig into what both options would mean for the company going forward, and explore which of the two would pave a road to success.

Heart of the rebellion

Today, Substack’s mission statement is clear:

Make it simple to start a publication that makes money from subscriptions

Digging deeper into Substack’s “About” section, the focus on helping independent writers becomes clearer still:

Over time, we will introduce an ever evolving suite of features and services to better serve independent publishers, helping them do the best work they can and build strong, enduring business.

Substack is lowering the barrier to entry for people to write online.

This mission isn’t a new one. Medium, Blogger, WordPress and plenty of others have all been born out of the same goal. Substack, though, has a more specific focus. Rather than just enabling creators to write. They’re enabling creators to get paid from their writing.

Writing, though, in itself, isn’t a very lucrative affair. This is only more true when you’re writing independently. The money comes from the other side of the equation: being read.

This is what brings up other side of the decision Substack has to make: to have your writing read, you need an audience.

Getting an audience, though, is hard.

To attract an audience, you need to show them what you can offer. But writing with nobody reading is a daunting task.

To help with this, Medium came along. They created a huge discovery network on the website. On the front page of the Medium experience, you’re recommended dozens of articles that could interest you, and suggested many more as you read. This attracts lots of new writers to publish on the site, as the prospect of being able to write for an audience right from the start is an attractive one.

This isn’t without major downsides, but more on that later.

So what should Substack do? Simply arm the rebels? Or pave the way to growing a following? Why not both?

Let’s explore.

To aggregate? Or not to aggregate?

So far, Medium has seemed like the obvious parallel. It’s a writing platform, right? It even (now) lets you make money from your articles directly on the site.

Substack, though, is a different beast.

Unlike Medium, Substack integrated the paid access aspect of the website right from the beginning. Failure to do this is largely what killed Medium as the go-to platform for writers, when they did, eventually pivot to the subscription membership model. It also didn’t do much to help the arguments that building a business on a service you don’t completely control is risky.

Substack, rather than offer a site-wide subscription, funds its rebels directly, by offering a creator-by-creator subscription model.

The monetisation model here is much clearer. You don’t subscribe to Substack, you subscribe to a newsletter, giving you access to premium content, unavailable to the non-paying readers.

In this, Substack looks a lot like Patreon, the independent creator funding platform. It’s a part of what makes Substack a platform. It facilitates the transaction between reader and writer, getting out of the way beyond that.

As a parallel, Shopify, until recently, followed a similar role. It puts merchants front and center, taking a backseat once they’re up and running.

By seemingly reducing the role Substack itself plays in this equation, it serves its creators, and its readers, well. It arms the rebels.

Still, it might seem like it wouldn’t hurt to help one side of the equation (the writer) attract the other side of the equation (the reader). Surely it would only help the site grow, bringing new readers, and, as supply and demand laws would tell us, new writers?

Aggregation, though, shifts away from Substack’s core mission.

At Substack’s scale already today, content aggregation implies a heavy dose of algorithmic ranking. This, though, inherently makes Substack a gatekeeper in the type of content they encourage, and prioritise.

In fairness, they do already have a “top publications” list, but it lists only the top 25 publications on the site, and isn’t made prominent for new users.

Other than this list, and 6 creators on the front page of the website (oh, and a search bar), discovery of new articles and writers is entirely dependent on the writer to attract the audience themselves.

The combination of all this, the fact they’ve so far stayed away from aggregation and on-site discovery does limit Substack’s platform power. In the same way as the Shopify example, by taking a backseat to put creators front and center, the company becomes a middleman — it simplifies a process, but right now does little to attract readership.

Positions of Power

There is the question, however, of whether it makes much sense for Substack to aggresively seek to increase this platform power, at least in its current state.

They currently take a 10% rake on all subscription revenue, which isn’t insignificant (considering they already had 50,000 paying subscribers across the site this time last year).

Furthermore, their platform position, focusing on providing only tools to independent creators, better fits their differentiated value proposition from similar publishing websites. It focuses on the 1 to 1 experience of newsletters rather than blogs.

This is where Substack is interesting.

Plenty of blogs include mailing lists (including this one 😉), which makes them double as a newsletter. Where Substack does this differently, though, is in making the blog the newsletter itself.

By building a platform specifically focused on the email inbox, Substack is able to nurture this 1 to 1 connection in a way that most content marketing focused/corporate blogs can’t. They feel spammy. Even the rare corporate blogs I’ve signed up to rarely get opened when they reach my inbox. Their content isn’t designed to interest the reader, it’s designed to attract eyeballs. If they can do both at once, great, but they rarely hit the mark.

If working to empower individual creators is the goal, then, the platform model, rather than one of content discovery and aggregation, seems better suited to reach it.

This is a subjective view, but the quality of the average Substack article far exceeds that of the average Medium article.

Increasingly, Medium (curated publications aside) has become home to SEO filled word-count focused fluff. The low barrier to entry and promise of instant audience growth attracts low quality writing.

The newsletter format, the chronological presentation of Substack newsletters massively reduces this, and increases the overall quality of content on the platform. It’s not even close.

That said, there is some nuance here. New York journalists and Silicon Valley tech writers / VCs have fallen in love with the platform. This obviously skews the average quality of the writing on the platform, and isn’t representative of the global writing scene as a whole. For this reason, it might be difficult to expect that this same quality writing level will remain steady as the platform inevitably looks to expand beyond its relatively niche community of today.

I’ve observed the birth, growth, and death of plenty of online communities, across writing, videos, design, and many more. Through all of them, some sort of derivative form of Godwin’s Law nearly always applies: as the number of users on a platform increases, past a certain tipping point, the average quality of the discussion (here, content) almost always declines.

Limiting the cross-discovery of writers on the website itself impacts its potential to attract new users on both sides of the equation. On the other hand, it also helps maintain the bar of quality Substack is rapidly becoming known for.

Differing Incentives

There is undeniably opportunity for Substack to build on the mistakes of Medium and become the new home for independent publishing on the web.

Over time, Medium devalued what a ‘follow’ meant for both creators and readers. It’s gone hand in hand in recent years with media platforms’ general moves towards algorithmically generated content suggestions.

For most of these sites, which generate revenue through advertising spots, this move makes perfect sense. In doing this, the platform is aiming to increase a user’s average time on site. The more time a user spends on the site, the more times a user can be shown ads. The more a user can be shown ads, the more revenue the platform makes. The platform has an incentive to help get content in front of users’ eyes.

This incentive is not shared by Substack.

From their initial launch, their advertising policy has been crystal clear:

Publishers will own their data, which we will never attempt to sell or distribute, and we won’t place ads next to any of our own or our customers’ products.”

Unlike other sites, Substack doesn’t need to increase time on site to increase revenue.

Let’s go back to the Medium example. Medium needs to optimise for new article discovery at all costs.

This is due to Medium’s central payment structure. They grant access to their entire library via a single subscription plan. If I’m an individual creator trying to make money off content I believe to be high quality content worth paying for, this is a weaker proposition. Each creator receives a much smaller slice of the subscription revenue pie.

It’s this benefit of individual subscription revenue which drove a large number of the top Medium writers away from the site — mostly onto personal publications. Invariably, on a platform where the size difference between the most popular and least popular creators is large, the top creators find themselves sharing a part of revenue to long tail, small size creators when the pool is split.

This is where Substack shines.

Substack offers some semblance of a meritocracy. The better your content (and distribution network) is, the more income you can make.

Substack knows that it’s unrealistic to imagine that the average paying reader (around 10% of overall readership) will pay for more than 3-4 newsletters max each month.

This means Substack has an incentive not to focus on content discovery, but to empower writers to write valuable articles that people want to pay for, in order to drive subscription revenue.

Alternative Trade Routes

Those 3-4 paid newsletters, each sending roughly 3 articles a week, on top of the free newsletters rapidly adds up time-wise.

Reading the long-ish form content that Substack has come to be known for presents huge opportunity costs — time, here, is a zero-sum game. The 15 minutes spent reading one writer is 15 minutes spent not reading another. This is evidenced by the state of my Instapaper account.

The benefit of email as a distribution channel for writers is that it cuts through the noise of social media and blogging sites. Julian Lehr wrote a brilliant piece which touches on this (and gave me the above heading).

The risk, in the near future, is that this alternative trade route for content quickly becomes clogged, as creators continue to leave the noisy party of social media in favour of the quiet backroom of email.

With this in mind, Substack would do well not to aggregate in a widespread fashion, for risk of devaluing their role as an interesting speaker in this backroom party. The platform’s focus on the direct-to-newsletter format rather than the blog format means it doesn’t even need to cut through the noise, it circumvents it.

Substack emails have a badge of quality associated with them. This recognition as being a consistently interesting speaker in the inbox is because you know you only ever get emails from Substack from writers you’ve specifically chosen to subscribe to.

Leaning away from this 100% creator focus risks devaluing this goodwill. It would relegate them to the ranks of the numerous other and newsletters and ‘content roundups’ I ignore everyday in my email. This risk is even greater with the chance of being pushed to the Social or Promotions tabs of Gmail, at which point it’s impressively difficult to get back to the main inbox.

To compare to Medium once again, Medium spams the inbox most days by default. Their company branding is put front and center, with a huge Medium logo at the top of each email, and 8-20 articles that are rarely tailored to my interests, simply resharing the top articles of the front page to their huge email list. Medium rarely gets my email click.

Becoming an aggregator makes this type of email nearly essential. Sure, Substack could work on better tailoring the articles recommended to me, but I’m still unlikely to read many of them. I never signed up to get those articles. The implied badge of quality is one of the most important assets to the platform and its creators. Aggregator status would put this at risk.

That said, Substack wants to grow, and while their current backseat role for creators might be enough for now, over time, the appeal of wider ranging opportunities will be too strong to ignore.

Platform Opportunities

I recently came across this chart from Maxime Eyraud.

It maps the positioning of 50+ media companies, content platforms and more across 5 core activities of players in the field: funding, creation, distribution, monetisation and engagement.

The player which stands out the most within the table is undeniably Substack. It spans all 5 main services of content platforms, even reaching into funding — namely taking the form of the $100,000 grant fund donated by Substack to independent writers experiencing financial difficulties because of the COVID-19 crisis.

That said, it’s the distribution/monetisation section that most interests me. Similar to the Shopify/Etsy/Pictra trio beneath it, there’s massive opportunity in this sector for Substack in the not too distant future.

Independent creators have never had as many choices when deciding where to publish, share and monetise their digital creations. Right now, Substack is emerging as the go-to for writing. But in the long term, it doesn’t have to constrain itself to its current sector.

Gumroad is quickly building itself into the digital storefront for independent creators working on ebooks, courses, video content and more. Over the next 2 years, Substack’s lead competitor will rapidly be solidified in the form of Gumroad.

Both offer a platform for independent creators to share their creations to the world. One focuses on written content, the other, about everything else.

This is where it gets interesting.

Gumroad isn’t blind to Substack’s recent success in the indie creator circle. Within the next year, I can see Gumroad building out further email integration, spanning into more newsletter-focused features.

For Gumroad to add a Substack style newsletter offer as a new category of content would be a relatively minimal operation. For Substack to add a Gumroad style digital wares hub, on the other hand, would be a large shift from their current project. Let’s focus on a 2-3 year+ timeline.

Over the long term, Substack’s horizontal expansion has huge opportunity relative to Gumroad’s. Better yet, Substack has a big advantage in the battle to be the home for independent creators.

Currently, if Gumroad creators want to gain access to the fabled prime real estate that is people’s email inbox, they have to build interest, drive the sale, then create new emails and content worth sending to this retargeted audience through email.

Substack approaches the equation from the other side. Substack’s newsletter focus allows a much lower barrier to sharing your email address with a content creator. No purchase required — it doesn’t even require a paid subscription.

This massively reduces friction to gain access to the email inbox, and allows creators a much more direct approach to sell their digital creations. Before even asking for the sale, though, it allows them to test the waters, gauge interest over time, storytell and build interest for the eventual sale. Substack is perfectly positioned to build out a digital goods integration for individual newsletters.

This goes far beyond newsletter-branded merch, though. Plenty of creators on the platform, and similar platforms, use their email list to drive purchases to online courses, ebooks, slide decks and more. Currently, though, all these sales are handled outside of the Substack ecosystem, linking to Gumroad, Teachable, Shopify stores, etc.

Imagine buying the new online course from your favourite Substack newsletter, all without having to leave the Substack platform. If you’re already a paying subscriber of the newsletter, maybe you get discounts on the product, all directly built into the transaction flow based on your subscription plan.

Substack is positioned perfectly to bring these transactions on-site, with zero marginal cost per new creator, all while taking their 10% off each transaction.

In this view, the crossroads decision quickly becomes clearer. Either try to build on the mistakes of the past, and risk losing their strongest weapon, or arm the rebels and together clear the path for the new age of independent creators.

The revolution, it seems, will not be televised.

It will be written.

Get smarter about business and technology strategy, straight in your inbox.

Join the audience of This Too Shall Pass readers who receive this newsletter each week.