"It Doesn’t Strike Me as a Good Omen for Substack’s Longevity"

March 29, 2023 3:56 PM

How much money do we think Substack lost last year? by Elizabeth Lopatto [The Verge]

Substack Asks Its Newsletter Writers to Become Investors Starting at $100 [Bloomberg; ungated]
Substack invites newsletter writers to invest [Axios]
Substack Asks Its Writers To Invest But They Can’t Ensure Future Projections [Deep Dive]

posted by chavenet (57 comments total)

Speaking as a trans person about a company that gave Jesse Singal a bunch of money: lol, lmao
posted by an octopus IRL at 4:18 PM on March 29, 2023 [68 favorites]

I just created a substack a few days ago because I'm missing the longer form writing I was able to do on LiveJournal and am too lazy, and right now poor, to set up my own web blog website. I don't plan on ever getting paid for this, I just want a place to park my writing that isn't my own desktop hard drive. Nonetheless, having only signed up days ago and having written nothing yet, I got this email.

I thought maybe this is a thing all new substackers get, this email, inviting them to put money into the site. I've gotten messages on my Mastodon account (which is not that old) asking me to contribute to the costs of the server for the instance I joined. I thought this was similar to that.

It seems not to be the case.

Ah well, I have no aspirations on substack. I guess I'll have to make sure I don't write directly onto the website as I'm not sure, if it goes tits-up, I can extract my stuff from it. So, that's a good early, even-before-starting, lesson.
posted by hippybear at 4:19 PM on March 29, 2023 [11 favorites]

Less flippantly, Substack provided not only a megaphone but funding to people who have made the world more dangerous for me so I hope I can be forgiven if I feel less than mournful about their putative financial struggles.
posted by an octopus IRL at 4:21 PM on March 29, 2023 [34 favorites]

Substack Asks Its Newsletter Writers to Become Investors Starting at $100

That absolutely reeks of MLM. It might not literally be an MLM but that is exactly what it smells like.
posted by mhoye at 4:21 PM on March 29, 2023 [13 favorites]

As usual, making a career out of writing and asking others to pay for it doesn't seem to go well for most people.
posted by jenfullmoon at 4:24 PM on March 29, 2023 [5 favorites]

It baffles me that they need so much money, I mean, it's newsletters. It's not like, 8k haptic smell-o-vision, it's literally Just Some Guy typing his thoughts that go out as an email. How can they be losing money?
posted by mittens at 4:24 PM on March 29, 2023 [47 favorites]

hippybear if you miss the experience of using LJ (as I do!) please check out dreamwidth -> www.dreamwidth.org
posted by hearthpig at 4:35 PM on March 29, 2023 [14 favorites]

How can they be losing money?

It's just LISTSERV with a web archival feature and a money collection system. It is weird that it costs so much to run.
posted by hippybear at 4:35 PM on March 29, 2023 [19 favorites]

Venture capitalists invest in something that could be a perfectly reasonable slow-and-steady profitable venture and then exert pressure for it to take on extra costs to make bigger gambles with fanciful ambitions (like making "a new economic engine for culture") in search of exponential growth?
posted by rivenwanderer at 4:38 PM on March 29, 2023 [26 favorites]

It's just LISTSERV with a web archival feature and a money collection system.

Pretty sure LISTSERV (or Mailman, anyway) also has a web archival feature.
posted by kristi at 4:44 PM on March 29, 2023 [8 favorites]

The estimated 18.4M real revenue and approx 95 employees sure makes it look like the problem they have is that a decent revenue model for a company that size isn’t good enough for their investors. (Assuming they aren’t getting completely fleeced by AWS , which is certainly possible.)
posted by mhoye at 4:44 PM on March 29, 2023 [16 favorites]

Substack previously.
posted by polytope subirb enby-of-piano-dice at 4:45 PM on March 29, 2023 [2 favorites]

I think it’s an adage among writers that publishers pay authors and if it’s going the other way around you’re being scammed.
posted by Horace Rumpole at 4:46 PM on March 29, 2023 [47 favorites]

Riverwanderer and mhoye nail it, I think. Substack isn't necessarily losing money, it's more likely that it isn't making enough money fast enough for it VC investors.
posted by KingEdRa at 4:51 PM on March 29, 2023 [8 favorites]

Ah, VC investing. There’s nothing that can’t be ruined by a few Stanford/Wharton/Sloan MBA’s who suddenly need to justify their existence.
posted by armoir from antproof case at 5:09 PM on March 29, 2023 [18 favorites]

The issue isn't the employees its what they're paying pros to create content for Substack. Apparently they paid out $160M last year. If they're only pulling in $18.4M then that is a pretty big deficit.

All I know is that one of my favourite comic book writers, Jonathan Hickman, jumped ship to Substack a couple of years back when he was offered a whole lot of $$$ and apparently he's put out some stuff on his substack but nothing that's made it to an actual comic shop yet. I'm glad he got the money but I'd like some more comics to read please.
posted by any portmanteau in a storm at 5:15 PM on March 29, 2023 [6 favorites]

It baffles me that they need so much money, I mean, it's newsletters. It's not like, 8k haptic smell-o-vision, it's literally Just Some Guy typing his thoughts that go out as an email. How can they be losing money?

They are paying established writers like Yglesias and Taibbi probably at least a couple hundred grand annually on top of actual subscription income just to use the platform. I don’t know how many writers are in that club but that can’t help.

isn't making enough money fast enough for it VC investors

that’s not exactly stereotypically the first priority of VC investors but of course this is about the right time for a sharp pivot to caring about profitability
posted by atoxyl at 5:20 PM on March 29, 2023 [3 favorites]

The issue isn't the employees its what they're paying pros to create content for Substack. Apparently they paid out $160M last year. If they're only pulling in $18.4M then that is a pretty big deficit.

Ok, but... that's good? That the writers make both good coin, and the majority of that coin, is the entire point of the Substack exercise.
posted by mhoye at 5:21 PM on March 29, 2023 [1 favorite]

That the writers make both good coin, and the majority of that coin, is the entire point of the Substack exercise.

The point is that they make special deals with “name” writers offering some significant amount of money beyond actual subscription income for N years in order to raise the profile of the platform. This is not necessarily bad (though I have my issues with some of their chosen writers) but it explains how they could be paying out more than they take in.
posted by atoxyl at 5:26 PM on March 29, 2023 [5 favorites]

It’s standard VC-backed loss-leader stuff but VCs may be less willing to back them now.
posted by atoxyl at 5:29 PM on March 29, 2023 [2 favorites]

Apparently they paid out $160M last year. If they're only pulling in $18.4M then that is a pretty big deficit.

The $18.4M is after the $160M payout--in fact, it's calculated based on what their cut of a $160M in subscriptions should be.

The estimated 18.4M real revenue and approx 95 employees sure makes it look like the problem they have is that a decent revenue model for a company that size isn’t good enough for their investors.

It's under $200k per employee, which may sound awesome, but is not remotely impressive if you want provide benefits, payroll taxes, and even partial office space as well as a salary for tech workers in SF. That imagines the salaries are distributed equally (hah) and it's even worse if they're contracting out various services the way so many companies do these days, spending money on HR, janitorial, and/or IT services without them showing up in their headcount. I'm sure the investors are getting negative returns.
posted by mark k at 5:48 PM on March 29, 2023 [14 favorites]

Substack has done a remarkable job enabling individual and small-team journalists and commentators to monetize their audience. Tough for current ownership if they have to sell out to big media because they can't raise more VC, but there will be a line of potential buyers going around the block if that happens. There really is nothing like it.

(I spend thousands of dollars a year on a multiple-user subscription to one Substack which has a 3 member full-time editorial team that creates what I regard as essential content for my industry. I spend another few hundred a year on a handful of substacks that I find significant for work but don't (yet) need to pay to have a bunch of people have access. I spend a hundred a year on a few hobby-relevant substacks.)
posted by MattD at 5:52 PM on March 29, 2023 [7 favorites]

So in effect, Substack is asking the other writers to pay for Yglesias' and Taibbi's content?

lol and rip

e: or are the big name substacks independently profitable?
posted by ryanrs at 6:16 PM on March 29, 2023 [13 favorites]

They are paying established writers like Yglesias and Taibbi

Don't forget *spits on the ground* Bari Weiss.
posted by praemunire at 6:54 PM on March 29, 2023 [24 favorites]

Yeah, every so often I want to start a Substack and then I remember where their money’s going. Then I try to figure out how to start a newsletter with different software but also not revealing my address but also not paying out for a virtual mailbox or PO box for—anyway, I haven’t got a newsletter yet.
posted by Countess Elena at 7:07 PM on March 29, 2023 [3 favorites]

They should be getting their money the traditional way, from wealthy family and/or spouses.
posted by bonehead at 7:41 PM on March 29, 2023 [4 favorites]

(isn't this the problem Patreon and other subscription sites solve, at least for the creators?)
posted by bonehead at 7:41 PM on March 29, 2023 [1 favorite]

Another alternative is Buttondown, which I heard about through Hillel Wayne (previously).
posted by a snickering nuthatch at 9:29 PM on March 29, 2023 [2 favorites]

Concretization of ideals is so 2020.
posted by mmrtnt at 11:08 PM on March 29, 2023 [1 favorite]

Okay, I had like three gummies a couple hours ago, and I might not be that clear-headed, but a whole bunch of this doesn't make sense.

The term revenue seems to be misused here, as well as cost basis, and the assumptions behind the writer's back-calculation are faulty, given that we know a bunch of writers have extensive contracts independent of their subscription revenue.

Substack obfuscates so much important financial info that I don't feel certain of anything other than that they light stacks of money on fire, as per the local native custom.
posted by Ivan Fyodorovich at 11:31 PM on March 29, 2023 [12 favorites]

I've tried various newsletter options for projects. TinyLetter was good for a while but was kinda buggy with formatting. Revue was great but got shut down by Twitter recently. Every other option is either costly (even Buttondown only has 100 subscribers free, and one of my projects goes past that by a bit) or overly complicated if you just want a newsletter out and don't care about market segmenting or whatever (and then you have MailChimp that's starting to not be as affordable and is still complicated).

Substack resolves a lot of those problems - but at the price of platforming transphobes. Yet no other newsletter platform comes close to what Substack is offering. If more viable options are out there that don't cost an arm and a leg, I'd be all for it.
posted by creatrixtiara at 12:06 AM on March 30, 2023 [7 favorites]

I’m sorry am I in fanfare? Because it can’t possibly be the case that people pay to read walking legacy admit and overall dumbass Matt Yglesias. It can’t possibly be. Say what you will about Taibbi but Yglesias’ entire written work is worth less than a throwaway line (there aren’t any) in Taibbi’s takedown of Friedman.
posted by MisantropicPainforest at 4:22 AM on March 30, 2023 [6 favorites]

A lot of trans writers I like use Substack (the marvelous Niko Stratis is the best of them, imho) and if the overall flavour of Substack's revenue funds shitty things, then why do excellent marginalized writers use it?
posted by Kitteh at 4:25 AM on March 30, 2023 [1 favorite]

why do excellent marginalized writers use it?

See creatrixlara’s comment about the lack of good alternatives. Marginalized people put up with a lot of shitty things because they have the most to lose from losing their community.
posted by Horace Rumpole at 4:44 AM on March 30, 2023 [22 favorites]

Agreed! Which is why the Twitter absolutists drive me buggy when they don't consider those same groups in terms of their community networks.
posted by Kitteh at 4:54 AM on March 30, 2023 [2 favorites]

For those with smaller newsletter looking for a free option, consider Beehiiv. Free up to 5k subscribers, reasonably easy to get subscriber lists into and out of. A number of my writer friends use it.
posted by sgranade at 5:02 AM on March 30, 2023 [6 favorites]

I understand that Substack people are meeting with writers who are generating large amounts of cash from subscribers. These writers are in turn being asked to invest prior to any IPO.
posted by DJZouke at 5:03 AM on March 30, 2023 [1 favorite]

In 2021, just as substack was really taking off (if I remember right), Tedium wrote a big piece on alternatives to substack; it's now a couple years old but I think much of the thoughts and advice there are still reasonably accurate.

I think it’s an adage among writers that publishers pay authors and if it’s going the other way around you’re being scammed.

I've always heard it as: "Money flows toward the writer [photographer/designer/creative/etc.]." If that's not happening, something's wrong. For some reason I thought where I got that was from this excellent rant by Harlan Ellison about paying the writer; it's not, but the rant is too good not to share again.
posted by msbrauer at 7:02 AM on March 30, 2023 [4 favorites]

This Verge article sure casts things in the worst possible light. In another time we'd be praising companies that let their customers/producers get in on the upside of the company's growth. Offering someone who's making $10,000+ a year on your platform the chance to kick in $100 or more to own a little bit of the company could be a good thing, not some evil dastardly plan.

The amount they're raising is pretty small, isn't going to make a huge difference to Substack's overall financial picture. The total raise from individuals is $5M, less than 1% of their $600Mish valuation. And 6% of the $82M they've raised so far.

But there's two damning things Verge reports. One; they failed to raise funding in other sources, which certainly puts the "get money from individuals" in a differenet li ght. And two, the pitch on the crowdfunding site leaves out the revenue numbers they shared with potential VCs last year. Seems like that's material info they should provide!
posted by Nelson at 7:08 AM on March 30, 2023 [1 favorite]

It baffles me that they need so much money, I mean, it's newsletters. It's not like, 8k haptic smell-o-vision, it's literally Just Some Guy typing his thoughts that go out as an email. How can they be losing money?

The draw of Substack isn't newsletters, though. It's prestige. Specifically, it's attempting to create a digital competitor to the likes of The Atlantic, The New Yorker, et al.

The Atlantic is probably the best publication to point to: at some point, it created its "author-centered verticals" or whatever, and gave Andrew Sullivan and Ta-Nehisi Coates spaces where they could publish whatever they felt like—so, blogs, but under the masthead of a venerable publication. (The fact that Andrew Sullivan has since slithered to Substack, like a transphobic roach, makes this comparison particularly easy to draw.)

It used to be that authors were prestigious because they belonged to the masthead. Now, it's often the other way around: mastheads matter as collection of authors. I read Rolling Stone for TV reviews because they hired Alan Sepinwall; I picked up The New Republic and Slate when all the ex-Gawker ex-Deadspin writers moved there (and then abandoned those for Defector). There are still publications with the sort of prestige that means something, but they're increasingly few and far between—and they're all publications that were born in the print era, without exception.

Substack's goal is essentially to create a brand that's comparable with The Atlantic, by creating such a line-up of individually prestigious authors that people start thinking of it as a singular publication rather than as a platform. It doesn't want to be Wordpress—it wants to be The New Yorker. And its bet is that, if individual authors can indeed draw large enough audiences of paying customers, they'll prefer Substack's "you make the bulk of the profits" model to the magazine model of "we pay you a salary or per-piece, and keep subscription money for ourselves." If they can persuade enough authors of that, then the fact that they make a comparatively small percentage of the profits doesn't matter—because unlike the magazine model, which has to pay each of its writers individually, Substack becomes more profitable the more writers it takes on, which means it could hypothetically have a "masthead" that's orders of magnitude larger than print-era publications could have ever afforded.

In order to make that happen, though, they need to establish that feeling of prestige. Which is why they've paid so many writers six-figure salaries to write there: every Atlantic writer they nab becomes yet another example that Substack is where the real discourse happens, and turns Substack from a rinky-dinky Web 1.0-viable service into something with legitimate renown.

But that costs money. And if the authors they nab don't stay, it costs more money, as they try to find more. It's like the way that streaming services bid for TV shows and films, only presumably a lot cheaper, since nobody values writers. Still adds up over time, though. (And they don't have nearly the audience that, say, Netflix does.)

It's an interesting idea. I don't exactly root for tech start-ups, but I'll admit that I probably read more Substack publications than I read anything else, at this point. It feels like Substack has helped create a viable way for writers to write the things they feel like writing, without any of the scummy clickbait-y cruft. So I'd sure like to appreciate the publications they've helped to generate, which is why it sucks ass that they gave so much money to transphobes. Personally, I feel like you can be The Atlantic without just buying into the "conservative elites" bullshit wholesale, but in that regard their imitation is unfortunately... robust.
posted by Tom Hanks Cannot Be Trusted at 7:26 AM on March 30, 2023 [20 favorites]

What about Patreon? It seems to have a lot of creators using it as an income source?

Tom Hanks Cannot Be Trusted, I don't think substack can be a source of prestige the way a big name magazine could be. Anyone can start a substack, and one of the draws is the offer of *not* being cancelled.

In other words, substack isn't curating your reading for you.
posted by Nancy Lebovitz at 7:42 AM on March 30, 2023 [2 favorites]

Regarding that business model--become The Atlantic, become The New Yorker, by attracting a large stable of well-known writers--the other question I run into is, what's the limit of reader patience with new subscriptions? Much like with streaming services, there are more writers who have interesting work, than most of us have money for. Every day (literally!) I run into an interesting article I'd love to finish--but hit the end of the email, the "sign up for a free 7-day trial or subscribe" or whatever, and then sadly toss the half-article in the trash.

The great virtue of the magazine was its ability to bring you a multitude of voices, including introducing new ones, for one set price. Substack certainly does have tools for surfacing new writers, but...it's not great? Surely there's a matter of sustainability there?
posted by mittens at 7:53 AM on March 30, 2023 [4 favorites]

I've got a fairly successful subscriber + free newsletter about Los Angeles historic preservation and cultural history, and the odd invitation to invest $100 made me concerned enough to look at the alternatives to Substack.

I like Substack as a service, but they take a pretty big cut of subscriber revenue. This works for us because we have many more free subscribers than paid ones. I'm concerned they'll start charging higher fees to find the money they apparently need.
posted by Scram at 8:36 AM on March 30, 2023 [1 favorite]

What I'm seeing is creators choosing to have income from multiple platforms. This seems very reasonable because you never know what's going to happen with any particular platform.
posted by Nancy Lebovitz at 8:38 AM on March 30, 2023 [4 favorites]

Substack's slogan is "The home for great writing" and the CEO claimed their goal is “to allow writers and creators to run their own personal media empire.” 2017 doesn't feel like it was that long ago until I read the substack manifesto where their policies on ads and data privacy sound amazing, and clearly aimed at the media situation at that moment.

They see themselves as the "whole ecosystem" for subscriber funded newsletters. I bet that the substack folks still think they are the best solution to the lack of trust in media. They truly believed that random people would be able to just bootstrap whole media operations, grow and grow and, actual quote here, "soon enough, it could be the best local news publication in the area."
posted by zenon at 8:41 AM on March 30, 2023 [1 favorite]

For me at least the substacks I like are by actual experts rather than the blowhard opinion columnists. As always with the internet I'm over here on the long tail hoping the weird detailed explainers of obscure topics somehow improbably survive.
posted by srboisvert at 9:08 AM on March 30, 2023 [8 favorites]

METAFILTER: they light stacks of money on fire, as per the local native custom.
posted by philip-random at 9:32 AM on March 30, 2023 [6 favorites]

Tom Hanks Cannot Be Trusted, I don't think substack can be a source of prestige the way a big name magazine could be. Anyone can start a substack, and one of the draws is the offer of *not* being cancelled.

I'm not saying I think Substack will succeed. But they've gotten pretty far already, in terms of getting people to think of them as "the" place where you go to play for newsletters.

In other words, substack isn't curating your reading for you.

In recent months, they've been pushing aggressively into recommending you "related newsletters," often trying to take a payment you're originally planning and "upsell" it into your paying for two or three more. I think it's just a matter of time before they offer something like an "our favorite newsletters," with maybe a pivot towards "pay for our curated list of favorite pieces, and we'll pay all of the authors we feature their usual share."

One thing you can reliably trust, for any VC-backed company, is that they aren't done adding features, disrupting their own business model, and looking for a better way to grab an audience. And given how same-y Substacks look, it would be easy for them to introduce a new prestige-y "best of Substack" design that both grabs readers and leaves writers hungry to get their words looking all slick and acclaimed.
posted by Tom Hanks Cannot Be Trusted at 9:54 AM on March 30, 2023 [7 favorites]

There are certainly some good Substacks out there (like that by historian Heather Cox Richardson), but generally I feel like the whole Substack experiment has proved the value of having a good editor - I can imagine a Substack-esque model working, but most (all?) writers benefit greatly from editors who not just polish their writing but comment on drafts with perceptive comments on how the piece might be improved. Comparing the work by journalists pre- and post- shifting over to Substack is striking in some instances, and despite what some of them might like to think, it's not that they've become more "free" to speak their mind - rather they've become more rambling and sloppy.
posted by coffeecat at 10:08 AM on March 30, 2023 [10 favorites]

If you don't need to monetize your writing, don't overlook Tumblr as a blogging platform. It lets you set up a blog instantly, with an RSS feed that your readers can use. You could use it as a social media network and interact with other tumblr users, or you can use it as a normal blog site.
posted by tofu_crouton at 10:20 AM on March 30, 2023 [3 favorites]

Tumblr's not a great choice unless you want to reach one of several specific audiences (or if you're just reposting from another site). I say this as someone who uses it and likes it -- it's an ecosystem more than a platform. The stereotype is "soft, sad freaks" from fandom, but there's also a lot of history, science, religion, etc. Tumblrs. They may like you, but not many of them have money to spend. Plus, in the search function, the algorithm disfavors posts with external links in order to keep you on the site -- no fun for those who like to cite things. Outside of Tumblr, the URL has as much of a stigma as an AOL address did back in the day. And the audience skews pretty young.

I have a Medium, but it seems to have the same problem with stigma without the charm, community, and energy of Tumblr.
posted by Countess Elena at 10:48 AM on March 30, 2023 [5 favorites]

I was thinking that a Substack competitor could plausibly be a very good 'lifestyle business' for someone with the right kind of web skills. A platform with email sending, payment collection, formatting, maybe a little analytics and that's it. You don't need to publish dozens of well-known authors, you need a modest amount of time to set up a tool like that and keep it running. It doesn't need to scale and become the Amazon of newsletters; it just needs to pay your rent. And then I read the Tedium piece linked above, and it seems very much like the guy behind buttondown has done exactly this. I particularly admire his commitment to spend 10% of revenue on funding the open-source projects that it relies on.
posted by Superilla at 11:38 AM on March 30, 2023 [13 favorites]

> In lieu of a pitch deck, we have flattery. Writers are notoriously bad at math — and even more notoriously bad at managing their own money. Shit, if we were good at this kind of thing, we would be doing something lucrative, probably.

Amazing article
posted by yuletide at 1:41 PM on March 30, 2023 [1 favorite]

Many Canadian journalists (at least, my experience is largely with them) have substacks now where they're trying to monetize what amounts to extended opinion pieces. I think it's somewhat successful. Substack seems to want want to travel the road of pre-musk twitter there. That's not a bad direction to encourage. I'd much rather read a substack than an x/21 twitter thread.
posted by bonehead at 8:20 AM on March 31, 2023 [2 favorites]

I use Ghost instead of Substack and though I'm dreading the $480 bill I'll get this year, it's still almost $100 less than I'd have paid out on Substack, and I know I'm not the product. Substack is very convenient, but that convenience is a subsidy from VCs, and that's running out. The thing just doesn't seem stable to me.
posted by indica at 8:34 AM on March 31, 2023 [3 favorites]

Ooh, buttondown looks great! I've been using tinyletter, which is chugging along despite the company being swallowed up by Mailchimp. It's very Web 2.0esque and feels like it hasn't been worked on in a decade, but it does what it needs to do, doesn't cost me a cent, and the occasional slight bugginess is almost charming.
posted by oulipian at 8:40 AM on March 31, 2023 [1 favorite]

I have a Medium, but it seems to have the same problem with stigma without the charm, community, and energy of Tumblr.

Medium was once the fresh new hotness that Substack has been coming off of, but seems to have died off quicker as an influencer publication hotbed.
posted by gentlyepigrams at 6:40 PM on March 31, 2023 [1 favorite]