Hi there --
I am back writing this week with a special edition of the newsletter -- a deeper look at the independent publishing space. I am excited to share actual numbers of my subscriber growth and some ideas on how to win as a platform in independent publishing.
Before we dive in, here's the usual count -- We now have 4,404 subscribers who get tech analysis delivered to their inboxes weekly. Enjoy!
Substack and email newsletters are changing the world of publishing. They are at the head of the current shift in digital publishing from large media conglomerates to independent publishers that own the audience relationship through the direct channel of email. You are a part of that trend just by reading this post. Substack, the main platform, and others like Revue, Convertkit, and Ghost allow publishers to easily start writing by providing a publishing platform that ties together the functionality they need: editing, publishing, email, and payments. They fail to, with the exception of Revue, help you build an audience.
To build an audience in the world of independent publishing, you must leverage word-of-mouth, SEO, and social media channels like Facebook, Twitter, and Linkedin. This generated traffic will then help you build up subscribers through an email list. That is hard to do, but the up-front cost to build said email list is worth it for many publishers. When you own the list of emails, you can better manage the customer relationship using your messaging, and provide better functionality and tools to what a single platform may offer by moving with your audience to another platform. It’s the easy way for publishers to not be “owned” by any news outlet or platform. In the previous world of magazine and newspaper, those companies owned the audience through the brand. With an email list and Twitter account, publishers can take their audience with them. If you are more technical, that may mean spinning up your own Wordpress or Ghost integration and moving off of Substack completely.
But why would you want to do that when Substack makes it so easy?
All about the Benjamins
Substack takes a 10% cut of any paid subscription minus any of the Stripe fees paid (typically 2.9% + 30¢). This is fine as you are getting up and running on Substack and need to pour your effort into the content itself rather than dealing with the building and managing of a publishing platform. That takes time and effort when you could be focusing on your audience. However, if (or when 🤞) you are able to grow a large paying audience, that 10% cut that Substack takes off the top is daunting.
Say you have 1,000 paid subscribers that subscribe at $10/month, for a gross profit of $10,000/month. Would you pay $1,000/month or $12,000/year in Substack fees for a platform that is being replicated by other platforms that already exist and undercut on cost? I assume most of you reading this would agree with me and say “no”. Ghost, for instance, charges a flat $36 to $200/month fee to use its Ghost(Pro) platform, depending on your tier. You just pay the Stripe fees for paid members and you’re now making ~$9,000/year more than you had with Substack. The inherent value of a platform is the publishing tools and email distribution, but that doesn't support paying that type of fee and competitors know this. The most difficult part of being a content creator is discovery, not the tools themselves, and Substack doesn’t do much of anything to help with that.
Substack provides the tools, but hasn’t cracked the nut on helping no-name publishers get discovered. Yes, Substack has announced their new aggregator -- the Substack Reader app -- to help discover and manage your newsletters, and that should help to some degree, but the current list of newsletters is ranked by some combination of number of subscribers, views, and interactions. They also help to feature substack writers on their social channels and by attempting network effects, but that doesn’t do much for the discovery of long-tail publishers on the platform. If you are a publisher who doesn’t already have a large following, you get lost in the shuffle because your audience isn’t large enough -- the exact reason why you might need a platform to help you build your audience.
That manual editorial and featuring could help with the aggregation problem, but the Reader App also requires that readers commit to newsletters through the Substack brand. This starts resembling a cross between Feedly and Medium. This is the tough balance between owning your audience and relying on Substack as a platform. The long-tail of publishers need discovery. Platforms know this and provide value through network effects and algorithms not solely based on the number of readers and views, but on other viral social signals. The top publishers are going to continue to be at the top of the list, which makes them happy and helps them grow their audience while also boosting the profits of Substack through the 10% cut -- until those publishers leave the platform.
That’s the rub -- right now the email list ownership that makes Substack great is in direct opposition to moat building and retention strategy. The differentiation that Substack brings as a platform is not enough currently to match its rake of 10% on all subscription revenue. What typically makes publishers stay with a platform is strong network effects through building your audience. If you could walk away with a list of your Facebook friends to another platform and immediately communicate with them through direct channels, you’d have very little reason to stay on Facebook other than everyone is already on the platform and it's free. The Substack model without additional benefits is preventing any platform lock-in.
What that means is that Substack’s business model is ripe for failure unless they can build a moat, supporting the growth of their long-tail publishers while providing tools and incentives for the top-tier publishers will continue to support the majority of revenue. Right now they have the momentum to capitalize on via the stream of news and authors flocking to the platform. To do so Substack has to provide value in publishing tools, support, customization, and discoverability that beats out Wordpress, Ghost, and Revue while also beating out social channels like Twitter and regular SEO for discoverability.
If that didn’t make things urgent enough, Twitter and Revue announced a merger on January 26th, bringing a newsletter platform (tools and direct distribution) and social network (audience building and network distribution) together. While it's too early to know what integrations will be built between the two platforms over time, the concept of bringing together two pieces of a broader newsletter puzzle together under one roof means that overnight Revue users are getting broader distribution through the Twitter network while Substack has little to no network effects. Beating that is a tall order, especially when the fees are substantially lower at 5%.
Network distribution and discovery
The Twitter and Revue announcement is a cause of concern for Substack and other platforms strictly because of the power and potential of Twitter’s network effects and reach. The argument in the beginning of this post started by looking at the difference in revenue models between Substack and Ghost. That argument assumed that the platforms were generally equal and provided similar tools, distribution mechanisms through email, and an easy way to accept subscriptions. All features that are can be easily built on APIs from companies like Stripe, Ghost, or Automattic (Wordpress). With Twitter and Revue joining forces, the hardest part -- network distribution and discovery -- is bundled. That may give publishers the justification they needed to pony up the dough.
Let’s look at a real example of network distribution through some high-level data on my newsletter growth over the past 7 months, starting with my overall Techonomics subscriber (free) number: 4,376. Not bad for 7 months of writing a newsletter. I leveraged both Substack and LinkedIn to publish and build my audience, so let’s look at those two numbers separately.
First, a quick glance at my Substack email subscriber data.
And now also at that data matched against the total.
That’s right. Only 2.7% of my overall subscriber count comes from my Substack email list while the remaining 97.3% comes from my LinkedIn newsletter. That’s network distribution effects at work helping discovery.
A few things here: (1) I have connections already on LinkedIn and have leveraged that network but the majority of subscribers are 3+ degree connections, (2) LinkedIn may be cannibalizing traffic that would otherwise be pointed to Substack leading to missed opportunities on email list growth (LI doesn’t share emails), and (3) with LinkedIn it’s low friction to hit subscribe. Regardless, it’s hard to argue with subscriber growth of that magnitude for someone starting to build out an audience who finds their work valuable. One that I can reach in their inbox.
The point here, again, is that discovery through network distribution is what’s going to keep publishers on your platform. How well you help your publishers build and maintain their audience is the reason you’ll retain them and is a hard one to build for companies who don’t already have a well established flywheel of viral network effects. So, what else can Substack and other publishing tool providers do to compete and make the recurring revenue cut of paid subscriptions worth it?
Winning independent publishing
As someone who’s been writing for years, helped rebuild the LinkedIn Publishing platform, and has been building an audience over the past 7 months -- helping your publishers find an audience is the holy grail. It’s why Twitter and Revue’s merger means a reckoning for the paid newsletter industry.
They’ll win independent publishing on network distribution and discovery by leveraging the existing Twitter network while Revue focuses on writers and the product experience. They have the eyeballs to convert to subscribers and an audience willing to search for (and surface) the best content. In other words -- both sides of the viral marketplace.
To make up for their lack of network distribution, Substack is trying to build their own network effects, but they also need to focus on making their product unbeatable through writer services, editorial integrations, better analytics, and author exclusivity deals to compete. Regardless, they won't win out without the help of a network. Why? When you own your email list, you take it to whatever platform you please.
The power is in the audience – you either own it or you get help in growing it. My money's on Twitter and Revue.