What Substack Gets Right!
Insight: Of Newsletter Platforms, Communities, and Business Models
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Hello everyone and a warm welcome to new readers of this publication!
In an earlier post, I have been pretty vocal about the poor user experience on this platform. Many users have since validated the research, agreeing on how Substack can improve, and have provided additional data points. However, I promised to also highlight what Substack does well—so, here we go.
Business Context: Understanding Substack’s Focus
According to TechCrunch, Substack has facilitated over $300 million in payments to writers and now has more than 35 million active subscriptions, including two million paid ones. Over 17,000 writers are earning money on Substack, with the top 10 publishers collectively making more than $25 million annually.
Recently, Substack raised $7.8 million from 6,688 individuals on Wefunder, in addition to nearly $90 million raised through five funding rounds from Y Combinator to Series A/B led by Andreessen Horowitz, totaling approximately $100 million.
The platform is currently valued between $650 million and $1 billion.
While the average investment size was reported to be between $100 and $250, it’s clear that some substantial checks were written to reach the $7.8 million total.
Substack is believed to employ about 76 people after laying off 14 people in HR, writer support, and research in early 2022. Their adoption of Decagon, a GenAI helpdesk chatbot, has helped offset some of these cuts.
Substack’s Business Model
Substack’s model is focused on the following target groups:
Incentivizing Established Media Figures: Substack heavily invests in attracting well-known journalists, authors, and media personalities, by offering financial support, branding, and promotional incentives. This strategy adds credibility to the platform and enhances the overall content quality available to all users.
Attracting Influencers with Large Followings: Especially those with significant presences on Instagram and Twitter, Substack encourages these influencers to shift their content creation efforts to the platform.
Supporting Writers with High Growth Potential: Through the SubstackPro program, the platform invests in writers who demonstrate potential for rapid growth, providing them with behind-the-scenes support, algorithmic boosts, and a scalable revenue model. For instance, some writers onboarded through the program retain most of their first-year earnings or receive a financial incentive, allowing them to focus on writing without the immediate pressure of growth while ensuring a steady income. With grants and fellowships, Substack provides financial and mentoring support to select writers, particularly those with backgrounds in journalism, to help grow their media business on the platform.
What Substack Gets Right
Given this clear focus on their target groups, Substack has effectively tailored its platform to meet their needs, while still providing valuable tools for aspiring writers.
One of the standout features of Substack is the quality of content and writing it hosts. The platform has attracted a diverse range of writers, from well-known journalists and authors to emerging voices who are passionate about their subjects. This concentration of talent has elevated Substack into a space where readers can consistently find well-researched, thoughtfully crafted, and engaging content.
Ad-Free Experience: Substack offers an ad-free experience, which is increasingly rare in the digital content space. For both writers and readers, this creates a more focused, distraction-free environment where the emphasis is purely on the content. This is particularly appealing to audiences who are tired of intrusive ads and to creators who want to maintain a direct, unfiltered connection with their readers.
Pay-as-You-Grow Model and Low Entry Barriers: Substack’s ‘We grow as you grow’ model, which takes a 10% cut of revenues, enables new writers to build on the platform with ease. This approach is one of the biggest incentives for new writers to join the platform.
Core Group Focus: Substack is selective in its feature releases, focusing on what benefits its top-tier users. Enhancements like video capabilities, algorithmic content boosts, and improved Notes functionality are likely designed to serve the needs of established media figures and high-growth writers, reducing their need for alternate platforms like Twitter/X. However, these features are available to all users, offering them similar growth opportunities.
Discoverability, Community and Engagement Tools: Substack is invested in fostering community and engagement through its native tools, which are somewhat helpful for discovery. This contrasts with other platforms, including beehiiv that rely on external forums - like Discord, Slack - for community building. By keeping these tools in-house, Substack ensures a more cohesive user experience.
Algorithmic Boosting for Visibility: The ‘Notes’ feature on Substack benefits from an algorithm designed to amplify engagement. Still in its early stages, this algorithm shares similarities with other social media platforms, where increased interaction leads to greater visibility. While it’s reasonable to assume that Substack’s algorithm favors content from its top users, supported writers, and others in its various incentive programs, all writers have the potential to benefit from increased engagement through consistent quality content.
Native Multi-Media Integration: Writers can integrate writing, podcasting, and video casting in one-go. New features like inline image editing help simplify the content creation process. The multimedia integration makes it easier for all creators, regardless of their following, to diversify their content offerings on a single platform.
Automation and Design: Substack offers some automation and design flexibility, particularly for basic workflows. Design themes and layouts are easy to apply, while the newer advanced features seem tailored for larger teams. The platform’s ability to give newsletter posts a website-like feel is similar to WordPress, providing an alternative to maintaining a separate blog site. However, users might prefer to keep their external domain pointed to their Substack site to maintain flexibility as they grow.
The Bottom Line
Substack has developed a broad based platform that is exclusively focused on promoting subscription-based written, spoken, and video content.
While the platform primarily targets high-growth, high-follower, and well-known journalists, publications, authors, and public figures, its business model ensures that these features are also accessible to a broader audience seeking better alternatives to traditional blogging.
Despite the common discoverability challenges that all newsletter and online platform users face, Substack’s decision to offer native community features helps it reduce writer reliance on external social media forums like Twitter for engagement.
The platform has continued to attract big names due to its network, strategic influence, and financial incentives.
These advantages also benefit aspiring creators, making Substack a great platform to experiment and safely explore new content strategies.
Plus, it offers exposure to accomplished writers who might otherwise be less accessible, and providing writers on the platform, valuable learning opportunities and inspiration.
While Substack has its challenges, it's also a platform that excels in many areas, offering significant benefits to both established and aspiring creators. From its ad-free experience and high-quality content to its supportive community and powerful tools for growth, Substack provides a unique environment for content creation and audience engagement.
What do you like about Substack?
Check out my detailed articles on Substack, complete with how-to videos on designing your stack successfully. Or pre-order my upcoming book - ‘The Definitive Guide to Substack.’
Celebrating reaching 1,000 readers, thanks to your incredible support! For a limited time, upgrade to access all premium posts and exclusive how-to videos. Don’t miss out on this limited-time offer on monthly and annual plans!
A lot of good things are happening here, as you point out. It’s important for us to choose a platform and be consistent. Sometimes it’s counterproductive to criticize the tools instead of just picking them up and building something.
If only Medium had been half the platform that Substack is. The ability to build a community and interact on Notes is a gift. Literally, since it’s free.
Very good insight, good data.