Activist company

Will Substack go beyond newsletters? A company weighs its future.

There are things newsletter editor Kirsten Han misses about Substack. They are simply not enough to compensate for the disadvantages.

She didn’t like how the platform presented itself as a haven for freelance writers with fewer resources while offering six-figure advances to several prominent white men. The hands-off content moderation policy, which allowed transphobic and anti-vaccine language, did not sit well with him. She also didn’t like earning $20,000 in subscription revenue and then giving up $2,600 in fees to Substack and its payment processor.

So last year, Ms. Han moved her newsletter, We, The Citizens, to a competing service. She now pays $780 a year to publish through Ghost, but said she still earns about the same in subscriptions.

“It wasn’t too hard,” she said. “I looked at a few options that people were talking about.”

Not so long ago, Substack haunted mainstream media executives, poaching their star writers, luring their readers and, they feared, threatening their viability. Rich in venture capital funds, the start-up was considered “the future of media”.

But now, Substack is no longer a prodigy but a company facing a multitude of challenges. Depending on who you talk to, these challenges are either standard startup growth pains or threats to the future of the business.

Tech giants, media and other companies have launched competing newsletter platforms over the past year. Consumers who have filled up on newsletters during the pandemic have started to cut back on their consumption. And many popular writers are gone, like Associate Professor of English Grace Lavery and climate journalists Mary Annaise Heglar and Amy Westerveltoften complaining about the company’s moderation policy or the pressure to constantly deliver.

“Substack is at a tipping point where it has to think about what it’s going to be like when it grows up,” said Nikki Usher, associate professor of journalism at the University of Illinois at Urbana-Champaign.

The good news for the company, which turns five this summer, is that it continues to grow. Paid subscriptions to its hundreds of thousands of newsletters soared to over a million at the end of last year, from 50,000 in mid-2019. (The company won’t disclose the number of free subscribers.) A hiring spree hopes to attract more than a dozen engineers, product managers and other specialists. Executives hope to eventually take the company public – which has raised more than $82 million and is reportedly valued at $650 million.

But to sustain that growth, Substack executives say, the company needs to offer more than newsletters.

In an interview at Substack’s downtown San Francisco office, its co-founders made some sweeping claims about Substack’s “big theory” and “master plan.” Chris Best, the managing director, described the desire to “change the way we experience internet culture” and bring “art into the world”.

“Substack in its fullest ambition is kind of this alternate universe on the internet,” he said.

In practice, this means that Substack will not only be a distribution channel for written newsletters, but more of a multimedia community. Executives want users to create ‘personal media empires’ using text, video and audio, and communicate with subscribers through an extension comments which might feature GIF images and profiles for readers. This week, Substack announced new tools for editors to recommend other newsletters.

Jairaj Sethi, co-founder and chief technology officer, described a vision of subscribers gathering around writers like fans at a concert.

“If you just give them a place to congregate and interact with each other, there are some pretty cool types of bonds,” he said.

In March, Substack introduced an app that aggregates subscriptions in one place rather than scattering them separately by email. This month, the company announced an expansion of podcasting.

“From the start, we wanted the company to do more than just provide subscription-based publishing tools,” Hamish McKenzie, co-founder and COO, wrote of the app.

But as Substack evolves beyond newsletters, it risks looking like just another social network or news publisher, which could make it less appealing to writers.

Ben Thompson, whose tech-focused newsletter Stratechery inspired Substack, wrote last month that Substack has gone from being a “faceless editor” behind the scenes to trying to bring “the Substack brand to the forefront,” building its application as a destination on the backs of writers.

“It’s a way for Substack to leverage its popularity to create an alternative revenue model that involves readers paying for Substack first, and publishers second, instead of the other way around,” Mr. Thompson.

Publishing on Substack is free, but authors who charge subscriptions pay 10% of their revenue to Substack and 3% to its payment processor, Stripe. The company also offers large advances to a small group of writers, whose identities it refuses to disclose.

Substack has one key difference from most other media companies: it refuses to chase advertising dollars. “On my corpseMr. McKenzie once wrote. “The antithesis of what Substack wants to be,” Mr. Best said.

“If we, through greed or mistake, entered this game, we would effectively be competing against the TikToks, Twitters and Facebooks of the world, which is just not the competition we want to be in,” added Mr. Best. .

This means that Substack continues to depend on subscription revenue. Subscribers pay over $20 million a year to read Substack’s top 10 writers. The top performer is history teacher Heather Cox Richardson, who has more than one million paying and non-paying subscribers. Other notable writers include knight novelist Salman Rushdie, award-winning punk poet Patti Smith, and Eisner award-winning comic book writer James Tynion IV.

Emily Oster, an author and economics professor at Brown University who has offered controversial advice on dealing with the pandemic with children, joined Substack in 2020 after Mr. McKenzie recruited her. Its newsletter, ParentData, has more than 100,000 subscribers, including more than 1,000 paying readers.

“Substack has certainly become a bigger part of the media landscape than I ever imagined,” she said.

But Dr. Oster’s main sources of income remain his teaching and his books; much of its newsletter revenue is spent on publishing and support services. Most users have struggled to support themselves by writing exclusively on the platform and instead use their earnings to top up other paychecks.

Elizabeth Spiers, a digital strategist and Democratic journalist, said she dropped her substack last year because she didn’t have enough time or paying readers to justify her lengthy weekly essays.

“Also, I started getting more paid assignments elsewhere, and it didn’t make much sense to keep putting things on Substack,” she said.

But Substack’s biggest conflict is about content moderation.

Mr McKenzie, a former journalist, describes Substack as an antidote to the attention economy, a “nicer place” where writers are “rewarded for different things, without throwing tomatoes at their opponents”.

Critics say the platform recruits (and therefore endorses) culture war provocateurs and is a hotbed of hate speech and misinformation. Last year, many writers dropped Substack for its inaction on transphobic content. This year, the Center for Countering Digital Hate said anti-vaccine newsletters on Substack generate at least $2.5 million in annual revenue. Tech writer Charlie Warzel, who quit a job at the New York Times to write a Substack newsletter, described the platform as a place for “internal internet jams”.

Substack has resisted pressure to be more selective about what it allows on its platform. Twitter employees who feared its content moderation policies could be relaxed by Elon Musk, the world’s richest man and the platform’s biggest shareholder, have been told to no need to apply for jobs to the sub-stack.

“We don’t aspire to be the arbiter of saying, ‘Eat your vegetables,'” Mr Best said. “If we agree or like everything about Substack, it would be below what a healthy intellectual climate looks like.”

The sub-stack makes it easy for writers to break away, and defectors have a growing collection of competitors waiting to welcome them.

Over the past year, newsletter offerings have debuted on Twitter, LinkedIn, Facebook, Axios, Forbes and a former Condé Nast editor. Last year, the Times made several newsletters available only to subscribers. Mr. Warzel moved his Galaxy Brain from Substack to The Atlantic as part of his newsletter campaign in November.

Media platform Ghost, billed as “the indie alternative to Substack,” has a Concierge Service to help Substack users transition their work. Medium has scaled back its editorial posts to pursue a more Substackian model of “supporting independent voices.” Zestworld, a new subscription comics platform, has been called “Substack without the transphobia”.

Mr Best said he welcomed the rivalry.

“The only thing worse than being copied is not being copied,” he said.