Unpacking Substack
Comparing Substack to Medium, two content marketplaces with identical long-term aspirations.
To this day, the best piece of advice I have ever heard about launching a multi-sided marketplace is “build the tools first, marketplace later” (thanks Sid).
This means focusing on creating value for one side of the marketplace (be it supply or demand) before trying to make the flywheel turn—this strategy is also commonly referred to in marketplace strategy as “single-player” mode.
Of course, building tools for one side is just one of many ways to bootstrap a marketplace—Andrew Chen has published an entire article on the others—but for some reason, it is the one approach that I keep coming back to.
Perhaps it is because this very approach enabled the publishing of my first newsletter (on Substack, in case the connection wasn’t clear). For now, Substack is a tool for writers to get paid for producing content. In the future, I imagine it will also become a platform where people discover content. In many ways, this is already happening. Simply stated, Substack is a different take on Medium. On Substack, writer-reader relationships are stronger and more personal, and are catered towards full-time writers who rely on niche followings. A consistent following of 1000 paying subscribers (paying $7/month) can net enough to live comfortably in San Francisco.
In contrast, Medium caters to casual writers and one-off pieces. Its payout structure, through its claps system, is as sporadic and inconsistent as the frequency at which its writers publish. Unlike Substack, a given article needs tens of thousands of views to convert into meaningful dollars, and content distribution is subject to the whims of algorithmic feeds over which the writer has no control. Medium’s paid content is used to convert readers into subscribers of the platform, not subscribers of the creator themselves. This aspect, which creates interdependence amongst the entire Medium community, marks the fundamental difference between the platforms.
Community alone is a tough sell for an aspiring writer trying to make a living—and will always be secondary to the holy grail of continuous and reliable income. When a writer publishes on Medium and shares the link throughout their network, their readers are multiple steps away (read -> subscribe to Medium -> clap) from contributing real dollars. On Substack, the monetization funnel is one critical step shorter (read -> subscribe to writer).
Of course, an obvious argument is that Medium owns the superior distribution channel, sporting millions of monthly readers and hundreds of thousands of paying subscribers. With a little luck (through a feature from its editorial staff), a viral piece of content can catch fire overnight and net you up to $4,000. That’s certainly not a number to scoff at—Medium is doing a fantastic job pushing boundaries for content creators. But articles like that are the exception that proves the rule. The median earnings for an article in Medium’s Partner Program is almost definitely closer to $0.04 than it is to $4000.
Put yourself in the position of a writer trying to make a living—which would you rather choose: a guaranteed $500 or a 40% chance of making $1500?
Besides, the viewership for a publication in its early days relies primarily on social sharing (via Facebook, Twitter, LinkedIn, etc.) to first and second degree networks. If you’re not one of the lucky few each day chosen by Medium’s editorial staff, the majority of your reads are going to come from friends and family.
In other words, Medium’s distribution power (and prestige) is nowhere near that of the New York Times in 2003—there is no imperative to publish on Medium (or any platform for that matter) over existing alternatives. The flywheel has yet to mature.
For now, indie writers have the luxury of choosing—we are still in the very early innings of the self-publishing revolution. Substack, and other platforms like it (i.e. Revue), believe content creators will choose—both now and in the future—a platform that’s built for them.
Ultimately, the question is: will the eyeballs follow the content? Substack is betting it will.