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I'm surprised Substack's business model is charging ~10% from one's revenue. A fixed pricing would make more sense. Why would anyone who is planning on profitin

I'm surprised Substack's business model is charging ~10% from one's revenue. A fixed pricing would make more sense. Why would anyone who is planning on profiting from their newsletter would go with a deal like that? Building a newsletter site these days is a pretty simple task with many no code solutions. I'm not saying what Substack provides is not worth paying for, just that it's a bad deal for people with successful newsletters that generate money, and a good deal for everyone else. But the former users are the ones Substack need in order to make money.

Angostura 6y ago
% fees are very attractive to people who are starting small or experimental and have no real idea as to whether the idea will take off. It’s and automated, easy to understand freemium model.
- tinyhouse 6y ago
  That's the catch. It's easy to start and experiment. But as you grow bigger you start realizing it's a bad deal so may start looking for alternatives. That's bad for Substack since why would you like your most successful users to be unhappy? A better model IMHO would be a fixed tiered price based on the number of subscribers you have, similarly to how most email providers' business model work. For most users it wouldn't be cheaper than 10%, but for the top X of users it would. Having a fixed cost you can plan in advance for is more attractive IMHO.
  - swyx 6y ago
    you say this but there are dozens of people running million+ dollar substacks with no plans to leave. this market is huge, writers really don't like to futz around with tech as much as we do
Dowwie 6y ago
They're charging "ad valorem" -- relative to the value received. The value that a Substack user with 4000 subscribers receives isn't the same as what someone with 50 subscribers receives. This is a very common fee structure that exists across industries.
- tinyhouse 6y ago
  The fact it's a common fee structure that exists across industries doesn't mean it makes sense for Substack. And I wouldn't call 10% standard. Most companies I know of, take Stripe for example, charge much smaller fees percentage wise and rely on high volume transactions. Maybe a better example I can think of is a referral site. Maybe a site like Kayak can charge Marriott 10% each time they refer someone who books a room. If that room wouldn't be booked otherwise it's probably a good deal for Marriott. Substack does help with discoverability, and that's probably where their main value is (similar to FB, Instagram, etc), but the problem is that unlike the Marriott example, the fee is not a one time payment.
  - dna_polymerase 6y ago
    And you think Substack can achieve the same high volume as Stripe does? > Substack does help with discoverability, and that's probably where their main value is (similar to FB, Instagram, etc), but the problem is that unlike the Marriott example, the fee is not a one time payment. No, they also provide the platform, the tools, the analytics. They are not just an aggregator. Also, Marriott has to pay for every transaction, just like someone using Substack. You pay per transaction.
    - tinyhouse 6y ago
      > No, they also provide the platform, the tools, the analytics Maybe I'm in a bubble but I don't see it as their main value for successful users who make money from their newsletter. I've setup a newsletter with analytics a few weeks ago without writing a single line of code and with a fixed cost (and custom domain...). Yes, starting with Substack is cheaper to start with but long term it'll cost you). > Marriott has to pay for every transaction, just like someone using Substack. You pay per transaction. I guess I'm not familiar enough with Substack. What does it mean you pay per transaction? It's a newsletter - you make money from paying subscribers who pay monthly let's say. Are you saying Substack users pay per email sent to their paying subscribers?
      - 6y ago

Angostura 6y ago

% fees are very attractive to people who are starting small or experimental and have no real idea as to whether the idea will take off. It’s and automated, easy to understand freemium model.

tinyhouse 6y ago
That's the catch. It's easy to start and experiment. But as you grow bigger you start realizing it's a bad deal so may start looking for alternatives. That's bad for Substack since why would you like your most successful users to be unhappy? A better model IMHO would be a fixed tiered price based on the number of subscribers you have, similarly to how most email providers' business model work. For most users it wouldn't be cheaper than 10%, but for the top X of users it would. Having a fixed cost you can plan in advance for is more attractive IMHO.
- swyx 6y ago
  you say this but there are dozens of people running million+ dollar substacks with no plans to leave. this market is huge, writers really don't like to futz around with tech as much as we do

Dowwie 6y ago

They're charging "ad valorem" -- relative to the value received. The value that a Substack user with 4000 subscribers receives isn't the same as what someone with 50 subscribers receives. This is a very common fee structure that exists across industries.

tinyhouse 6y ago
The fact it's a common fee structure that exists across industries doesn't mean it makes sense for Substack. And I wouldn't call 10% standard. Most companies I know of, take Stripe for example, charge much smaller fees percentage wise and rely on high volume transactions. Maybe a better example I can think of is a referral site. Maybe a site like Kayak can charge Marriott 10% each time they refer someone who books a room. If that room wouldn't be booked otherwise it's probably a good deal for Marriott. Substack does help with discoverability, and that's probably where their main value is (similar to FB, Instagram, etc), but the problem is that unlike the Marriott example, the fee is not a one time payment.
- dna_polymerase 6y ago
  And you think Substack can achieve the same high volume as Stripe does? > Substack does help with discoverability, and that's probably where their main value is (similar to FB, Instagram, etc), but the problem is that unlike the Marriott example, the fee is not a one time payment. No, they also provide the platform, the tools, the analytics. They are not just an aggregator. Also, Marriott has to pay for every transaction, just like someone using Substack. You pay per transaction.
  - tinyhouse 6y ago
    > No, they also provide the platform, the tools, the analytics Maybe I'm in a bubble but I don't see it as their main value for successful users who make money from their newsletter. I've setup a newsletter with analytics a few weeks ago without writing a single line of code and with a fixed cost (and custom domain...). Yes, starting with Substack is cheaper to start with but long term it'll cost you). > Marriott has to pay for every transaction, just like someone using Substack. You pay per transaction. I guess I'm not familiar enough with Substack. What does it mean you pay per transaction? It's a newsletter - you make money from paying subscribers who pay monthly let's say. Are you saying Substack users pay per email sent to their paying subscribers?
    - 6y ago