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Substack’s business model doesn’t make sense. They are just using VC money to try and build social platform, but it’s a flawed one at best: - MOST people will

Substack’s business model doesn’t make sense. They are just using VC money to try and build social platform, but it’s a flawed one at best: - MOST people will not want to pay for articles. Especially in an ever increasing world of subscription payments across tv, music, SaaS, I really don’t see how email newsletters will be high on people’s lists - for the quality writers that people do want to pay, they will eventually move off the platform if it makes sense to do so (ie they get their brand recognition and followers and then jump ship to their own website). For the smaller ones, patreon onlyfans or some other direct contribution model would make more sense IMO So I really don’t get Substack’s model and how it can be successful long term unless it truly becomes the landing page / YouTube of articles. Which I can’t imagine it will with all the competition More generally I’m looking forward to the day where the SaaS bubble bursts a bit or at least pricing consolidates - every Tom, Dick and Harry is taking a crud app and adding a few features and trying to create a b2c or b2b business It works to some degree, but I’m looking forward to the day that there are enough programming specialists that many solutions are done in house As to substack, it’s a very simple technology stack; really the play with it and all other vc funded startups is to spend big, grab marketplace / users and exit. Then the buyer needs to monetize or is left holding the bag I’m much more of a fan of the Medium model, and even there it’s very hard for writers and for the platform to make reasonable money. It’s interesting how substack is asking everyone to bring their own mailing list with them, it’s a very smart way to build out their users / network, I give them that.

bhupy 6y ago
I guess my questions are: - Does it have to appeal to "MOST" people for it to be a viable dividends-paying business? - Does it have to be the "landing page / YouTube of articles" in order to be a viable dividends-paying business?
- abhinav22 6y ago
  Both these questions are related in the sense it reflects how large the audience needs to be to a viable business. Question is how much VC money has been burnt on it - perhaps it’s bootstrapped well and it can succeed at a much smaller scale; it’s definitely possible. However in the long run, it’s somewhat of an easily replicable stack / feature set, particularly as I assume that most highly successful writers would want to control their branding and prefer not to be on substack if they could reach the same audience. Which they likely can’t. Substack’a SEO abilities will be key to its success as that is in many ways it’s main feature (everything else can be replicated by any one of the millions of web developers out there). In that sense, becoming the landing page of bookworms would be a significant achievement and to answer your question an important goal for any considerable success. I base this on the fact that it seems like they have spent a fair bit in building the platform and it’s not as bootstrapped / low in capital as it may need to be to be viable as a smaller entity. But I’m guessing very much here! Is it really that different to hosting blogs, personal websites or to Medium.com? They just have the mailing list feature, but for most that doesn’t work because it takes a long time to build your own mailing list, so the target audience of writers is small. My 2c
  - bhupy 6y ago
    > Both these questions are related in the sense it reflects how large the audience needs to be to a viable business. But as long as the unit economics are positive, why does the audience size matter? AFAIK, Substack's OPEX looks a lot more like traditional software/SaaS businesses and a lot less like Uber's or Amazon's. You're right that Substack's functionality can be commoditized, but loads of successful dividends-paying businesses operate in commoditized spaces.
fra 6y ago
> More generally I’m looking forward to the day where the SaaS bubble bursts a bit or at least pricing consolidates - every Tom, Dick and Harry is taking a crud app and adding a few features and trying to create a b2c or b2b business I see these "I could build this in a weekend" type responses regularly on HN, and in my opinion it could not be more wrong. Substack isn't a CRUD app with a few features, it is man-years of work on the technical side. More importantly, they've had amazing execution on the business and product side. Building a business is really hard, and because you could replicate substack-the-app does not mean you would can build substack-the-business. > It works to some degree, but I’m looking forward to the day that there are enough programming specialists that many solutions are done in house What a waste this would be! Starting a business today is tractable because we build on the shoulders of giants. Tools like JIRA, Github, Sentry, Salesforce, Hubspot, Zoom, Slack, Notion, Stripe, GSuite, ... and many more are so much better and cheaper than anything you'd build in house.
- abhinav22 6y ago
  The business side of things - very difficult to pull off, I agree. The pure technical side of things? I honestly could replicate within 3 months of full time work and I’m sure a fair few others could. Thing is in theory, SaaS / Cloud should be win-win due to specialization. However the pricing I have seen is anything but - they need to charge that to support the sky high valuations and funding rounds. Which is why most scramble to do vendor lock in because without a barrier to entry they will need to keep reducing their prices down the equilibrium level that others can charge and have normal (but not abnormally high) economic profits. To give you an example, I was quoted 12,000$ per year for an enterprise b2b database solution to record questionnaire answers. Great software, meeting a need we have. But I’m building a basic postgresql database and a very basic web front end for free in its place. 80% of the functionality, 0% of the cost. I admit the remaining last 20% is the most complex and hardest part; also marketing and all the business aspect is a whole another game. So I have no intentions trying to compete with them, I respect them but at the same time I can’t justify to my company to spend 12,000$ per year for something that an in-house solution can cover most of. Even my CEO said - isn’t that just a database? This case doesn’t apply generally, but there should be enough examples of SaaS that can be replicated and we don’t need to pay an inordinate fee to use. I would place substack firmly in this list - it is a mailing list software with a text editor (I wouldn’t be surprised if they just reused TinyMCE for this). Most of the examples you have are very advanced software and I agree with you that having them readily available for all companies is a net positive. Perhaps sales force could be replicated, the rest require serious programming chops and investment. I basically agree with you but want to share a few more data points on uncommon cases to show the angle I’m coming from. My belief is substack is in this set of uncommon cases.
Lazare 6y ago
> - MOST people will not want to pay for articles. Especially in an ever increasing world of subscription payments across tv, music, SaaS, I really don’t see how email newsletters will be high on people’s lists I've subscribed to three Substack newsletters. A lot of other people have too. A 90% cut of the fee is netting some writers - including some not super-popular writers - a living wage, and for very popular writers, a *LOT* of money. Writing is not generally well paid; at a 90% cut, it doesn't take a lot of $5/month subscriptions to exceed what traditional media can pay. > - for the quality writers that people do want to pay, they will eventually move off the platform if it makes sense to do so (ie they get their brand recognition and followers and then jump ship to their own website). For the smaller ones, patreon onlyfans or some other direct contribution model would make more sense IMO Onlyfans has a stigma of being for porn, Patreon has a host of problems, takes a pretty high cut as well, and has a poor UI for this. Substack is objectively much better. You're right that it would probably make sense for the super-stars to jump to a cheaper platform, but there's also wide scope for them to negotiate better deals. > So I really don’t get Substack’s model and how it can be successful long term unless it truly becomes the landing page Taking 10% of a bunch of money for a pretty lightweight tool seems like a good business model to me. Can they keep those margins going? It's not implausible. The 10% Substack takes for, essentially, hosting is really high if you compare it to the $X/month you'd need for a hosted blog or VPS + Cloudflare, but it's very, very low when you compare it to the cut a traditional publisher takes. As so often, a lot depends on framing and how people compare the deal being offered. > I’m much more of a fan of the Medium model I've never paid Medium money, I will never pay Medium money, I don't understand why people pay Medium money, and I don't know anyone who has, is, or likely will pay Medium money. The Medium model, to me, seems to be an attempt to copy the traditional non-working model, without even an attempt to fix it. I can see why people might be fans of the concept, but it seems crystal clear to me that it represents the dead past, currently kept alive as a shambling zombie by VC money. Substack, maybe, is the future. And contrary to your assertions, does NOT seem to be burning VC money to bring it about. They seem to be coming out ahead on the Substack Pro advances, after all.

bhupy 6y ago

I guess my questions are: - Does it have to appeal to "MOST" people for it to be a viable dividends-paying business? - Does it have to be the "landing page / YouTube of articles" in order to be a viable dividends-paying business?

abhinav22 6y ago
Both these questions are related in the sense it reflects how large the audience needs to be to a viable business. Question is how much VC money has been burnt on it - perhaps it’s bootstrapped well and it can succeed at a much smaller scale; it’s definitely possible. However in the long run, it’s somewhat of an easily replicable stack / feature set, particularly as I assume that most highly successful writers would want to control their branding and prefer not to be on substack if they could reach the same audience. Which they likely can’t. Substack’a SEO abilities will be key to its success as that is in many ways it’s main feature (everything else can be replicated by any one of the millions of web developers out there). In that sense, becoming the landing page of bookworms would be a significant achievement and to answer your question an important goal for any considerable success. I base this on the fact that it seems like they have spent a fair bit in building the platform and it’s not as bootstrapped / low in capital as it may need to be to be viable as a smaller entity. But I’m guessing very much here! Is it really that different to hosting blogs, personal websites or to Medium.com? They just have the mailing list feature, but for most that doesn’t work because it takes a long time to build your own mailing list, so the target audience of writers is small. My 2c
- bhupy 6y ago
  > Both these questions are related in the sense it reflects how large the audience needs to be to a viable business. But as long as the unit economics are positive, why does the audience size matter? AFAIK, Substack's OPEX looks a lot more like traditional software/SaaS businesses and a lot less like Uber's or Amazon's. You're right that Substack's functionality can be commoditized, but loads of successful dividends-paying businesses operate in commoditized spaces.

fra 6y ago

> More generally I’m looking forward to the day where the SaaS bubble bursts a bit or at least pricing consolidates - every Tom, Dick and Harry is taking a crud app and adding a few features and trying to create a b2c or b2b business I see these "I could build this in a weekend" type responses regularly on HN, and in my opinion it could not be more wrong. Substack isn't a CRUD app with a few features, it is man-years of work on the technical side. More importantly, they've had amazing execution on the business and product side. Building a business is really hard, and because you could replicate substack-the-app does not mean you would can build substack-the-business. > It works to some degree, but I’m looking forward to the day that there are enough programming specialists that many solutions are done in house What a waste this would be! Starting a business today is tractable because we build on the shoulders of giants. Tools like JIRA, Github, Sentry, Salesforce, Hubspot, Zoom, Slack, Notion, Stripe, GSuite, ... and many more are so much better and cheaper than anything you'd build in house.

abhinav22 6y ago
The business side of things - very difficult to pull off, I agree. The pure technical side of things? I honestly could replicate within 3 months of full time work and I’m sure a fair few others could. Thing is in theory, SaaS / Cloud should be win-win due to specialization. However the pricing I have seen is anything but - they need to charge that to support the sky high valuations and funding rounds. Which is why most scramble to do vendor lock in because without a barrier to entry they will need to keep reducing their prices down the equilibrium level that others can charge and have normal (but not abnormally high) economic profits. To give you an example, I was quoted 12,000$ per year for an enterprise b2b database solution to record questionnaire answers. Great software, meeting a need we have. But I’m building a basic postgresql database and a very basic web front end for free in its place. 80% of the functionality, 0% of the cost. I admit the remaining last 20% is the most complex and hardest part; also marketing and all the business aspect is a whole another game. So I have no intentions trying to compete with them, I respect them but at the same time I can’t justify to my company to spend 12,000$ per year for something that an in-house solution can cover most of. Even my CEO said - isn’t that just a database? This case doesn’t apply generally, but there should be enough examples of SaaS that can be replicated and we don’t need to pay an inordinate fee to use. I would place substack firmly in this list - it is a mailing list software with a text editor (I wouldn’t be surprised if they just reused TinyMCE for this). Most of the examples you have are very advanced software and I agree with you that having them readily available for all companies is a net positive. Perhaps sales force could be replicated, the rest require serious programming chops and investment. I basically agree with you but want to share a few more data points on uncommon cases to show the angle I’m coming from. My belief is substack is in this set of uncommon cases.

Lazare 6y ago

> - MOST people will not want to pay for articles. Especially in an ever increasing world of subscription payments across tv, music, SaaS, I really don’t see how email newsletters will be high on people’s lists I've subscribed to three Substack newsletters. A lot of other people have too. A 90% cut of the fee is netting some writers - including some not super-popular writers - a living wage, and for very popular writers, a *LOT* of money. Writing is not generally well paid; at a 90% cut, it doesn't take a lot of $5/month subscriptions to exceed what traditional media can pay. > - for the quality writers that people do want to pay, they will eventually move off the platform if it makes sense to do so (ie they get their brand recognition and followers and then jump ship to their own website). For the smaller ones, patreon onlyfans or some other direct contribution model would make more sense IMO Onlyfans has a stigma of being for porn, Patreon has a host of problems, takes a pretty high cut as well, and has a poor UI for this. Substack is objectively much better. You're right that it would probably make sense for the super-stars to jump to a cheaper platform, but there's also wide scope for them to negotiate better deals. > So I really don’t get Substack’s model and how it can be successful long term unless it truly becomes the landing page Taking 10% of a bunch of money for a pretty lightweight tool seems like a good business model to me. Can they keep those margins going? It's not implausible. The 10% Substack takes for, essentially, hosting is really high if you compare it to the $X/month you'd need for a hosted blog or VPS + Cloudflare, but it's very, very low when you compare it to the cut a traditional publisher takes. As so often, a lot depends on framing and how people compare the deal being offered. > I’m much more of a fan of the Medium model I've never paid Medium money, I will never pay Medium money, I don't understand why people pay Medium money, and I don't know anyone who has, is, or likely will pay Medium money. The Medium model, to me, seems to be an attempt to copy the traditional non-working model, without even an attempt to fix it. I can see why people might be fans of the concept, but it seems crystal clear to me that it represents the dead past, currently kept alive as a shambling zombie by VC money. Substack, maybe, is the future. And contrary to your assertions, does NOT seem to be burning VC money to bring it about. They seem to be coming out ahead on the Substack Pro advances, after all.