S, M, L 1 - Wither Substack

Housekeeping: this is a new blogchain I’m kicking off that’s going to be written back and forth between myself and Brian. The premise? We’ll explore ideas in media - old and new. Small, medium, large.

Today’s the first installment - all about Substack…

Wither Substack

Substack - the email service for building paid-subscription emails for individual writers - just announced that they raised $15m from A16Z.

To be clear - I love Substack. They have indie street cred, they host some great writing and overall quality is high. Great. Ben Thompson loves them too! But…

Frankly, I’m a bit skeptical: while I am a huge believer in the possibility of individual writers building their own atomic publications, I’m still not certain the (necessary) role of being a Faceless Publisher is a venture-scale business, and I wasn’t sold on Substack’s answers in that regard.

To be clear, I believe this business model works, and for more people than myself; however, is supporting people like me a $150 million business, which would give Andreessen Horowitz its 10x return? I’m not so sure, particularly since any moves to maximize Substack’s revenue run the risk of losing its most profitable publishers out the top. I do think it is a reasonable bet by Andreessen Horowitz, but then again, their default position is that most of their investments will not generate that 10x return.

At a minimum, I do think that Substack will need to quickly expand their purview: I am not only bullish on individual writers, but also on the potential for local news. That, though, needs more expansive tools. Substack has committed to the venture course and will need to lean in heavily to owning the entire subscription space.

From a subscriber-only update

I’m with Ben Thompson - VC money doesn’t tend to play well with a mass of indie content creators.

See exhibit A: Medium. Remember, Medium started out all cool with the street cred and the high quality bar and gradually raised too much VC money, pivoted too many times, screwed over the very indie creators they saught to sustain and ultimatley limps along too bloated to either die or raise more money¹.

Substack’s Future

Will Substack follow the same path? I sure hope not! I’m rooting for Substack - they’re nice people and it’s a great service opening up a world of great emails (some of which I subscribe to).

But raising VC money does put the pressure on to scale their ambitions. Perhaps Ben Thompson is right and they’ll attack the local news market. A more realistic ambition however is podcasts.

It’s not a perfect analogy because it’s really just “audio” not strictly podcasts as we understand them but in China subscription audio is a $8bn industry.

For more context on that market and the types of audio take a look at this piece: https://www.niemanlab.org/2019/05/the-chinese-podcast-industry-isnt-really-podcasting-as-americans-think-of-it-but-it-is-fascinating/

And - surprise surprise there’s a huge piece by A16Z on investing in the podcast industry: Investing in the Podcast Ecosystem in 2019. It ends with the types of thing they’re looking to invest in:

Platforms that helps creators own their end users and monetize content

But for creators who don’t have the technical or financial resources to develop their own apps or piece together various third-party solutions to accept payments or manage members, there could be a turnkey platform for creators. Down the line, there’s opportunity to create a network of these creators and listeners, along the lines of “come for the tool, stay for the network.”

Substack already has the beginnings of a podcast feature - it feels like a small nice to have feature today but could power their whole business in the next few years.

Over to you Brian…