What is Substack?
Substack is a US-based online platform. It provides publishing, analytics, design and payment infrastructure to support subscription newsletters. Essentially, it allows writers to send digital newsletters directly to subscribers. Not every writer may have the resources to fund or support those operations on their own. Therefore, Substack provides a platform that offers that infrastructure.
Substack started its operations through Christ Best, Hamish McKenzie and Jairaj Sethi. These founders started the company in 2017. Currently, it operates from San Francisco, California. All founders played a crucial role in helping the company become a well-known name. Substack is one of the unique platforms and does not have significant competition. However, there are some alternatives to it.
Christ Best was a well-known entrepreneur before starting the company. He was also behind the launch of Kick Interactive and Kik Messenger. Best was a CTO of the business and helped it grow to millions of active users. At the time, Kik was a prominent name in the social media networks industry. Kik was also where he met the other founders, McKenzie and Sethi.
Hamish McKenzie was a journalist. He had been working as a reporter for various media outlets. In 2012, he joined the tech site PandoDaily to cover Tesla and its founder Elon Musk. Later, he got hired by Musk in 2014 as a lead writer. However, he quit the job after spending over a year there. From there, he joined Kick Interactive. In 2017, he and Best decided to leave Kik and start working on Substack.
Substack got its inspiration from the work of Ben Thompson. The author had made a name for himself through his email newsletter known as Stratechery. With this newsletter, Thompson had created a sustainable income source. That’s where the idea came for Substack. Best and McKenzie realized the need for an infrastructure to allow authors to support their newsletters. They also recruited Jairaj Sethi, who became the CTO for the company.
Initially, Substack did not allow everyone to access the platform. Instead, it partnered with Bill Bishop, a world-class content creator. Through the platform, he launched Sinocism, a newsletter focused on China. It was the first newsletter on the platform launched in 2017. After five months, in 2018, the company opened the platform to everyone. Over the years, its platform has grown substantially and become a well-known name.
How does Substack work?
Users must register on Substack to start using its services. Once they log into their account, they will get a list of popular articles and newsletters. The platform refers to these as Publications. When users click Publish on Substack, they will get redirected to a new page. From here, they can choose between two Get Started buttons.
Once users go through with it, they can pick a specialty. The platform sorts its newsletters into several categories, including climate change, productivity, news, etc. Users that want to post into those categories can select them at this point. However, it is an optional process. Users can skip it if their content does not relate to a specific specialty.
Users can also set up a mailing list. This process comes after they select their specialty. However, they can also jump directly to it without the selection. Setting up the mailing list requires users to pick a web address. This address is where their newsletter archive will get stored. Apart from these, users can also tamper with other options.
Once they set up their mailing lists, users can start writing. It is where they can create their newsletter. Substack provides a built-in word processor. Using this processor, users can create and format a post to go on their newsletter. Furthermore, they can also include images, videos and audio files on their posts. Users can create content using this feature.
Users can then organize their material to support their editorial goals. They must consider their audience, who they want to attract. On top of that, users must set the rules for their newsletters. It requires them to plan their content ahead of time by creating an editorial calendar. Based on this schedule, they can write their pieces. The audience can also expect what is to come from the calendar.
The final step in the process is to spread the newsletter. This step relates to the user. If they want to attract an audience to their newsletter, they must promote it. This process may require them to incorporate existing email connections on the platform. Similarly, users can cross-promote their newsletter by posting it on social media. Users can also advertise it or connect with other newsletter writers.
What is the Substack business model?
Substack uses a customer-to-consumer business model. Through this model, the company connects its customers to their consumers. This model is similar to that used by Uber and other companies. With this business model, the company only provides a platform for users to use. However, it does not play an active role in how those parties interact.
Writers can use the platform to create their own newsletters. These users act as the company’s customers. Using this newsletter, they can spread information to readers. In this context, the readers become the consumer. Therefore, the primary services that Substack provides are towards writers. However, it helps them connect with several readers.
Substack uses several tools to attract users. In the absence of this platform, users must create their own mediums to spread their work. However, Substack allows them this medium without any costs. Despite that, the company makes money from consumers. These consumers pay a subscription fee to receive newsletters. The company charges a commission from any amount that customers receive.
Therefore, Substack also uses a commission-based business model. Consequently, the company charges a commission every time a consumer pays. However, the base for this model is a subscription-based model. Under this model, Substack allows customers to charge a subscription fee from their readers. These subscription fees allow the customers and Substack to make money.
In essence, Substack’s business model is complex. The company uses several business models to make money. Primarily, it operates a C2C business model, allowing customers and consumers to connect. In this relationship, the company serves its platform as an interaction tool. Within this model, Substack uses a commission-based business model. However, it depends on a subscription-based business model as well.
How does Substack make money?
Substack makes money from the commissions it charges its customers. The company allows customers to create their own newsletter. Sometimes, customers may provide these newsletters for free. However, some may also charge a subscription fee from the readers. This fee does not come to Substack. Therefore, it does not constitute income for the company.
Instead, Substack only keeps a portion of this income. Substack charges 10% commissions on any subscription fee that customers receive. However, Substack may charge a higher or lower percentage. This distinction occurs based on the deals they have with the author. For example, some writers pay a higher upfront fee to receive more subscription fees later.
Substack also makes money from its platform. However, this income is not direct. Instead, it comes indirectly through the demand for its products. The more quality its customers provide, the more consumers they will attract. This attraction can help Substack increase its user base, thus, inviting better writers to offer content. This way, the company makes more money the more popular it becomes.
In essence, Substack makes money from its commissions. However, these commissions are not fixed. Instead, the company deals with writers on an individual basis. Furthermore, the platform that it operates also helps the company generate revenues. The user content on the website can significantly increase the number of readers. Thus, it can help the company attract more users.
Conclusion
Substack is an online platform that allows writers to offer readers a newsletter. The company uses this platform to provide various tools to facilitate those writers. Primarily, Substack’s business model is a C2C model. Within that, the company uses a commission-based model to make money. This model further depends on the subscriptions that readers pay to access newsletters.
