Will Substack ever embrace advertising?

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Startups are emerging to help newsletter writers sell ads on 'ad-free' Substack and it could force a reckoning for the platform

Link: [Business Insider]

This was inevitable. Substack's founders may not want advertising on the platform, but you can't blame newsletter writers for seizing on an opportunity to diversify their revenue.

You really have to wonder how Substack will respond to this trend. On the one hand, its founders have forever sworn off building out advertising tech, but you could see how avoiding an ad strategy could hurt the company in the longterm.

After all, Substack’s biggest selling point is that it’s one of the few newsletter platforms that is completely free to use, regardless of your list size. And the way it pays for all that free functionality is by collecting 10% of paid subscription revenue from all of its users. But if there’s an explosion of users who monetize solely through advertising, then that could be a huge drain on the company’s resources with very little upside.

And then there’s Twitter’s recent acquisition of Revue to consider. Right now, Twitter is monetizing Revue solely through its 5% subscription cut, but Twitter also has one of the biggest ad platforms in the world, and I could certainly see it building out newsletter ad tech that would allow it to run ads in Revue newsletters and give the writers a cut of the revenue. At that point, you’d be crazy for picking Substack over Revue.

YouTube creators have seen big viewership spikes on short videos as the platform preps its TikTok rival

Link: [Business Insider]

This is an interesting trend given that YouTube just spent several years prioritizing longer videos through its recommendation algorithm. A lot of creators complained that the pressure to produce longer videos led to burnout.

He got laid off from Yahoo Sports, so he launched his own sports newsletter

In December 2019, after more than a decade at Yahoo Sports, Kevin Kaduk got laid off. But as it just so happens, he had been nursing an idea to launch his own Chicago-focused sports newsletter, and so he took the plunge in early 2020.

I interviewed Kaduk about what he learned during his first year of solo writing, how he adapted the newsletter during the pandemic shutdown, and why he eventually left Substack.

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Nextdoor Is Quietly Replacing the Small-Town Paper

Link: [Medium]

A quote from the article: “Nextdoor is fundamentally opaque. You can’t view posts from outside your own locale, and there aren’t public analytics about what types of posts perform well or poorly.”

I had heard rumbles about Nextdoor serving as a kind of ad hoc local news source, but this is the first time I’ve seen comprehensive reporting on how it’s being used for that purpose. I certainly think it could serve as a good vehicle for enterprising local reporters to find new stories and report them out in a more holistic way that can’t be replicated within the platform. And yes, I do think Nextdoor could also fill in some of the information gaps as legacy newspapers shrink.

Washington Post adds video to its Zeus platform

Link: [Axios]

The Washington Post is basically building a Substack on steroids. I saw someone else make this apt analogy: Zeus/Arc will be to publishing what AWS is to web hosting.

The brilliance of WashPo’s strategy is that it didn’t just build yet another CMS, but rather it also aimed to help publishers’ bottom line by offering them an entire ad tech platform that will let them squeeze more revenue out of their traffic.

And as more and more publishers join that ad tech ecosystem, it becomes more valuable to the entire network. The growth potential there is strong, and five years from now we might find ourselves thinking of The Washington Post as a tech company that just happens to own a newspaper.

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The podcast business is booming, but few are making money

Link: [Axios]

I think podcast advertising today is about where YouTube advertising was in 2012 or so. Back then you could have a million subscribers on YouTube and not actually make much money, but YouTube monetization is much more mature today.

User adoption always grows much faster than advertiser adoption. The rise of platforms like Anchor and Megaphone will gradually allow brands to advertise and target at scale, and that will have all the same kinds of downstream effects that we’ve seen on YouTube, which just announced the other day that it’s paid out $30 billion to creators over the last three years.

One of Substack’s most successful newsletters leaves Substack

Link: [Axios]

If I had to choose Substack's biggest longterm threat, it's publications like this moving off the platform right when they start generating real revenue.

I could see a scenario where a lot of writers start on Substack to build a minimum viable product and then move to a less expensive tech stack once they hit their "1,000 true fans," just so they don't have to give Substack a 10% cut of their revenue.

How could Substack combat this trend? Well, for one, it could offer tiered pricing that incentivizes larger newsletters to stay on the platform. For instance, what if it set a new rule in which Substack gets 10% of revenue from your first 1,000 subscribers, but for every subscriber after that the revenue cut drops down to 5%. So in that scenario, a newsletter that has 1,500 subscribers would pay a 10% cut for 1,000 subscriptions and only 5% for the remaining 500.

The other way to combat it, of course, is by simply rolling out more and more features, making the platform so valuable that creators consider the 10% cut to be worth it. It could also introduce more content discovery features into the platform, making it easier for Substack writers to grow their audiences.

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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on TwitterFacebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.