Substack's first big miss?

Is the Reader App a glimpse of the future, or the world we thought we were leaving behind?

Few companies have jumped to center stage faster than Substack has in 2020. As traditional publishers continue to furiously bail water, every day sees another hugely successful writer jump ship and start a newsletter on Substack. It’s not hard to see why; according to the company, the top ten writers are collectively making ten million dollars a year and new success stories are cropping up left and right. 

Yesterday, Substack launched a brand new beta product, their reader app, a highly anticipated addition pitched as the solution to the growing woes of oversubscription. It’s a beta, but digging through the app casts some serious doubts on their ability to execute what is shaping up to be a very ambitious strategy. It feels like we’re seeing the raw edge of their thinking and potentially of the pressure they’re under from top earning writers and moonshot oriented VCs, which is exactly why a proper teardown is in order.

Where does the reader app fit within Substack’s 10% bet?

Many (including their top earners) have cast doubt on Substack’s business model of taking 10% of all subscription revenue that flows through the platform. 

Lenny Rachitsky @lennysan

9/ The money is real, but your take-home income is lower than you'll expect After the Substack fees (10%), Stripe fees (2-4%), and taxes, you're lucky to see half of what you think you will make (1,000 subs at $10 is closer to $5,000/month after fees and taxes).

For those top ten writers making a million bucks a year, that means they’re theoretically paying $100k/year which feels crazy when you consider that more full-featured CMS systems like Ghost are priced more like a traditional SaaS tool, around $2-3k/year for the volume of a top Substack writer. Ghost may not be as good of a newsletter tool yet, but a lot of established writers are looking for customization. So where’s the $98k in added value supposed to come from?

Jake over at The Flywheel was kind enough to let me use this simple graphic of where that extra money goes: towards “$$ features” aka things that make writing on Substack a compelling and sticky offer. Things like their new legal defense fund to support writers in risky spaces, a fellowship program to nurture budding talent, and some apparently large advance payments to the established writers they’ve pulled away from their job at the Times, Vox, etc. 

More successful writers, more subscribers, stickier products for writers. So then why is Substack pushing so hard on this reader app? How does it fit into the flywheel? The answer is that if it works, it’s the most $$$$ feature of all.

Give me visibility, or give me death

The strongest value you can give to writers is the ability to grow their audience. That’s what has made Substack so successful so far; it’s incredibly powerful to be able to live in someone’s inbox. Inboxes have this feeling that you “need to get through them” which means that instead of the frenetic, clickbait-y scrolling behavior on most other platforms, people take the time to look at a mail, decide whether to read it, save it for later, delete etc. The default is action, which is the critical difference from feeds. That also means you’re much more likely to invest enough attention into a publication that you get hooked, become a fan, and then bring other people into it with you because the experience is better when more of your network is reading the same thing. In a recent interview with the Verge Substack CEO Chris Best even commented that Substack’s primary growth channel is direct traffic, which means that the referral loop is spinning fast. All of this growth does lead to a pain for readers, which Best points out:

“Something that we think about a lot is readers tell us, ‘Hey, I’m subscribed to six different Substacks now, and I want to read them all, and it sucks that they’re in my email inbox along with all my other stuff’”

Let me tell you, it does indeed suck. I used to read Ben Thompson’s Stratechery every time it came out, now my inbox has twenty different newsletters Substack-ed right on top of each other and I’m so overwhelmed that I don’t end up reading anything. 

This, in essence, is the problem Substack is looking to solve with the reader app. So... does it work?

Out of the inbox, into the fire

Let’s start with the home screen of the reader app, fittingly called “inbox.”

The reader app “Inbox”

To give them credit, the experience of opening the app and already having all of your Substacks in one place is good compared to the cold start of most other reader apps. But that’s really about all you can say for this beta. Even though this is meant to be an inbox, you still feel cheated by the lack of article previews because let’s be real, this is more of a feed than an inbox. Since I know that clicking on any one of these links will lead me off of the app, I feel I don’t have enough information to click on any of them.

Tellingly, the key interactions seem designed to add value to the writer, not the reader. And even in that context it’s unclear when I’d want to comment or like a publication before I read it. Worst, you see all of the paid articles from publications you subscribe to but don’t pay for yet. If a writer consistently sent me emails where when I click I hit a paywall, I would unsubscribe immediately, yet here it is the default.

Chris Best described the beta as “a cozy new space for reading your newsletters” but instead it took a fairly overwhelming experience in my inbox, put it in a separate app, and made it worse. Let’s say I go and read one of these articles and then come back to my reader - it’s still there staring me in the face, undeletable, unarchivable, unfolderable, just there. Nor does the app facilitate some common unmet desires I have with my inbox, such as wanting to easily pull up a particular publication to choose which one of the unread posts I should read, or show me how popular a given article is in comparison to the others from that publication. Importantly, these are features that all already exist in competitor apps like Feedly. Also if you just set an automatic filter in Gmail you can basically create a more feature rich and enjoyable reader app in a few minutes. The thing is, in any of these alternate solutions you reduce the pain of having an overwhelming inbox, but you also lose a lot of the benefit the writer gets from occupying that central space. You create a list of things that’s easy to ignore. 

Feedly, a reader app with many of the features Substack will likely build next

The point here isn’t that there’s competition, it’s that Substack isn’t solving this pain just because readers have it. If that were the case, why not just partner with Feedly so that Substack readers could automatically import their publications? After all, any valuable reader app will likely have to take Substacks and other newsletters too, especially given that it’s inevitable we’ll see growth in other newsletter platforms. The reason Substack wants to own the reader experience is because if they can truly aggregate demand, they own the one resource that writers can’t live without.

More newsletters, please

The discovery section of the reader app is where the big strategic play comes to life. 

Again, the whole thing seems oriented towards providing value for the top earners and keeping them on the platform. It’s just a simple list of publications with the ability to filter down by vertical. By default you see the top paid publications, which Substack clarifies are “ranked by gross revenue.” You can switch to the free view, but no matter what you see the biggest publications. No search, no granular filtering, nothing that would actually help you find that newsletter from an up and comer (*ahem*). Given how much of Substack’s core mission has been framed around the long-tail of writers, I would expect more emphasis on finding less established publications as the product develops, but V1 is all about the ones already over the hump.

I can’t help but be disappointed, even for a beta. There’s already a functional discovery loop within Substack where if you connect your Twitter account you see publications from all of the people you follow. We’ve gotten a few subscribers that way, and it feels like a much more scalable tool for the long-tail of writers than a simple leaderboard. Why not build that into the Discover section of the reader account from the start?

Platform, aggregator, or publisher?

Remember how I used to diligently read Stratechery? I learned a lot, and one piece that stood out to me was “The Faceless Publisher” in 2017 after Vox’s acquisition of Bill Simmons’ The Ringer. In it Thompson predicted a lot of what we’re seeing now. 

“The problem with editorial is that while the audience scales, production doesn’t: content still has to be created on an ongoing basis, and that means high variable costs. Infrastructure, though, does scale: Vox Media uses the same underlying technology for all of its sites, which is exactly what you would expect given that software can be replicated endlessly.”

Stratechery’s “The Faceless publisher”

It seems like a key aspect in understanding Substack’s strategy is understanding the cost of providing a full-stack publishing platform to writers, which is something that Chris Best really stresses in his podcast with Nilay Patel (who holds no punches). If Substack wants to be a one-stop-shop for legal, editorial, and infrastructure then it’s going to take a lot of money, which means taking a high % cut. But unlike a traditional publisher, Substack doesn’t own the brand of any of its writers or their audiences. So keeping them means more than just building this faceless publisher, it means building the Substack brand and aggregating demand under its own roof.

The challenge is that in the near future it means Substack will be competing on multiple fronts. Ghost and others will continue building products that truly feel like platforms, where you can plug in your own services and fully customize your site. Right now those are prohibitively difficult for most writers, but that’s a tough moat to bet on given the advancing usability of no-code tools. Meanwhile modern email clients like Hey, Superhuman, Gmail, and so on will likely adapt to the influx of newsletters and improve the experience for readers, or Feedly type RSS readers may see a surge. Substack will be competing in both arenas, banking on the fact that success in one will drive success in the other. As we see in the beta which seems built almost entirely for the benefit of writers and Substack’s bottom line, it’s unclear that they can build transformative products for readers and writers at the same time. 

Substack’s promise to writers

What I think we’re seeing is early signs that Substack has absolutely massive ambitions in this space, and they’re going to try and shoot for the moon pretty quickly. Perhaps we’re all somehow complicit in this; we’ve made such a big deal out of their rise that it almost seems impossible for them to fade back into the background as the silent tool behind great independent writers. 

Nonetheless It seems unclear if Substack’s product chops can live up to those ambitions. The reader beta feels oddly disconnected from the problem it was meant to solve for users, even for an MVP. Anybody who has been in this business knows that shipping a dud from time to time comes with the territory, but from what we can see of their strategy they will have little room for error if the coming years are to be anywhere near the success story of the past one.

To be honest, I’m really rooting for them. I’m a writer and I do feel like they’ve been hell-bent on the mission of making my life easier because it will lead to a better internet. But I can’t help but look at this product and worry that Substack will be the latest media startup to put their brand too far in front, to Mediumify the indie experience in a quest to own discovery and the unmistakably Silicon Valley-ish holy grail of stickiness for writers. But stickiness via demand aggregation was what we were told we were leaving behind in the move from traditional publishers and endless feeds to Substack, and I believe many writers have no intention of going back.