Substack's growth spurt brings growing pains

New York

THERE are things that newsletter writer Kirsten Han misses about Substack. They just aren't enough to outweigh the downsides.

She disliked how the platform portrayed itself as a haven for independent writers with fewer resources while offering 6-figure advances to several prominent white men. The hands-off content moderation policy, which allowed transphobic and anti-vaccine language, did not sit well with her. She also didn't like earning US$20,000 in subscription revenue, and then giving up US$2,600 in fees to Substack and its payment processor.

So last year, Han moved her newsletter, We, The Citizens, to a competing service. She now pays US$780 a year to publish through Ghost, but said she still made roughly the same in subscriptions.

"It wasn't too hard," she said. "I looked at a few options that people were talking about."

Not long ago, Substack haunted mainstream media executives, poaching their star writers, luring their readers and, they feared, threatening their viability. Flush with venture money, the startup was said to be "the media future". But now, Substack finds itself no longer a wunderkind but a company facing a host of challenges. Depending on whom you talk to, those challenges are either standard startup growing pains or threats to the company's future.

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Tech giants, news outlets and other companies have released competing newsletter platforms in the past year. Consumers who loaded up on newsletters during the pandemic began to scale back. And many popular writers left, such as associate English professor Grace Lavery and climate journalists Mary Annaise Heglar and Amy Westervelt, often complaining about the company's moderation policy or the pressure to constantly deliver.

"Substack is at a pivot point where it needs to think about what it's going to be when it grows up," said Nikki Usher, an associate journalism professor at the University of Illinois Urbana-Champaign.

The good news for the company, 5 years old this summer, is that it is still growing. Paid subscriptions to its hundreds of thousands of newsletters exploded to more than 1 million late last year from 50,000 in mid-2019. (The company won't disclose the number of free subscribers.) A hiring spree hopes to net more than a dozen engineers, product managers and other specialists. Executives hope to eventually take the company - which has raised more than US$82 million and is said to be valued at US$650 million - public.

But to maintain that growth, Substack executives say, the company must offer more than newsletters.

In an interview at Substack's office in downtown San Francisco, its co-founders spoke in sweeping statements about the "grand Substack theory" and "master plan". Chris Best, the chief executive, described a desire to "shift how we experience culture on the Internet" and to bring "art into the world". "Substack in its fullest ambition is kind of this alternate universe on the Internet," he said.

In practice, that means Substack will be not just a delivery channel for written newsletters but more of a multimedia community. Executives want users to create "personal media empires" using text, video and audio, and communicate with subscribers through expanded comments that could feature GIF images and profiles for readers. This week, Substack will announce new tools for writers to recommend other newsletters.

In March, Substack introduced an app that consolidates subscriptions in one place rather than dispersing them separately via e-mail. This month, the company announced a podcasting expansion.

"Right from the start, we've been intending for the company to do more than just provide subscription publishing tools," Hamish McKenzie, co-founder and chief operating officer, wrote about the app.

But as Substack evolves beyond newsletters, it risks looking like another social network or news publisher - which could make it less appealing for writers.

Ben Thompson, whose tech-focused Stratechery newsletter inspired Substack, wrote last month that Substack has gone from being a "faceless publisher" behind the scenes to trying to put "the Substack brand front-and-centre", building up its app as a destination on writers' backs.

"This is a way for Substack to draft off of their popularity to build an alternative revenue model that entails readers paying for Substack first, and publishers second, instead of the other way around," Thompson wrote.

Publishing on Substack is free, but writers who charge for subscriptions pay 10 per cent of their revenue to Substack and 3 per cent to its payment processor, Stripe. The company also offers hefty advances to a small group of writers, whose identities it refuses to divulge.

Substack has one key difference from most other media companies: It refuses to chase advertising dollars. "Over my dead body," McKenzie once wrote. "The antithesis of what Substack wants to be," Best said. "If we, through greed or error, got into that game, we would effectively be competing with the TikToks and the Twitters and the Facebooks of the world, which is just not the competition that we want to be in."

This means that Substack continues to rely on subscription revenue. Subscribers pay more than US$20 million a year to read Substack's top 10 writers. The most successful is history professor Heather Cox Richardson, who has more than 1 million subscribers. Other notable writers include novelist Salman Rushdie, punk poet laureate Patti Smith, and Eisner-winning comic-book writer James Tynion IV.

But Substack's biggest conflict has been over content moderation.

McKenzie, a former journalist, describes Substack as an antidote to the attention economy, a "nicer place" where writers are "rewarded for different things, not throwing tomatoes at their opponents". Critics say the platform recruits (and therefore endorses) culture war provocateurs and is a hotbed for hate speech and misinformation. Last year, many writers abandoned Substack over its inaction on transphobic content. This year, The Center for Countering Digital Hate said anti-vaccine newsletters on Substack generate at least US$2.5 million in annual revenue. Tech writer Charlie Warzel, who left a job at The New York Times to write a Substack newsletter, described the platform as a place for "internecine Internet beefs".

Substack has resisted pressure to be more selective about what it allows on its platform. Employees of Twitter who worried that its content moderation policies would be relaxed by Elon Musk, the world's richest man and the platform's largest shareholder, were told to not bother applying for jobs at Substack.

Substack defectors have a fast-growing collection of competitors waiting to welcome them, but Best said he welcomed the rivalry. "The only thing worse than being copied is not being copied," he said. NYTIMES