Substack and the smiling curve
When the New York Times and the New Yorker write long stories on the same subject within months of each other, it is worth a deeper look.
At the end of 2014, I was suddenly moved from running the Asia subscription business for The Economist to a newly created strategy role reporting to the group CEO. The job had a one line brief: Understand and come up with an appropriate strategy to the disruption being caused by the tech platforms.
Facebook (FB) had crossed a billion users in April 2012 and the honeymoon period between publishers and the platform was coming to it’s logical end. Regular changes in FB’s algorithm was causing organic traffic to news sites to plunge. FB wanted publishers, dependent on FB for traffic, to pay for their articles to be shown more widely. Meanwhile, FB (and Google) were busy siphoning of majority of digital ad revenues. In a blink, FB’s ad revenues had gone from US$ 1.8 billion in 2010 to US$ 11.5 billion in 2014.
The discerning among you may be wondering where this is headed and what its relevance to the title of this article is. Indulge me a little bit more. As I was saying, FB and Google were playing havoc with digital ad sales and the ‘free’ (oh , we were so pleased with it) traffic from FB was disappearing. It was not the end of the road for the likes of The Economist, who had built a solid subscription business over time, but the cream that was ad sales was disappearing. It was in the scenario that I was told by my boss to go away for three months, do what you do and come back with an approach for the newspaper. (Yes, it has always been the newspaper).
This is when I met the smiling curve.
From Ben Thompson’s Oct 2014 (how convenient for me!) piece Publishers and the Smiling Curve.
Here’s the thing: the shoe has in many respects already dropped. When people follow a link on Facebook (or Google or Twitter or even in an email), the page view that results is not generated because the viewer has any particular affinity for the publication that is hosting the link, and it is uncertain at best whether or not their affinity will increase once they’ve read the article. If anything, the reader is likely to ascribe any positive feelings to the author, perhaps taking a peek at their archives or Twitter feed.
Over time, as this cycle repeats itself and as people grow increasingly accustomed to getting most of their “news” from Facebook (or Google or Twitter), value moves to the ends, just like it did in the IT manufacturing industry or smartphone industry:
Legacy publishers existed as a content delivery mechanism. Aggregating news and using their distribution might to be the only way you could get news. And advertisers had no other way to reach large audiences. As the internet reduced distribution cost to zero, the one moat that legacy publishers had disappeared. All this was visible to all but as is oft repeated in industry after industry, incumbents saw the writing much much later than clever innovators who built entertaining and engrossing spaces using the power unleashed by the internet. The readers bound to publications by distribution jumped ship and starting playing in what would be come to be called ‘walled gardens’.
As Ben argued in his post the end would look like:
All of this is because of the Internet: by removing friction it removes the need for folks in the middle, and the result is that value will flow to the edges. In the case of publishing that is aggregators on one side, and focused, responsive, and differentiated writers and publications on the other.
Sitting here now in 2021, we know that the value has indeed flown to the edges. At least, its clear to most of us about the right side of the curve. The much discussed duopoly of FB and Google has cornered most of the riches.
What about the other side? The curve predicted that individual content creators and focussed publishers would be the other beneficiary. Well, Ben Thompson himself is a shining example. He runs the must read Stratechery singlehandedly, charges US$ 100 for a year, and depending on who you ask has between 20,000 and 30,000 paying subscribers.
As he quipped on twitter it was six and a half years after Ben started Stratechery, the New York Times (NYT) came out with a ‘trend’ piece on newsletters-as-business. From the article:
Casey Newton recently announced that he was leaving The Verge, the website where he has covered the tech industry since 2013, to write a subscription newsletter hosted by Substack, a three-year-old platform that is growing in popularity.
Mr. Newton is joining the ranks of journalists who have left the relative comfort of an established publication to try their luck at Substack, including the culture writer Anne Helen Petersen and the political writer Matt Taibbi.
Mr. Newton, 40, said in an interview that he would start his newsletter, Platformer, next month. The time was right to go solo, he added, because of the changing relationship between readers and media outlets.
“You might follow a publication,” Mr. Newton said, “but it’s more likely you care about an individual reporter or writer or YouTuber or podcaster. People are increasingly willing to pay to support those people.”
Substack, a little over three years old, is built on the belief in the left side of the smiling curve: individual creators. And the well know venture fund, Andreessen Horowitz bet US$ 15.3 million in the middle of June, 2019 on Substack.
So, what is Substack?
As they describe it themselves on their website: “Substack is a place for independent writing. Subscribe directly to writers you trust.”
Encouragingly, it’s not just well-known journalists who are flourishing on the platform. A professor of American history recently became the highest earning writer on Substack. As the NYT notes in this piece:
Dr. Richardson confounds many of the media’s assumptions about this moment. She built a huge and devoted following on Facebook, which is widely and often accurately viewed in media circles as a home of misinformation, and where most journalists don’t see their personal pages as meaningful channels for their work.
She also contradicts the stereotype of Substack, which has become synonymous with offering new opportunities for individual writers to turn their social media followings into careers outside big media, and at times appears to be where purged ideological factions go to regroup.
From the engrossing piece in which the New Yorker questions if Substack is the media future we want:
Nahman publishes “Maybe Baby” on Substack, a service that enables writers to draft, edit, and send e-mail newsletters to subscribers. Writers can choose whether subscriptions are free or paid; the minimum charge for paid subscriptions is five dollars a month or thirty dollars a year, and Substack takes ten per cent of all revenue. Nahman’s Sunday newsletter is free, but a paid subscription to “Maybe Baby,” which costs the minimum fee, includes access to a weekly podcast and a monthly advice column. Nahman’s writing is warm, candid, thoughtful, and gently political; she cites theorists such as Karl Marx, Jean Baudrillard, and Marshall McLuhan, offering an accessible leftist lens on everything from celebrity culture to the changing seasons. On her newsletter’s About page, Nahman explains that her goal is to make subscribers feel like they’ve just had “a long talk with a friend”—“slightly less anxious or confused about the alien hellscape that is the modern world.”
The left side of the smile is certainly curving upwards even more.
And in case you didn’t notice, you are reading this on Substack. More reason to smile.
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