The Legacy of Substack Pro

The winners, losers and a two-tier system.

Photo by NMG Network on Unsplash

Hey Everyone,

I read a couple of reports on Substack Pro, which got me thinking.

• My year as a Substack Pro

• Why Substack Is, and Isn't, the Right Platform for Gaming Journalism

Substack’s top writers do make the bulk of profits from the recommendation and Notes and Substack Network funnel.

Niches that are too defined (like the Gig Economy or Gaming) might be too specific for Substack’s audience and reader ecosystem maturity.

Ali and Jacob are incredible writers, and they essentially got grants from Substack, money that isn’t available to those of us who are investing our heart and soul in the platform. Since Substack didn’t publically even admit the existence of Substack Pro until 2021 (according to Ali), it makes me wonder about data transparency at this company.

Substack thought giving grants to viral journalists around things like anti-vaxxing was a good idea. But if we are serious (whether professional or not) journalists or ethical Creators, how do we rectify the wealth inequality and topic choice of Substack Pro and how it has set up a pyramid shaped ecosystem? I’ve never quite found a solution.

For every Casey Newton, there are other niches that don’t quite make it, it has little to do with the writer. It makes me wonder about the product-market fit of various categories on Substack. The gig economy or gaming are relatively unsmet sub-categories of technology.

Even Venture Capital, which you’d expect was thriving on Substack doesn’t have that many decent Newsletters outside of Newcomer and a few others. Tech should be thriving by now on Substack, but outside of A.I., I’d argue it really isn’t. This is I’d argue because Substack Pro has harvested mostly political journalists (from the little information I can gather).

Here is another run-down of a Substack Pro deal. My feeling is that Subtask Pro has generally created a two-tier system. When I interviewed Jacob after Substack Grow, it was obvious to me he knew how the experiment would turn out, his Podcast is awesome by the way. Getting a grant from Substack it turns out, it’s not always the best intrinsic motivation.

No these aren’t startups Substack is investing in. I could tell you on paper, which likely would and which likely wouldn’t succeed from day one. Any Chatbot could tell you, so why did they do it? Substack thinks network effect, mostly from Twitter, was an optimal way to grow. I’d argue that myth has basically been busted. Substack I’m sure has some data on Substack Pro, and what went right or wrong.

As someone living in poverty and who has struggled with other platforms, I’m really sensitive to the feeling of living in a pyramid scheme, but if you have incentives for different tiers of Creators, it becomes very problematic. Journalists have training and are talented, but they aren’t exactly irreplaceable (as the media industry is showing us now). Buzzfeed News shut down and Business Insider had to fire 10% of their staff, it’s likely just the beginning.

A Newsletter niche has to be specialized enough to be original and have a large enough TAM to grow quickly. Without “tens of thousands” of free subscribers, there’s little chance it will succeed, no matter how many followers you have on Twitter. As someone who has worked in marketing, this is so elementary.

Hamish even wrote an explanation of why Substack does Substack Pro, it only led me to more questions. Bro it’s not a “transparent business model” if Substack Pro is not made public. A two tier pyramid system is not congruent with Chris’s ideological brand narrative. I’m sure you get that on some level right? Writers aren’t total idiots.

In short, Substack is in financial trouble because they over-invested in this sort of marketing, the pay to play and pay to win variety. They burned cash to grow, thinking this was the best way to do it.

We started experimenting with advances, paying a small number of writers sums ranging from $10,000 to $30,000 to cover them for a few months as they got established on Substack. They paid back the money over time through a revenue-sharing agreement. We also introduced a fellowship program, where, over two cohorts, we offered writers coaching, business advice, and more cash advances. - Hamish (read)

I don’t know the hit rate of Substack Pro, it must have been high in the political category where the bulk of Substack’s revenue come from.

A Costly Risky Approach to Marketing

Hamish continues:

The advances worked well. They helped writers start high-quality and profitable publications beloved by their readers. And they gave us confidence that we could invest even more deeply in writers in a way that would help both them and us. 

But the advances also had limitations. On a per-deal basis, we could never really do better than break-even. A Substack advance was effectively an interest-free loan that would never be paid back if a publication failed.

By not creating a Gaming sector for Jacob, they basically set him up for failure (my categories of Future, A.I. and Venture Capital to this day don’t even have their own categories in the leaderboards.)

Jacob wrote:

For starters, there’s not a gaming section on Substack’s homepage or its explore page. To find my work, there’s a few ways you get here….

For early Substack Pro deals, they were always at the top of the leaderboards, so they grew by virtue of the social proof signalling. Today, they make millions. Subtack is perhaps 3-6 years from having liveable middle class. But they are pretending that they are 1-2 years from it. As someone who has grinded up the ladder by myself, I take offense.

Let’s go into some more controversial details, where I can feel a bit more free to have my own opinions on this.