How Does Substack Make Money? The Substack Business Model In A Nutshell

Substack is an American online publishing platform created by Chris Best, Hamish McKenzie, and Jairaj Seithi in 2017.
Substack operates under the subscription-based business model. To drive revenue, it takes 10% of the subscription fee a writer charges for access to their content.
Substack may also collect a larger commission from writers it lured to the platform to boost readership during the early days.

Business Model Element	Analysis	Implications	Examples
Value Proposition	Substack’s value proposition is to provide writers and content creators with a platform to publish and monetize their newsletters. It offers simplicity and ease of use, allowing creators to focus on their content. Substack emphasizes creative freedom, ownership of subscriber lists, and the ability to set subscription prices. It aims to empower writers to build direct relationships with their audiences and earn a sustainable income from their work.	Offers a user-friendly platform for writers to publish and monetize newsletters. Emphasizes creative freedom and ownership of subscriber lists. Allows creators to set their own subscription prices. Aims to empower writers to build direct relationships with their audiences. Provides tools and resources for creators to earn a sustainable income from their content. Attracts writers seeking independence and financial support for their work.	– Writers can use Substack to easily publish and monetize their newsletters, reducing the administrative burden and enabling them to focus on content creation. – Creative freedom and ownership of subscriber lists give writers control over their publishing and audience engagement. – The ability to set subscription prices allows writers to determine their earnings and monetize their content effectively. – Substack’s platform empowers writers to establish direct connections with their audiences, fostering reader loyalty and support. – Writers who value independence and financial sustainability are drawn to Substack as a platform to pursue their creative endeavors.
Customer Segments	Substack serves two primary customer segments: writers/content creators and subscribers/readers. Writers are individuals or organizations looking to publish and monetize newsletters, including journalists, bloggers, and experts in various fields. Subscribers are readers who seek high-quality, curated content and are willing to pay for premium newsletters on topics of interest. The platform caters to a broad range of niche interests.	Addresses the needs of writers and content creators seeking a platform for newsletter publishing and monetization. Attracts journalists, bloggers, and experts in various fields. Targets readers interested in high-quality, curated content on niche topics. Offers a diverse range of newsletters to cater to a wide range of interests. Provides a platform where creators and readers can connect directly.	– Writers from various backgrounds, including journalism, blogging, and specialized fields, use Substack to publish and monetize their newsletters. – Subscribers are readers who value premium content and are willing to pay for newsletters tailored to their interests. – The platform offers newsletters on diverse niche topics, making it appealing to a broad spectrum of readers. – Substack facilitates direct connections between writers and readers, fostering a sense of community and engagement. – Creators and readers alike appreciate the platform’s ability to cater to their specific interests and needs.
Distribution Strategy	Substack operates as a digital platform accessible through its website and mobile apps. It provides a straightforward and user-friendly interface for writers to set up and publish newsletters. Subscribers can easily browse and subscribe to newsletters of interest. The platform also offers features such as email integration and social media sharing to promote content. Substack relies on word-of-mouth marketing, referrals, and its own newsletter to attract both writers and subscribers.	Ensures accessibility through online platforms and mobile apps with a user-friendly interface. Simplifies the process for writers to set up and publish newsletters. Allows subscribers to discover and subscribe to newsletters of interest effortlessly. Offers features like email integration and social media sharing to promote content. Utilizes word-of-mouth marketing, referrals, and its own newsletter to attract writers and subscribers. Focuses on a seamless and convenient experience for all users.	– Writers can easily access Substack’s platform through web browsers and mobile apps, simplifying the process of setting up and publishing newsletters. – Subscribers can effortlessly discover and subscribe to newsletters that align with their interests, enhancing the user experience. – Features like email integration and social media sharing provide creators with tools to promote their content effectively. – Substack’s reliance on word-of-mouth marketing, referrals, and its own newsletter contributes to organic growth in both writers and subscribers. – The platform’s focus on a seamless and convenient experience attracts and retains users.
Revenue Streams	Substack generates revenue through a revenue-sharing model with writers. It charges a percentage of the subscription fees collected by writers on the platform. Creators typically keep the majority of their earnings, with Substack taking a portion as its platform fee. The platform does not charge readers to access newsletters. Additionally, Substack may explore advertising partnerships or premium features in the future as potential revenue sources.	Relies on revenue-sharing with writers, charging a percentage of subscription fees. Creators keep the majority of their earnings. Does not charge readers to access newsletters. Explores potential revenue sources through advertising partnerships and premium features in the future. Focuses on a creator-centric approach, ensuring that writers benefit from their work.	– Creators on Substack earn revenue through subscription fees, with the platform taking a percentage as its fee. – Readers can access newsletters for free or subscribe to premium content, depending on creators’ offerings. – Substack’s creator-centric approach aligns with its commitment to supporting writers and content creators in their monetization efforts. – Potential future revenue sources, such as advertising partnerships or premium features, may further contribute to the platform’s financial sustainability. – The platform’s revenue-sharing model encourages writers to leverage Substack as a monetization tool for their content.
Marketing Strategy	Substack’s marketing strategy involves content marketing, community building, word-of-mouth marketing, and referrals. It highlights success stories of writers who have monetized their newsletters on the platform. Substack actively engages with its community of creators and readers through newsletters, forums, and events. It encourages writers to refer others to the platform, fostering organic growth. The platform also utilizes social media to reach a wider audience and promote featured newsletters.	Utilizes content marketing to showcase success stories of writers monetizing their newsletters. Actively engages with the creator and reader community through newsletters, forums, and events. Encourages word-of-mouth marketing and referrals to drive organic growth. Utilizes social media platforms to expand its reach and promote featured newsletters. Focuses on building a supportive and engaged community of writers and readers.	– Success stories of writers monetizing their newsletters on Substack serve as inspirational examples for potential creators. – Substack’s active engagement with the creator and reader community fosters a sense of belonging and encourages user participation. – Word-of-mouth marketing and referrals play a significant role in the platform’s organic growth as creators refer others to join. – Social media platforms help Substack reach a broader audience and promote featured newsletters, increasing platform visibility. – Building a supportive and engaged community of writers and readers enhances the overall user experience and contributes to Substack’s growth.
Organization Structure	Substack operates with a centralized structure overseeing platform development, marketing, customer support, and community engagement. The company collaborates with payment processors to facilitate secure transactions. Substack maintains a dedicated support team to assist both creators and subscribers with inquiries and technical issues. The platform actively engages with writers and readers through its own newsletter and online forums.	Employs a centralized structure to manage platform development, marketing, customer support, and community engagement. Collaborates with payment processors for secure transactions. Provides a dedicated support team for user inquiries and technical assistance. Actively engages with writers and readers through its own newsletter and online forums. Focuses on a user-centric approach to ensure a positive experience for creators and subscribers.	– Substack’s platform development team continuously enhances features and functionality to meet the needs of both creators and subscribers. – Collaboration with payment processors ensures secure transactions and subscription processing. – The dedicated support team assists users with inquiries, subscription management, and technical issues, enhancing user satisfaction. – Active engagement through newsletters and online forums fosters a sense of community and open communication among writers and readers. – A user-centric approach underlines Substack’s commitment to delivering a positive and supportive environment for creators and subscribers.
Competitive Advantage	Substack’s competitive advantage arises from its creator-centric approach, allowing writers to retain ownership and control over their content and subscriber lists. The platform’s simplicity and ease of use attract both established writers and emerging voices. Substack’s emphasis on monetization and direct audience relationships sets it apart in the newsletter publishing space. Its active engagement with the creator and reader community fosters a sense of belonging and support.	Derives a competitive advantage from its creator-centric approach, emphasizing ownership and control for writers. Offers a user-friendly platform appealing to established and emerging voices. Stands out in the newsletter publishing space through its focus on monetization and direct audience relationships. Actively engages with the creator and reader community to build a supportive environment. Attracts creators and readers seeking a platform that prioritizes independence and creative freedom.	– Writers on Substack appreciate the ownership and control they have over their content and subscriber relationships, fostering loyalty to the platform. – The platform’s user-friendly interface makes it accessible to both experienced writers and those new to newsletter publishing. – Substack’s unique emphasis on monetization and direct audience relationships distinguishes it from other newsletter platforms. – Active engagement with the community creates a supportive environment, building a loyal user base among creators and readers. – Substack’s competitive advantage is reinforced by its commitment to empowering writers and content creators, setting it apart in the newsletter publishing industry.

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Origin story

Substack is an American online publishing platform that was created by Chris Best, Hamish McKenzie, and Jairaj Sethi in 2017.

Substack provides publishing analytics and design infrastructure enabling writers to send newsletters to paying subscribers.

McKenzie and Best became friends while working at messaging app company Kik, with McKenzie working part-time in communications while writing a book and Best one of the company’s founders and also its chief technology officer.

In the middle part of 2017, the pair were looking for a new project and discovered a mutual concern for the state of the media industry.

Journalists, they argued, had long been constrained in the sort of content they could produce by editors, advertisers, and page-view metrics.

What’s more, consumers were bombarded with so much media content that they spent every waking second in a distracted state.

Best and McKenzie then created Substack to change writer incentives so they could get paid by their readers and not by advertisers.

They hoped that if a reader paid to consume content, they would be more selective about what they consumed and thus value it more highly.

The co-founders then recruited Bill Bishop as their very first publisher in October 2017.

Bishop, who authored a newsletter on everything China called Sinocism, earned six figures in revenue from his first day writing on the Substack platform.

For the next five months, Substack recruited writers on an invite-only basis before opening the doors to the general public in February 2018.

Around the same time, the Substack team joined the Y Combinator accelerator program and received multiple rounds of funding as a result.

The funds were used to add additional features and attract various high-profile political writers and journalists.

Growth then picked up as the creator economy subscription model for which Substack was known began to gather momentum.

Substack recently surpassed 1 million subscriptions, representing more than 500,000 individuals who pay to read newsletters. The top ten writers collectively earn more than $20 million a year on the platform.

Substack revenue generation

Substack operates under the subscription-based business model.

To drive revenue, the company takes a percentage of the subscription fee a writer charges for access to their content.

Writers keep 90% of their subscription fee minus a credit card fee charged by Stripe, with Substack taking the remaining 10%.

For example, a writer who charges $10 per month will forfeit $1 per subscriber to Substack. The same commission structure also applies to writers who charge an annual subscription fee.

Substack likely takes a larger commission from higher-profile writers who were initially lured to the platform with an up-front payment.

Key Highlights

Founding and Purpose: Substack, an American online publishing platform, was founded in 2017 by Chris Best, Hamish McKenzie, and Jairaj Sethi. The founders aimed to address concerns in the media industry, including the constraints on content produced by journalists and the overwhelming amount of media content for consumers.
Subscription-Based Model: Substack operates on a subscription-based business model. It provides writers with the infrastructure to send newsletters to paying subscribers. The company generates revenue by taking a percentage of the subscription fee charged by writers for access to their content.
Incentive Shift: The founders sought to change writer incentives by allowing them to get paid directly by readers rather than relying on advertisers. They believed that this model would lead to more selective consumption of content and higher value placed on it.
Early Days: Substack recruited its first publisher, Bill Bishop, in October 2017. He earned significant revenue from his newsletter about China. Initially, Substack recruited writers on an invite-only basis before opening to the general public in February 2018.
Y Combinator and Funding: Substack joined the Y Combinator accelerator program and received multiple rounds of funding. This funding helped the platform add features and attract high-profile writers and journalists.
Growth and Creator Economy: Substack’s subscription model gained momentum as the platform attracted more writers. It recently surpassed 1 million subscriptions, with top writers collectively earning over $20 million annually.
Revenue Structure: Substack’s revenue generation is based on a 90-10 split. Writers keep 90% of their subscription fee after deducting a credit card fee charged by Stripe, a payment processor. Substack takes the remaining 10% of the subscription fee.
Higher-Profile Writers: It’s likely that Substack negotiates a larger commission from higher-profile writers who were initially enticed to the platform with upfront payments or incentives.