Back in the day, newspapers were the main source of information for people. And outside knowledge was discounted as gossip or rumor. But come 2020, things are very different. Companies like Medium, Substack, WordPress, and many others have created their business model around letting people share their knowledge with the world.
Substack business model – How does Substack make money?
Substack makes money by making it easy for those who publish newsletters, to charge for the same. The Substack business model is designed such that the company earns only when the creators earn money from their readers.
Substack, founded in 2017 by Jairaj Sethi and Hamish McKenzie, is the newest addition to the list of independent publishing platforms. And it has already shaken the industry in this short time!
Today, let’s explore Substack and understand the company better.
What is Substack?
Substack is an independent publishing platform that makes it easy for writers and bloggers to build free and paid communities. The company offers the right set of tools to allow you to publish unlimited content for free and helps you easily set up paid subscriptions for your readers.
Consider this scenario:
Suppose you are a health and fitness thought leader and help many people get in shape. People are going crazy over your advice and are always ready for more!
So, you decide you want to convert this into a community instead of simply sharing content on LinkedIn.
There are two common ways to make this work:
- You can build the entire setup from scratch with a custom hosting, a content management system (like WordPress) and a payment gateway.
- Use a self-publishing platform where they have everything setup for you.
Which one would you rather choose?
If it were for me, I’d go with the second one here. It’s easier to manage and if my entire purpose of writing is to build a community, using Substack is a no-brainer.
So, What is Substack’s Business Model?
Influencers and thought leaders share a lot of content with their LinkedIn connects. And it is all in good faith.
Substack introduced the opportunity to get paid, build a community, and have complete control over each aspect while doing what they already enjoyed doing – sharing ideas.
They made it easy for even the least tech savvy people to get setup and running in less than a minute.
Substack allows writers to decide what content they share with paying subscribers and what content the free subscribers receive.
And they built this beautiful platform and gave it away for free – no upfront costs whatsoever.
Now if all of this is free, how does Substack generate an income to sustain their platform?
This is where the Substack business model shines.
Substack earns a 10% commission from all the paying subscribers on their platform. So if a writer charges $5 monthly to their subscribers, Substack makes $0.5 for each paying customer.
So, until you make money on Substack, the platform itself doesn’t make a dime!
NOTE: Substack uses Stripe payments which charges a transaction fee. You can get the details here.
Substack readers are more inclined towards true journalism, business and investing. And that’s visibly clear when you look at the top publications.
You will see a lot of successful journalists going full-time on Substack to start their paid newsletter who now have tens of thousands of subscribers at $5 to $50 a month and some even more!
Substack is a brilliant platform for any existing publisher looking to get paid for their knowledge. Just share the right knowledge that the community is ready to consume, and you’re in for a treat.
And that’s it for the Substack business model article today. I hope you enjoyed reading this post.