Learning from Newsletter Platforms

03 Sep 2021

Could Substack offer a useful example for any other kind of resource subscription?

The ways to generate revenue from news and information were settled long ago. There are but three models: ads, subscriptions, and the combination of ads plus subscriptions.

Yet when we look at the market for online news and information, only a few providers can efficiently support an ad-based revenue model. These platforms bring together channels with worldwide reach, highly frequent usage, and can therefore harvest fine grained signals meaningful to 3rd party advertisers. Among such platforms, Facebook and Google stand out.

This leaves most other news and information providers reliant upon subscriptions as the primary source of revenue. The recent trend of online newsletters and newsletter platforms (eg Substack and Revue) can be seen within this context. A premise behind them is that subscription based platforms promise equitable revenue sharing. With ad-based models, the platform disproportionately benefits from the creative work of its users.

This line of explanation has gained a lot of attention recently. Less considered is the question of what relevance subscription based newsletter platforms have outside the delivery of long-form journalism and the monetization of influence. And that is relevant to consider for any founder or product leader today, since almost everything happens online. If your product is delivered there, you can think of it like content. Consider B2B software-as-a-service (SaaS). Could similar revenue sharing platforms deliver a better experience than what SaaS companies are doing now?

Let’s touch upon what these newsletter platforms do. They provide 1) distribution 2) engagement and audience metrics, and 3) a simple way to monetize content. These are ingredients that have proven to turn writing and other creative forms into meaningful income for creators. Importantly, the platform succeeds as creators succeed: the model is built around an alignment of similar interests.

But enterprises work differently than individual content creators. They have a go-it-alone way of doing things, like what existed before the web. They have their own way of considering privacy, security, and property rights, all of which play into perceptions about how platforms could possibly help aggregate their digital products together with other companies. I’ll be coming back to this set of concerns in a future blog post.

Still, as a generation of new digital-native businesses are founded we should expect them to find the subscription based newsletter feature set to be compelling: frictionless onboarding of customers, streamlined provisioning and delivery for their digital services, and business tools such as analytics and billing/collection.