At Substack, The Stacks May Not Appear Even

Last Updated on May 3, 2021 by Chris

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In recent weeks, Substack has been all over the news for their apparent inequality in how they distribute funds to the creators who use the popular platform. At the same time as this bad publicity has been circulating, they've also managed to take a massive step forward by agreeing to a $65 million Series B funding found, which places Substack at a $650 million dollar valuation.

In a world in which valuations have the propensity to skyrocket (please see Clubhouse‘s 4 billion dollar valuation for more details), it's not out of the question that Substack could surpass the 1 billion mark themselves.

However, many are saying that questions need to be asked about how Substack is structured before they're too powerful to be questioned any more.

What's Substack?

In Hot Water

For those who don't know, Substack is essentially a newsletter platform that is designed for self-publishers looking to monetize.

It is, in short, kind of like Patreon in the world of newsletters.

The idea is as simple as it sounds – readers pay writers directly, so that writers can focus on creating. As they say on their website, “A few hundred paid subscribers can support a livelihood. A few thousand makes it lucrative.”

The model has worked, as there are now over a quarter of a million paying subscribers.

And we're talking big money as well in some cases. For the top writers on Substack, we're not talking about a lucractive side-hustle, we're talking about millions of dollars.

Substack‘s bet isn't all that different from someone like Netflix. They are, in effect, saying that they believe that people will pay for high quality, curated information that isn't loaded with ads (since the revenue model is all about breaking free of ad reliance).

Why is Substack in Hot Water?

Substack sells itself on the idea that it exists to serve writers. In essence, to help creators get paid fairly for their time, effort, and content.

The problem is that, according to TechCrunchthey aren't treating all their creators equally. They allegedly offered huge advances to big-name writers who would switch over to Substack.

The reason that's an issue is because this begs the question of whether they're a newsletter platform for creators, or just another media company in disguise (oh hey there, Spotify).

Let's be honest, creators are tired of being promised one thing, and then promptly used as gasoline to fuel monetary initiatives for others. Just like how companies like Airbnb recently blatantly used creators to create content for them, then pulled their affiliate program when it was convenient.

Of course, it's not the same, but creators are right to be cautious when a platform starts to pull strings in particular directions.

On an even more problematic note, noted writer Jude Ellison Sady Doyle, penned an open letter using Substack to suggest that she was lured to the platform with a false promise – and she's downright pissed that she's seen massive advances offered to people who she says “actively hate trans people and women.” She's not the only one who has aired grievances, with others saying that some of the people who were paid hefty sums by Substack are part of the alt-right.

A big problem has ultimately been that Substack doesn't acknowledge who they pay, which might just be against the whole principle of the enterprise in the first place.

Some people are pulling back from Substack and getting off the platform, while others are finding their stride and making a full-time living.

It is, no doubt, a complicated and divisive situation at the moment. However, it doesn't seem to have scared off investors in the same way that Dispo did.

What's Next for Substack? 

The recent news about funding, as well as more recent media, suggests that Substack has effectively weathered the storm. The Financial Times even ran a recent article touting Substack's virtue in showing that “newsletters can generate six or seven-figure pay cheques, far in excess of most newsroom salaries.”

Time will tell with Substack, but it appears that they've been able to convince the world (and investors) that this is a hurdle they can overcome, and that profits for both themselves and writers aren't going anywhere.

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