Substack’s Funding, The Journalism Unbundling, The Newsletter Challenge

Last week it was reported that Substack closed a funding round of $15.7 million. I have been watching Substack with interest, and have a number of friends in journalism who have Substack newsletters. Substack is a platform that allows anyone to create and distribute a newsletter for free or for a fee. Having been running a site, with a newsletter as part of the service since 2012, I have some broader thoughts on the opportunity and the challenge.

Journalism Unbundling
Netscape co-founder Jim Barksdale famously coined this phrase, “there are “only two ways to make money in business: One is to bundle; the other is unbundle.” The continuous cycle of bundling and then unbundling and then bundling again, repeat, seems to have been accelerated thanks to the Internet. This idea of going direct to consumer is made easier thanks to the Internet. I spend a lot of my time studying D2C (direct to consumer) companies because it is one of the more fascinating trends of our time. The Internet has given anyone direct access to consumers without the need to aggregate, and in this case, it applies to news, analysis, and the individual voice.

Newsletters are becoming the de facto way journalists are going directly to the consumer, or perhaps direct to reader, with their style of reporting. It is interesting to subscribe to a number of journalists newsletters, and they are often much more interesting to read than what they write for a major newspaper or publisher. This is likely due to the lack of an editor, or a limitation of their style in a major news outlet, but more personality and unique commentary often come through in their newsletters than it does in their mainstream published articles.

Substack offers them a platform, the backend service, as well as a way to monetize should they choose. These are all things I had to invest in to build to start Tech.pinions in 2012, and thankfully I didn’t have to build it from scratch, but it did take a lot of work customizing and integrated many different components. This was a barrier for many that are now gone thanks to Substack.

When I started Tech.pinions in 2011, and then the subscription service in 2012, it was because of the extremely poor state of journalism at the time. At least, in my opinion, much of the writing as new upstart publishers/blogs were started was headline-driven and rarely covered the key parts of a story with any real insight or interesting commentary. My goal was simply to add more voices to the public landscape and get better quality technology content and analysis in front of more people. From my viewpoint, anything that makes it easier for better content to go mainstream. I’m all for this idea, and Substack has this potential.

That being said, the challenge of unbundling journalism will still exist, and this is the harder part as voices try to go independent.

The Newsletter Challenge
As more journalists, writers, and content producers looking to go direct to the reader, several things happen which add complexity to the market. First is there becomes quite a bit of competition. Competition for time, attention, share of wallet, etc. One of the biggest pain points I regularly discuss with readers of our Think.tank newsletter is how they often struggle to read everything we write on a weekly basis. On average, our newsletter open rates are 65% on the first day with that same newsletter reaching nearly 85% by the end of the week. My interpretation of that is that most of you read it on day one, but still, 40% or more take a few days to a week to get caught up. I note that email inboxes can be overloaded, often with higher priority emails fighting for your time every day.

Here, then, lies one of the bigger problems for newsletters going forward. Email is not the best RSS tool, but that is exactly what email newsletters shaping up to duplicate. Email is such a key part of everyone’s daily workflow that newsletters are often a distraction even if valued. Certainly, it is possible to sign up with a non-work based email and just check it later, but I’d wager most people use unified inboxes now and most are checking all their accounts frequently. Any newsletter distributed to email is competing against daily work based workflows and often timely communication from colleagues and bosses. Honestly, not the best place to distribute news, journalism, or analysis but it is the best option we have today.

Websites serve as great aggregators that allow people to get caught up on the news on their time. I already get eight newsletters to my email, and I struggle to read all of them each day. There is some value to bundling, in this case, that gets lost with newsletters, and I maintain that will be a challenge as more journalists looking to go on their own.

Of course, that may not be a goal. Maybe they just want a direct line to their readers and still plan to write for their newspaper and make a living that way. But for those who wish to go out on their own, and make their newsletter their primary business, my hunch is many of them may struggle.

This is one of those situations where I completely understand the desire and the opportunity, but I’m not sure we have solved the best way forward yet. While not perfect, something like the Athletic is something I think that makes the most sense. Largely because all my favorite sports writers have moved to the Athletic and I enjoy being able to curate my experience to just the sports teams I am passionate about. Yes, it is an aggregator, but it is also one that has the best voices, and passion-fueled content customized to the reader’s interest.

I’m arguing for a bundle yes, but a completely different kind of media bundle. It really is about bundling and unbundling, but the consumer convenience of media bundles is so high I struggle to see how we get around this for the mainstream consumer.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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