Substack’s Shopify problem

Shopify rose to become one of the most consequential companies in retail, playing a pivotal role in powering the growth of the direct-to-consumer brand business by providing a platform that enables independent retailers to sell online. Its platform and tools allowed upstarts to compete in an e-commerce world ruled by Amazon. Shopify nailed the narrative too: It was “arming the rebels.”

I’ve long found similarities between Shopify and Substack, which has become, in my view, one of the most consequential companies in publishing, powering the growth of direct-to-consumer publishing businesses. The Substack platform has enabled individuals and small groups to publish directly to audiences and make money through subscriptions. It too has armed the rebels after an era in which platforms got between publishers and their audiences.

Both Shopify and Substack face similar challenges to make their visions a reality. Both companies endeavor to be platforms. That means they don’t want to be just tools. Shopify doesn’t see itself as a Squarespace-like tool for quickly spinning up a storefront. It offers all the services needed to run an e-commerce business. An app store added more functionality. As the anti-Amazon, Shopify has been careful to not compete with its merchants. Its CEO has said that Shopify is “nearly invisible” to shoppers by design. The consumer-facing Shop App doesn’t do much for discovery, with its main functionality being tracking packages. When it came to distribution, Shopify basically outsourced this to Facebook. That became a big problem when ad targeting and measurement got harder and the ads more expensive, leading to what Alex Kantrowitz termed “the DTC reckoning.” You could argue that Shopify’s reticence to get between retailers and their customers ended up hurting both Shopify and its retailers. Aligning incentives is hard.

Substack faces many similar challenges as it seeks to build out a platform. The company doesn’t see itself as an email service provider with a Stripe integration. Nobody says they write a Mailchimp, but they do say people are “Substack writers.” I’ve always found this curious. I’m uninterested in building Substack’s brand; I want to build The Rebooting as an independent publisher, not be beholden to some tech company. For me, Substack is simply a tool. It sends emails reliably, they’re formatted correctly – not to be taken for granted – and the cost is attractive (zero) since I don’t have a subscription model. Substack has mostly outsourced distribution to Twitter threads that clog up your feeds, as well as providing sharing buttons to ask readers to help out with distribution.

That’s why Substack’s new app is both interesting and puzzling. The Substack app could clearly help improve distribution with smart recommendations. Substack clearly doesn’t see itself as an email newsletter company. Email was just where it began. But I came to Substack for an email newsletter because I believe email is a perfect format for primary-engagement media. With the new Substack app, I’m now writing for an app, with my content in feeds. In fact, originally the default was for users to toggle off email altogether, although now the default is to continue receiving email. To be clear, publishers still receive the email data, a critical feature of primary-engagement media. The entire point of newsletters is having a direct connection to your audience. It also signals that Substack, with a lofty $640 million valuation, is not interested in being invisible to readers. In fact, its announcment of the app put the “For readers” paragraph ahead of the “For writers” one.

Sometimes what’s best for the publishers doesn’t align with what’s, in Substack’s view, best for the readers. Substack CEO Chris Best clearly sees the reader’s interests first for the company.

“Email is great for all of the reasons it has always been great. It’s low friction. It’s this direct connection where you can reach out, unmediated by the algorithm. But it’s obviously not the best version of that reading experience.”

That gives me pause. This list is incomplete. Newsletters are more than just a hack to get around algorithms. They’re not just a direct connection, they’re a more personal connection. Newsletters are a media format more akin to a conversation. One of the reasons many of us who have spent a career writing on websites like email newsletters is they’re often a jumping off point for a conversation with readers. Just hit reply to this email — if you’re not on the app — and tell me if you find this to be true.

Anyone in media the past decade has PTSD from tech platforms promising they know what’s best for the audience (and for publishers). From a business perspective, I’m always skeptical of companies that want to operate both B2B and B2C platforms. I can remember when Brightcove, which in the early days of web video was the primary tool for publishers to display video, tried to turn its site into a consumer destination or something it called an “electronic programming guide.” Needless to say, that didn’t work.

Ben Thompson notes that Substack’s opportunity is to not just rebundle the delivery of publications but eventually subscriptions. So much for autonomy.

Yet as much as I want to join the chorus of haters of the app, as a reader I like it. The experience is clean and enjoyable. The curation is done by me – I subscribe to a dozen or so newsletters – and not some algorithm. Like most sane people, I do not wish to get more email. The email newsletter has long felt like a hack, a reaction against the undeniable shittiness of the website-centric, pageview-driven web that’s full of overlays upon overlays, blaring autoplay ads and an endless scroll of visual atrocities courtesy of content-rec ad networks. I can understand the urge to throw that out and start over.

I doubt this new app will lead to a mass exodus from Substack. As Casey Newton points out, inertia is a powerful force, even more so for writers who have perfected the art of procrastination. Switching to an alternative like Beehiiv (I’m an angel investor), Memberful or Ghost is fairly easy. Perhaps I’m being naive, but I still believe Substack’s incentives are for the most part aligned with publishers. In the end, the low switching costs are the ultimate leverage writers have as Substack figures out what it wants to be: a consumer platform or a publishing platform that operates in the background for the most part. What’s more, there’s the reality that few apps thrive anyway. As one pissed-off publisher said to me after the app launched, “The good news is the app will probably fail.”

Support independent media in Ukraine

My friend Andrey Boborykin is the CEO of Ukrayinska Pravda, the leading independent news publication in Ukraine. Ukrayinska Pravda has continued operating since the Russia’s invasion, publishing in Ukrainian, Russian and English, even as staff has been forced to scatter throughout the country. Andrey and his family left Kyiv for Mykolayiv, in southern Ukraine, until the fighting reached there. They are now in Chernivtsi, a city in southwestern Ukraine close to the border with Romania. I met Andrey when I visited Ukraine in September to speak at the Mezhyhirya Fest. We had beers in a great Irish bar in Kyiv that has a big mural of various greats of Irish history, including James Joyce, Bono and Sinead O’Connor. I asked Andrey to explain the challenges that independent Ukrainian news media business is facing.

“The ad market is gone. Ukrainian media business relied on native advertising and programmatic revenue, and now they both are pretty much nonexistent. Reader revenue is something the Ukrainian media have just started tinkering with, and obviously membership payments are now unlikely. The only viable option we have right now is to reach out to international organizations for donor support — and to the international community. Although the situation is pretty tough, Ukraine is going through unprecedented national unity in its stand against the Russian invasion. We have zero doubt Russia will lose this war. However, our question to the global community is at what cost for Ukraine.”

Please consider helping Ukrayinska Pravda and other independent media in Ukraine get to the other side of this horror. A free and independent press is critical for a free and independent Ukraine.

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