Substack’s CEO on ads, bundling and what’s next

Plus: Beware of benevolent billionaires with Nazi memorabilia collections

I spoke with Substack CEO Chris Best on what’s next for the platform, including whether to expect support for advertising and bundling of some form. Also: The risky business of publishers relying on billionaire backers. First up, quick word from TRB supporter Zephr.

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How Substack thinks about ads and bundling

Yes, this is a Substack about Substack. Sue me.

I’ve found Substack is a consequential company at this point of publishing’s evolution. It captures several of the macro themes of the moment: the importance of direct audience connections; the shift to reader revenue; and targeting niches as opposed to chasing scale.

This being media, it is also a challenged business, as its recent crowdfunding campaign laid bare. Substack didn’t disclose results for 2022, and in 2021 generated just $12 million in net revenue with a $22 million net loss. You don’t need to be a financial analyst to conclude that Substack will need to find new growth paths if it hopes to justify a $590 million valuation.

Last Thursday, before the Elon Musk tantrum over Substack’s new Twitter-like product, Notes, I spoke to Substack CEO Chris Best to get a better understanding of where the company is going. I’m not overly obsessed about Substack’s valuation – I didn’t “invest” in its round and have a small investment in Substack alternative, Beehiiv – but I do care as a publisher how its efforts to catch up to that 2021-era valuation will change Substack’s approach and therefore my own little business.

As Chris said a couple of times in our conversation, “Business model is destiny.” Looking at the math, Substack’s existing business model will need to evolve.

The current Substack business model is admirably simple – take a 10% cut off paid subscriptions generated on the platform – and well-aligned with the goals of the company and the needs of publishers and the audience. The only flaw: It isn’t lucrative enough for a VC-backed business. I’m interested in trying out Notes, the new Twitter alternative Substack is rolling out. But as I told Chris, my selfish concern as a publisher is that this focus on taking on Twitter will distract from the basic tools needed for writers to operate successful and sustainable businesses. Maybe I think too small, but I’d be more enthusiastic to have basic audience segmentation tools and better analytics.

A couple important takeaways from the conversation:

Substack doesn’t hate all advertising. Chris spoke about the perverse incentives ad models create, which is largely true as publishers and platforms see just how far they can push the envelope of the audience’s patience. I don’t want to put words in Chris’s mouth, since he didn’t say ads are coming to Substack. What he did say – and I’ve heard this from others who marketed an anti-advertising stance only to introduce advertising under a different guise – is that Substack would consider unobtrusive advertising.

“If you reduce advertising to a bargain where the audience is a commodity to be sold off, that is in opposition to the reason Substack exists in the first place,” he said. “The place where it gets interesting is when you ask the question of whether there are ways you can do advertising without that property. That’s an interesting philosophical question. We’re not cracking down on you running your own ads.”

This is a no-brainer to me, considering how publishers making money off only 10% of their audience isn’t a way to run a sustainable business. Ads work perfectly well with subscriptions, too, enabling free access to solve for the sampling issue of paywalls.

Substack is open to some form of bundling. Ben Thompson wrote how Substack’s publisher agreements have an embedded flaw in being almost too pro-publisher by allowing writers to own their Stripe accounts. This makes moving a business off Substack easy, but it hinders Substack being able to grow its subscription universe. Media is a story of bundling and unbundling and rebundling. Substack will need to expand the paying customer base. Chris admits that there is some limit to the number of individual publications a person will pay for, although he believes it is higher than many believe.

“Bundle economics are still real,” he said. “You say pay more to get more. There’s economic potential that could be unlocked if done correctly.”

He added: “You can imagine writers forming federations and readers constructing bundles out of direct relationships. It’s a fertile space. The obvious answer is the wrong answer, I’d say.”

Hope you enjoy this episode. Check out the full episode by listening above or on Apple and Spotify. If you enjoy it, please leave a rating and review on Apple or Spotify.

Also check out another podcast I do called People vs Algorithms. In our latest episode, I discuss with my collaborators Troy Young and Alex Schleifer the coming disruptions to the publishing business from AI. You can find PvA on the regular podcasting platforms.

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Too many publishers are focused on acquiring net new emails versus maximizing the value of existing, yet dormant emails.

A dormant subscriber is not the same thing as someone who is disinterested. Many publishers have lists of inactive users built by software that relies on automated decisioning. Readers have their own lives: Habits, needs, and interests change and change back… For example, you are interested in travel newsletters when you’re traveling, but otherwise remain dormant with that newsletter.

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This becomes all the more important because Apple’s Mail Privacy Protection obscures this information. Dormant email reactivation provides clarity.

Learn more about how LiveIntent drives revenue with every email open.

Beware of “benevolent” billionaires

The publishing business is not the easiest or most reliable way to generate financial returns. Yet it tends to have an outsized influence that attracts rich people who have proven very adept at accumulating vast amounts of money. These billionaires are attracted to the media business for a rational reason: They’re in the business of power and influence; money is just a way of keeping score. It was fitting that Logan Roy died while jetting off to close a deal while skipping his son’s wedding. (If you haven’t watched already, it’s your fault at this point.)

That’s why I’ve long felt the concept of the “benevolent billionaire” an error for publications. America is “blessed” to have an oversupply of billionaires – 735 to the mere 495 in China – so finding some benevolent ones to put their ample financial resources behind quality journalism is an attractive option in a field without many. There’s no free lunch, even if you convince yourself your billionaire is different and just really loves your way of viewing the world.

Time and again, we’ve seen publishers that rely on rich people have their credibility dented and reputations sullied. In this business, it’s all you got. The Dispatch, a publication I like quite a bit, is in this situation as one of its backers, Harlan Crow, is in the spotlight for the lavish trips “hospitality” (private jet travel to mega yachts) he provided Supreme Court justice Clarence Thomas. He apparently has something of a Nazi memorabilia aficionado with outré garden landscaping tastes. Jonah Goldberg’s defense of Crow – the Garden of Evil is a perfectly normal expression of disgust with tyranny, what else? – comes off as playing defense for a well-heeled backer. Appearances matter.

Meanwhile, Elon Musk is taking a different approach by looking to own a news platform in Twitter – and positioning it as oppositional to the dreaded mainstream media of elites in shabby Fort Greene apartments. He is slapping “government funded” labels on NPR – never mind  Musk depends on direct and indirect federal government subsidies for both SpaceX and Tesla – and demanding payments from news organizations while continuing a bizarre running feud with institutional news publishers in favor of so-called independent journalists.

Then again, these independent journalists are finding the downsides on relying on the good graces of the rich guy who acts like a shitposting adolescent with the emotional maturity of a Beavis and Butthead fan.

Matt Taibbi predictably found himself in the crosshairs of Musk, who gave him access to Twitter’s internal content-moderation deliberations as part of his dubious Twitter Files project. Taibbi ended up having his tweets throttled by Musk in a fit of Howard Hughes-like pique as he warred with Substack. The same fate, of course, fell on fellow Twitter Files publisher Bari Weiss, who fell out with Musk when he banned journalists from Twitter.

It’s almost like there’s a pattern here. This is more Connect Four than 3D chess. (Kara Swisher’s take at the Semafor Media Summit yesterday was: “You all think there’s method to his madness, but maybe he’s just mad. He’s surrounded by enablers. They’re licking him up and down every day.” Certainly paints a picture.)

Meanwhile, Musk is coming to the realization that even the richest person on the planet has to schlep to South Beach, put on a lanyard and suck up to advertisers who aren’t as amused by his antics. Mercurial billionaires tend to be eccentrics who are not great at self-awareness.

Not all billionaires, I suppose, although I believe it’s nearly impossible to be a well-adjusted person and become a billionaire. I’ve heard too many stories of bizarre behavior to believe otherwise. SBF was the “good kind” of billionaire, only to not turn out that way, denting the credibility along the way of Semafor and The Block. Even a non-profit model isn’t immune to these risks.

The biggest risks publishers set up with relying on benevolent billionaires is their publications tend to be toys, rounding errors in a vast array of interests. The Dispatch’s founders learned that at The Weekly Standard, which was killed by its billionaire backer. Or ask DNAinfo and Gothamist, whose billionaire owner shut down the publications because its workers had the audacity to unionize. (Gothamist lives on as part of New York Public Radio.) The public service talk can go out the window pretty quickly when the losses mount.

Legacy media is an attractive bauble for billionaires. Fortune is owned by a Thai billionaire, and Time is owned by Marc and Linda Benioff. When a publication become a nuisance or the billionaire decides to focus elsewhere, it tends to lose out. Jeff Bezos has now owned The Washington Post for nearly a decade. He’s also in the running to buy the Washington Commanders. Owning an NFL team sounds a lot more fun than dealing with newsroom drama and the typical challenges of finding a sustainable business model.

Perhaps the most alarming part of all of this is that people with varied success across many different fields all find it difficult to build reliably profitable media businesses.

Thanks so much for reading. Send me a note with feedback, good or bad, by hitting reply.  Or you can email me at

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