Adding My Data Point To The Discussion Of Substack Advances

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[warning: boring inside baseball post]

From The Hypothesis: Here's Why Substack's Scam Worked So Well. It summarizes a common Twitter argument that Substack is doing something sinister by offering some writers big advances. The sinister thing differs depending on who's making the argument - in this case, it's making people think they could organically make lots of money on Substack (because they see other writers doing the same) when really the big money comes from Substack paying a pre-selected group money directly. Other people have said it's Substack exercising editorial policy to attract a certain type of person to their site, usually coupled with the theory that the people they choose are problematic.

I'm one of the writers Substack paid, which gives me some extra information on how this went down. Here's a stylized interpretation of the email conversation that got it started:

SUBSTACK: You should join our new blogging thing!

ME: No.

SUBSTACK: It's really good!

ME: No.

SUBSTACK: You can make lots of money!

ME: No.

SUBSTACK: Like, X amount of money (where X is very large, much larger than I would have thought possible).

ME: No I can't, you're lying.

SUBSTACK: No, we're serious, we've gotten good at making these kinds of predictions, and we really think you can make X.

ME: I wasn't born yesterday and I refuse to believe you.

SUBSTACK: Okay, we'll put our money where our mouth is. We're so sure you can make X that we'll sign a contract promising to give you an advance of Y% of X (where Y% of X is still a very very large number) your first year, in exchange for Y% of your subscription revenues (but not all, because then people who want to support you would have no incentive to subscribe). After the first year, you’ll go back to our normal payment scheme, and if it’s not as much as you want, you can quit.

ME: Give me a second to talk to some smart people to figure out how you could be scamming me...huh, none of them can think of a way this could be a scam. Fine, I'll join.

That's the shot. The chaser is - as I write this, my organic subscriber-generated revenue is very slightly more than X. I lost money by taking the deal! This is in no way a complaint - I'm making much more than I thought possible, much more than I conceivably deserve for writing online articles, it would be ridiculous to complain, and Substack deserves the extra money for the work they put in overcoming my skepticism.

Matt Yglesias, another writer who took the same deal, says the same thing. He says that if he hadn't taken Substack's advance, he’d be making $775,000, but as it is, he'll only keep $380,000 this year. Again, these are all huge numbers, Yglesias has no right to complain, and AFAIK he isn't complaining. But it suggests that I'm not a one-off. I can imagine Yglesias having the same conversation with Substack management. They say "You could make more than $250K!" Yglesias says "Haha no you're lying". They say "We're so sure of this that we'll offer you a fixed payment of that much plus a little extra your first year." Then Yglesias says yes and ends up making even more, and Substack goes on to offer the same terms to lots of other people including me.

[update: Yglesias confirms this is what happened, Taibbi says that “everyone he knows” would have made more money not taking the advance]

At least for Yglesias and me, I don't see any reason to attribute sinister motives to Substack. We didn't believe Substack's estimates of how much money we could make. They made their projections more credible and skin-in-the-game-y by offering an advance. We took it, and they increased their market share plus made a lot of money. Usually if a for-profit company uses a strategy, and it ends with them increasing their market share and making a lot of money, it's safe to assume that was what they were going for.

I don't know anyone's stories except Yglesias' and my own, so maybe they're doing something else with other people. But there's no particular evidence to make me think that; the two of us seem like pretty typical cases, and you can see why Substack would stick with the strategy.

[edit: some people suggest I mention I had a blog with tens of thousands of readers, built up over a ten-year period, before I joined Substack. My experience will not generalize and most people won’t make lots of money Substacking.]