The Business of Email: How Substack Changed Everything

0:02You probably don't think about your inbox as part of the creator economy, but sending emails is actually a billion-dollar business. And that business is being led right now by one platform, Substack. Talk to us about what you have to offer readers and journalists at such a tumultuous time in the news business. So what Substack is offering is an alternative business model where readers subscribe directly to writers they trust and they pay them directly, which means that they are ultimately the customer. They sort of, you know, hire and fire the writers that they trust. And it's kind of an alternate ecosystem to ad-supported social media as we know it.

0:44So here's an interesting stat. Substack now has over 50 ,000 revenue-generating newsletters, with more than 50 newsletters making over a million dollars a year through paid subscriptions. Substack's monetization model is pretty simple. They take 10 % of a newsletter's paid subscription revenue, and the writer gets to keep 90%. And in exchange for that revenue share, Substack provides publishing tools as well as discovery and growth. It's an ecosystem that gives economic autonomy to independent voices. And it fosters direct relationships that are built on trust. Instead of just putting everyone at the mercy of algorithms that maximize engagement and advertising revenue.

1:24So we've been hearing so much about Substack that we wanted to sit down with one of the top creators on the platform. So we brought in Rachel Carton. She writes a newsletter called Link in Bio with over 100 ,000 subscribers. She covers the landscape of social media. And she came on the show to talk to us about how to grow and monetize on Substack and also just talk about her experience as a Substack creator. Now, I find email to be one of the most interesting and under-discussed aspects of the creator economy right now and something that I think we should all be taking a harder look at. And there's four reasons why I think it's really important.

1:59Number one is ownership. A big conversation in the creator economy is do creators actually own their audiences? And obviously with platforms like YouTube and Instagram, the answer is no, you don't. So with email, what's fascinating is you own the list. If you move from Substack to Beehive, which actually we did early on with the published press, we get to take our list. The second is engagement. The inbox is one of the most trafficked places for working professionals. So even with our newsletter, the fact that we send it three times a week, we have a very regular base of people who open that on Mondays, Wednesdays, and Fridays.

2:34So reaching your audience doesn't have an algorithm between it. It's the question of, did you write a good subject line? Did you write a good email? And do you have a relationship with your audience? The third in this context is actually financial stability. The fact that you can build paid subscription tiers where you have a large group of people or a relatively large group of people paying on a month-to-month basis builds a lot of financial stability for creators and independent journalists to leave their jobs. And the fourth is growth. And this is unique to Substack. Substack has a recommendation engine that drives about 40 % of all new subscriptions on Substack and 12 % of new paid subscriptions.

3:14That's really significant. The fact that the platform is actually recommending newsletters to its user base. So this is our conversation with Substack writer, Rachel Carton of LincolnBio.

3:31All right, Rachel, we're here at Adobe Max. We just saw a bunch of incredible visuals and demos about effects and AI. And we're here to talk about written newsletters.

3:48well first of all welcome to the show I'm just curious to hear a bit of your background what you do on sub stack and who you are as a creator sure so I write a newsletter called link in bio on sub stack it's all about working in social media so the subscribers are mainly social media teams marketing teams people who are just like interested in the internet and what brands are doing on the internet and I started my sub stack in 2021 which I think like is old for a lot of people but I've been there for a while now and have 105 ,000 subscribers who read my newsletter that I sent through there. Do you consider yourself a journalist or are you like an educator?

4:28Welcome to my like... I understand. Yeah I would say I'm a writer. Sometimes I do some journalism, sometimes I do some interviews and sometimes I do ads so it's a mix. Got it. So, okay. 105 ,000 people read your newsletter, LinkedIn bio. How is, is it monetized primarily through advertising? Is it monetized through paid subscriptions? How is it monetized? Yep. So in 2023, I turned on paid subscriptions. I was writing it for free up until that point. I had, I think 27 ,000 free subscribers at that point. And so I felt like I was doing it consistently enough to feel confident asking people to pay for the newsletter.

5:13And of course I added on perks that would be paid for. Um, and so I make money from the newsletter through paid subscriptions and through advertisers on the free newsletters. I never put an ad in a paid newsletter. What were some of those perks that you added? So before I was just doing interviews that I sent out once a week, even in the beginning, it was like, you know, when I felt like it. And so when I got myself to like a really good, like, I will write this consistently. I added on the free newsletter for interviews because they're good with reach. I want people who I interviewed to be able to share the interview and share with their community.

5:50And then I write a strategy newsletter that's like, if you're on a social team, like here's the secret sauce of like what you need to know. And I kept that very clear. And then I launched a discord as well for subscribers, paid subscribers. Yeah. Do you have an idea of what has led to growth? Like what's been the most impactful for you? Honestly, I feel like the Substack network, not to be a Substack like evangelist, but I looked for this interview. I was like, how much of my subscribers in the past 90 days have come from the Substack network? 60 % of my free subscribers come from within the Substack ecosystem.

6:28So that's recommendations. You know, I was just with Casey Lewis who writes after school last night. Like if she recommends LincolnBio, people are coming from hers, they're discovering me that way. There's the notes feature, which is essentially like a social media feed at this point. And so the ecosystem of Substack is a huge growth lever. Wow. So essentially similar to any other platform where, not exactly, but obviously like with YouTube, you benefit greatly from the recommendations algorithm if you are fitting into the recommendations algorithm. Yep. Instagram, you can find audience if you are talking about something that is shareable and relatable.

7:05And so with Substack, like if you, does it have to be like tangentially similar to fit into the ecosystem as something else? Like are there genres on Substack where it's like, okay, if you are, if I'm part of this algorithm on Substack, I could discover other creator economy stuff. Yep. It's organized by like, I'm in the business section, but there's, you know, food sections, there's culture sections. And so if you're posting on notes, if you're writing a viral essay, like you're showing up in that algorithm in a very significant way. Wow. Yeah. Who's the biggest creator on Substack? Like who's the top?

7:41I'm not exactly sure, but like Lenny Richits. Like he's my like business. He's at the top of the business. I'm always like, I want to get to Lenny's level. For people who don't know who he is, because I became aware of him from seeing his events and seeing how many people were showing up to his events. Can you describe what Lenny talks about? Lenny is a newsletter for product managers, product people. It's not a world that I live in, but he's a huge inspiration to me because to me, I'm like, that's a niche industry, but he just owns it. And I'm like, I want to own social media industry. And he just stays so laser focused, I think, in a way that's very – it works very well on that platform.

8:20And I think what's, I think a lot of people think about Substack is that you have to like bring an existing audience there. And I think what that like 60 % number shows is like, oh no, you can like build like a homegrown Substack talent. I think about like Emily Sundberg who writes Sweet Me. She didn't have a huge social following and like she is huge now and has like so much like cultural cache and is so disciplined about showing up and she just, she built that there. What do you think makes up that other 40 %? because I've seen a lot of headlines of traditional journalists who leave to start a sub stack.

8:50I'm always like, that seems like the riskiest thing I've ever seen, like to go cold turkey basically into starting a sub stack. So what do you think makes up if sub stack takes up a decent portion of growth, which is great? What's the other 40 %? So there's like the part of that 40 % that I know. And so it's like, you know, a LinkedIn for me is really a big platform. Twitter drives a lot of subscribers. But I think there's like these like silent levers as well. It's like, I know that people are forwarding the crap out of my newsletter. Or I see my favorite things when I see like Teams was a referral or Slack was a referral.

9:24I'm like, oh, you're sharing this in your company chat. And so I think there's these also like hidden ones that we don't quite know exactly where it's coming from. But I mean, Derek Thompson joined Substack recently. He's already like, he's on the leader board every day, like growing like crazy. So yeah, I wouldn't say that it's tough to grow there right now, even if it feels like not late, but a little bit like more developed into their time. And what are the prices of your subscription or is it one price? So it's monthly is$8, annual is$80. And then there's like something called the C-suite, which is like, if you're a CMO, you pay$150.

10:02dollars and do you get additional perks or just if you are a cmo no just if you're a cmo or if your company and i so i have a template for if you um are going to expense it at your company you can copy it and send it to your manager and so a lot of my subscriptions come from people expensing it wow that's really smart to create the template is just make it as easy as possible it's huge yeah make yourself a write-off exactly yeah yeah before we started recording we were are you thinking about how to extend the value of your newsletter outside of the subscription, whether it be through events or some sort of merch or speaking?

10:42How do you like what else is there? Yeah, I think I mean, it's funny because my newsletter is about social media, but I don't have the best social media presence myself because I'm allergic to green screen recording for some reason. So I think a video product for me is in the future, whether it's a video podcast, I've like done fake versions of it where when Zaria Parvez was leaving Duolingo, I like flew to Pittsburgh and recorded a podcast with her and just posted one podcast. So I want to like make that a thing. And then events is huge. And I want to create a marketing event that is fun to attend.

11:19I like the idea of the emergency pod. Oh, like I got on a plane. Like really eventizing it. Yeah, like something. I was like, Zaria's leaving Duolingo. This is my Super Bowl. I am flying to Pittsburgh. She could have given that to the New York Times. She could have given that to Adweek. I was like, she's trusting me with this story. I'm on the plane tomorrow. That one podcast a year, I think, is way more impactful for your brand than just saying, all right, I'm going to be available every week. Like one good eventized podcast that everyone remembers. Great. Like maybe only do as many of those as you have in a year.

11:49So from my understanding, Substack has an audio and video functionality as well and live streaming. Is that correct? That is correct. Do you utilize any of those or no? I don't. I utilize the audio before and the video, but I've not done a live stream much to their probably like disappointment. I know that that's a big growth lever for people, but I haven't gotten quite on board with that. And do people live stream for growth or two paid subscribers? Like you can do a Q &A or something like that. So it could be two paid subscribers and people might be so intrigued by who the guest is that they're going to convert.

12:25or when you go live with somebody else, there's like a subscribe button like right there while you're watching it. So I think it leads to growth. So Substack says. So I think there was like a moment in time where newsletters were hot and then it felt like they kind of went away for a second. And now, you know, I'm seeing like Patreon just launched a paid newsletter product, which feels very much in response to Substack's growth. Yep. I find it interesting that you also were at Bon Appetit. and specifically I find that interesting because that felt like very emblematic of a moment in time where like a network and a brand like a Bon Appetit or like a BuzzFeed represented a cast of characters or like Vox right like Johnny Harris and and Cleo Abram are here at Adobe Max and like we've been chatting with them and we always talk to them about the the Vox era of like a network brand with a cast of characters.

13:20That does not feel like it is happening anymore. And it feels like Substack specifically, especially with journalists or writers or storytellers in that way, is what created the opportunity for people to leave and actually become independent. Does that feel consistent? Or like, what do you feel from the era of Bon Appetit to now has changed for the world of like a storyteller like yourself and your ability to monetize the craft that's a heavy question i feel like i think you know well these are independent writers on a platform like substack i do feel like they're still like a cast in some way that i can't explain like i feel like people are always like oh i read like rachel carton leah haberman like there's like a cast still we have our own newsletters but it's like bundled in people's minds, I think.

14:15It's not the same, obviously, but I think that the growth opportunity is just bigger on a place like Substack, especially for journalists. I think when you work in publishing, the salaries are not great. And so I think that there's a lot of opportunity for people who want to write and want to make it a sustainable thing that they can do for a long time. What do you think the difference is between a good newsletter and a good writer who can write an article for a publication? Like once that writer maybe moves over to Substack, what do they now need to know about newsletters that's maybe different?

14:58I think that like a strong opinion, I feel like is what almost like attracts you to somebody as a writer. I think like besides the like technical side of like consistency, like I, there's a lot of writers who will start a newsletter and then you don't hear from them for two months, right? Like that's just obvious. But I think to me, like there is like a parasocial sort of relationship that can be created, I think, with a newsletter writer. I was like reading your newsletter the other day and there was like a little anecdote from Sid that was like about a movie she wanted to see. I was like, oh, I feel like I got to know Sid a little bit more through that.

15:36Like, I want to read that now and hear more from what Sid's perspective on that. And so I think that, to me, is like that little bit of like personal detail and hearing like at the top of Emily Sandberg's news. She always gives an update of what she did that weekend. It's like it has nothing to do with business, what her niche is. But I'm like, oh, I like trust her opinion here. So I want to hear what she's doing in her free time. Right. Like I forget who said this, Samir, you may remember, but someone said how to the word newsletter, the most important word is letter. So that the news is very much secondary to that experience of sending someone a personal letter.

16:11That that's actually what's important. And you should prioritize that feeling when you're sending the newsletter. Yeah. Yeah. Yeah, I find it just so fascinating that we're, maybe there's people listening who are surprised, like in the world of the creator economy, that this is such a robust part of it, which is written content. at some point I would assume that people felt like this would start to to dissipate with the rise of other mediums yeah and I found you know I enjoy writing and I I used to enjoy writing on LinkedIn I I find it extremely hard to write in a way that doesn't feel like chat GPT there because everything is chat GPT on LinkedIn and I write and then I look at it and I'm like does this look like and I just hold myself back from writing at times now because I I can't figure out like I think if AI took AI has taken a lot from creatives and it's also added a lot to creatives but the one thing that I'm upset that it took away is the m - I mean I still use it and I've I don't use chat gbt I've never used it to write my newsletter I like know that it would be like a slippery slope if I just tried it so I don't touch it but I still use the m - I don't care I don't care.

17:29It's been around. It's been around. It's the only way to have a run-on sentence. Exactly. A comma? No, that's not enough. I need the separation. The M-Dash is the only way to write conversationally. I agree. In terms of a parasocial or developing your actual personality. I know. Should we take back the M-Dash? Maybe collection. A movement. I'm trying to. Maybe here and now we take it back. I'm trying to take that. I'm still using it. So does Substack help you sell ads or do you do that independently? I do it independently. People reach out to you independently. Yep. And so could you, which part of the business is bigger, ads or paid subscribers?

18:04Paid subscribers. Really? That's amazing. Yeah. That's incredible. Maybe that's actually like a sign that my ads, me selling my own ads is a bad idea. I think that's a great sign for just stability. I think that's an incredible sign for stability. And I think it's actually my opinion, and maybe we can go into a broader conversation about the creator economy. but I've noticed that we're moving back in a direction of like way deeper connections to to creators and like smaller groups and I actually find that the the creator with like a hardcore smaller audience is also getting more brand opportunities than the large creator I actually think that the creator who reaches millions and millions of people right now is harder to sponsor it's more expensive it's uh you're taking less shots on goal and i'm noticing brands being more hesitant in the large creator space the audience is actually less defined and the audience is a smaller creator yeah and so with the potential of like the next chapter of the creator economy being way more focused on smaller tribes like smaller groups of people i think opportunities to directly transact are incredibly important.

19:21Yep. Because small audiences don't do well in platform payouts and they can have ups and downs with advertising. And so it's amazing to go like, you have 105 ,000 readers, I would assume even at a healthy open rate, let's say it's 60%. So like that amount of people is like not really monetizable if that was a YouTube audience at like the same scale as it's monetizable as a direct transaction or a direct relationship. Yeah I mean I think like it's funny because I have my like social media hat and then I have my newsletter writer hat and the writing the newsletter is the best social media job I've ever had because I have an audience that is not dictated by an algorithm right that I'm not worried about like oh my god I'm nervous to post this is anybody gonna see this like they get my email they open my email it's pretty consistent what I who will open my email and that feeling is unreal when you come from a world of social media that like kind of feels like gambling at this point where you know these interest-based algorithms it's like do my followers even see my content anymore I mean I'm talking that from the brand side but I sure creators can feel that way too of like it gets served to more non-followers than followers at this point and so how do you capture those like super fans of yours which there are a lot of and move them into a place where you're able to really truly reach them it's not just like a broadcast channel or whatever it might be i also think the um the the reality is as a creator your obligation is to your audience the audience is your boss right and it gets really confusing when you get a large check from brand because they feel like your boss, but the audience is your boss, right?

21:11Like if you lose them, the whole thing is gone. And I actually think having a clean relationship where they pay you and you make them a thing is actually a very representative of what the creator audience relationship is, which is you like my thing and I make my thing for you. When you add the brand into the mix, it becomes a new, the chemistry of that is very different, right? Because it's, I'm making a thing for you and I'm also trying to get an outcome for them that does acknowledge you, but also hopes for more people than just you who care about it. And I need you to go take another action for this to be successful.

21:53Right? And so there's a, there's a whole new chemistry to what that looks and feels like versus the purity of like I make you a thing and you and there's like I think just something about your opening a newsletter in a more clickable environment and so you know there's great you can see the click-through rate that like a lot of brands want to even if it's a smaller reach but they know that people are in a mood to click and learn more or whatever it might be like that is very intriguing I think for brands that feel like okay I'm gonna pay this person with a million followers but it got 8 000 views like how do i rationalize that to some degree um and i know i don't use like shop my links on my newsletter but like i got a peek into what the back end of that looks like i'm like oh my god affiliates is what you're talking about sorry but some of the fashion writers on sub stack i know are making a lot of money per newsletter using those links as well so that's a whole other piece of the ecosystem that I think um and there's no public metrics in an in sub stack I mean I know they have like a feed where you can post stuff and there's public metrics there but one of the beauties of sending an email is there's no public metrics like I can make assumptions there's likes on it oh there are there are likes and I don't like it I see I think that public metrics create a lot of fear for creators and you know even like Spotify adding public play counts changes the dynamic for like totally the social proof for an audience member like a YouTube video with 90 views feels very different than a YouTube video in 90 ,000 views also changes the nature of what gets made exactly YouTube now moves in a direction together because of public view metrics, right?

23:38Like people make what works. Whereas Spotify prior to viewership felt so free because of that and like a great place for expression because there's no basis for what's actually great, what's doing well. Yep. I mean, so I'd say Substack is adding more of those metrics. There's a leaderboard, which is essentially whose gross revenues like climbing the quickest is what that is. That's public? Yes, that's public. Can I look at it right now? You could look at it right now. I'm number three on the leaderboard right now. I can understand how you don't like that, but I'm kind of into that. Well, I'm addicted to it in a bad way.

24:10Yeah, it's like the YouTube one out of 10 ranking of how well did your video do compared to the last 10. I want to know. Give me... Business bestsellers. I need some indicator of if I'm declining or not. And do you see the leaderboard? Rachel, you're number six. Yeah. That's pretty good. That's great. On the business best... They call them the bestsellers. Oh, bestsellers. You are the bestselling newsletter. Yes. Whoa. So wait, like talk to me more about your relationship with this ranking. Horrible. Horrible. They're, they're like doing things now that they're like, they'll send in this morning.

24:44I wake up to like a push notification, like you're number three on rising. And I'm like, oh my gosh, I don't like need to know that. But I'm like texting my husband. I'm number three on rising. Like, oh my God. Like I need to have a healthier relationship with this. So I do think like, um, it's tough, especially as like the feed becomes more of a thing. Like there are things you can write about like for a viral essay. And so like, I need to keep that out of my head because delivering a really great inbox product is different than delivering a viral essay product. I think. What's a, give me an example of a viral essay in our space.

25:19If you were to solely think about creating a viral essay, like the death of Instagram, you know, like leaning into the negative. So it's not too different than YouTube, honestly. No. And it would just be like one essay, really like strong opinions. and it would just be that. Whereas like my paid subscribers want to see kind of more like piecemeal, like similar to how yours is written, right? Like it's like a little digest and that doesn't work in the sub stack algorithm quite as well because it's too many topics. People want that like one hot topic, I would say. And like a lot of conviction in the take and a controversial headline.

25:53They almost don't want to read. They just want to engage with the take. Repost it, like it signals something. I mean, similar to any social network, yeah. Yeah, got it. Interesting. so then does so substack do they have any competitors right now like is anyone else doing this well i mean beehive i would say but beehive is nothing like this like i don't there's no built-in i love beehive but there's no network system to it like i don't know how big anyone else is on beehive no i'm looking at this leaderboard and like i immediately feel competitive welcome to my life immediately i'm like i want to throw my name in this hat and compete yeah see where would I land on the leaderboard?

26:32Yeah. And like, obviously social platforms have done this really well, but I think that's what maybe every platform understands about us is that as a human species, we are inherently competitive with each other and there's nothing matters more than status. Yep. But also like it's a, it's a very much love hate relationship. Cause like for me, my newsletter felt like my safe space outside of that. And like, why am I worried how many likes my like, thing is getting, but I am. And I don't like bringing that into my writing. It's weird because we only react to what these platforms give us. Because in a world where it doesn't have likes and it doesn't have ranking, you're actually probably a more fulfilled, creative writer.

27:15Totally. Right. But then these come into the picture and it actually changes completely your relationship with the work. Yes. I know you were just in our session, our creator support session, but there was a, I think it was the last creator who came up and was like I'm a filmmaker but I pivoted because my management told me to yep to become a creator and now I'm doing well as a creator but like how do I navigate my honest human desire to create art and like how burnt out I am yeah and it was interesting that the statement started with I pivoted because my manager yeah told me to and I'm like, I think it is challenging to balance creativity and strategy when there is a leaderboard.

27:59Because then you're like, I need to be strategic. Great move for Substack, challenging move for creative writers. Exactly. And I already have that in my brain because I work in social media. So I think about things in that kind of strategic way anyway. So I don't need my platform also telling me that in a way. Whereas I can look at the metrics on the back end that I know will help me. but I don't need it publicly. So Feed Me, Emily's newsletter. I only heard about this this week. It feels like it's all over Twitter. The TBBN boys just had her on. What is that about and why is that so popular? She writes a great, like from her, and I think it's like what is so good about it.