[tinyhouse]

I'm surprised Substack's business model is charging ~10% from one's revenue. A fixed pricing would make more sense. Why would anyone who is planning on profiting from their newsletter would go with a deal like that? Building a newsletter site these days is a pretty simple task with many no code solutions. I'm not saying what Substack provides is not worth paying for, just that it's a bad deal for people with successful newsletters that generate money, and a good deal for everyone else. But the former users are the ones Substack need in order to make money.

[Dowwie]

They're charging "ad valorem" -- relative to the value received. The value that a Substack user with 4000 subscribers receives isn't the same as what someone with 50 subscribers receives. This is a very common fee structure that exists across industries.

[tinyhouse]

The fact it's a common fee structure that exists across industries doesn't mean it makes sense for Substack. And I wouldn't call 10% standard. Most companies I know of, take Stripe for example, charge much smaller fees percentage wise and rely on high volume transactions.

Maybe a better example I can think of is a referral site. Maybe a site like Kayak can charge Marriott 10% each time they refer someone who books a room. If that room wouldn't be booked otherwise it's probably a good deal for Marriott. Substack does help with discoverability, and that's probably where their main value is (similar to FB, Instagram, etc), but the problem is that unlike the Marriott example, the fee is not a one time payment.

[ThomPete]

This is called value based pricing.

No cure no pay.

They take care of everything for you and will provide more and more tools for you.

Furthermore it's a white label solution which means you aren't on some platform like medium. People pay for removing branding on platforms these day.

I am biased as we are currently launching a similar model for live video 1-1 sessions, classes and events but I believe you will see much more of these types of solutions in the future.

10% + credit card fees isn't a lot to pay and if you become really big you can always pay someone to build your own platform.

[dna_polymerase]

And you think Substack can achieve the same high volume as Stripe does?

> Substack does help with discoverability, and that's probably where their main value is (similar to FB, Instagram, etc), but the problem is that unlike the Marriott example, the fee is not a one time payment.

No, they also provide the platform, the tools, the analytics. They are not just an aggregator. Also, Marriott has to pay for every transaction, just like someone using Substack. You pay per transaction.

[tinyhouse]

> No, they also provide the platform, the tools, the analytics

Maybe I'm in a bubble but I don't see it as their main value for successful users who make money from their newsletter. I've setup a newsletter with analytics a few weeks ago without writing a single line of code and with a fixed cost (and custom domain...). Yes, starting with Substack is cheaper to start with but long term it'll cost you).

> Marriott has to pay for every transaction, just like someone using Substack. You pay per transaction.

I guess I'm not familiar enough with Substack. What does it mean you pay per transaction? It's a newsletter - you make money from paying subscribers who pay monthly let's say. Are you saying Substack users pay per email sent to their paying subscribers?

[tinyhouse]

> No, I was referring to the whole Marriott thing. If you book a Marriott hotel with an aggregator (like Kayak), Marriott has to pay for that booking. If you do it the next week again, Marriott has to pay again.

> Substack fees work the same, you pay a fee to Substack whenever a person renews (transaction).

> So to make the loop back, no the Kayak example works the same way as Substack does.

Replying here since HN doesn't let me reply to the comment directly (probably reached the max number of nested replies).

I now understand your example but I disagree with it. A newsletter, unlike a hotel, relies on a small number of paying users who are likely to renew their membership. Many even pay for annual membership. The main cost is finding a new paying user. Once the user is subscribed it's the newsletter's job to keep that user paying. Marriott pays Kayak only for new users. Next time the user can book a room via the Marriott site. It doesn't need to keep paying Kayak for life every-time that user books a room.

[dna_polymerase]

> Are you saying Substack users pay per email sent to their paying subscribers?

No, I was referring to the whole Marriott thing. If you book a Marriott hotel with an aggregator (like Kayak), Marriott has to pay for that booking. If you do it the next week again, Marriott has to pay again.

Substack fees work the same, you pay a fee to Substack whenever a person renews (transaction).

So to make the loop back, no the Kayak example works the same way as Substack does. It just happens to be the case, that customer retention is higher with Substack (or lower-cost transactions in general)

[criddell]

Maybe I don't understand how the fee structure works, but if it's a percentage that doesn't feel very equitable.

If I launch a paid newsletter with one reader, I'm getting a lot of value from the platform. Once I gain a second reader the platform isn't doing twice as much for me. It's gone up a smaller, incremental amount.

[Angostura]

% fees are very attractive to people who are starting small or experimental and have no real idea as to whether the idea will take off.

It’s and automated, easy to understand freemium model.

[tinyhouse]

That's the catch. It's easy to start and experiment. But as you grow bigger you start realizing it's a bad deal so may start looking for alternatives. That's bad for Substack since why would you like your most successful users to be unhappy? A better model IMHO would be a fixed tiered price based on the number of subscribers you have, similarly to how most email providers' business model work. For most users it wouldn't be cheaper than 10%, but for the top X of users it would. Having a fixed cost you can plan in advance for is more attractive IMHO.

[swyx]

you say this but there are dozens of people running million+ dollar substacks with no plans to leave. this market is huge, writers really don't like to futz around with tech as much as we do