Substack is infrastructure for media unicorns 🦄
why I think Substacks will eat the world
Friends we need to have a serious talk about the fact the LTV of my Substack subscribers is between $50-$100+.
As a previous YC founder who kind of prides himself in being able to identify Product Market Fit, whose current career plan is to take strong seed stage companies to exit and then repeat the cycle, I am honestly blown away.
I thought Substack was pretty cool, but I hadn’t really looked into it that hard. An interesting alternative to Medium or traditional blogging.
I remember helping my friend who owned a “blog” with ~30M monthly views optimize his eCPM to take it from $2 to $4 back in 2014.
The eCPM of this Substack is over $500. 😐
Like uh, excuse me?
Substack doesn’t simply create a slightly better model for blogging, it has provided an industry disrupting business model + stack that is going to absolutely destroy traditional media companies, and pave the way for a whole new wave of media unicorns.
Evaluating a Substack for PMF
Here’s the real question - can an individual Substack have unicorn level Product Market Fit?
To evaluate this I want to consider the core metrics that I use to determine how strong a product is.
How much are people willing to pay for it
How strong is the products retention
How much do people love the solution (Superhuman survey, NPS, etc)
Putting market evaluation aside, if people are willing to pay a ton for a product, if it has super strong retention, and people truly love the actual solution, generally I consider that a good product.
This is where the model of Substack is kind of blowing my mind. I truly did not understand how much people wanted access to “good writing”.
Honestly, I think it’s more than just good writing though.
People want “behind the scenes” access to smart people within niches that they care about, that they could not otherwise gain access.
Lenny’s Newsletter is a great example, he’s an amazing PM that I would love to learn from. There’s no way he’s going to give me the time of day.. But I can subscribe to his Substack for $15/mo ($180 per year).
I like to think I’m a pretty damn good Head of Growth (form your own opinions). I have an extremely good job, I don’t do any consulting work, and writing my thoughts down in a blog for a $4 eCPM isn’t worth my time when I have equity & leadership in an amazing startup that has a clear path to exiting for billions.
I’m bombarded by founders and people asking me about growth and marketing and PMF and fundraising and XYZ a minimum of 3-5 times a week - but there’s no way for them to get access.
So I think I’m beginning to understand why creating a Substack is such a strong product.
I create posts like the What does a "Head of Growth" actually do? 🤷🏻♀️ article, it speaks to people and they subscribe.
Maybe if I can write down things that are both entertaining for other growth/marketing people like myself, and are also truly useful, I’ll be able to drive a lot of value for my users.
… But how far can I take it?
What’s the limit of a Substacks value/LTV?
At this point you might be thinking to yourself okay Koby, this is kind of an interesting article but honestly who are you good sir? I’ve never heard of you before. I’ve never heard of the company you’ve worked at before.
This is basically the response I’ve been getting with my outreach.
Some people tell me to fuck off, some people reply back and are like “I loved this article but how did you get my email?” (hint: I used Apollo), and some people explain how it’s like I spoke directly to their souls, and then they go through and subscribe for a year.
(PS if this is you, I love you)
So okay, my slightly smart but completely unknown butt seems like it’s able to drive subs for ~$7/mo or $35/year. There’s no community attached, I have 243 Twitter followers, I have no designer creating graphics for my articles, it’s literally just a half way decent growth person writing half way decent articles about growth.
Lenny on the other hand with 80k Substack subs & hundreds of thousands of social followers seems to be able to command $15/mo or $150/year subs.
Friends, wtf happens to a Substack at scale? Like what happens if a VC puts in $2M into a seed round for a Substack that’s trying to create a publication for 1,000,000 people.
First thing I’d do is go hire amazing famous growth people - I only need 4 articles a month. Now it’s not just me, it’s people 10x better than me.
I’d go build a huge community with millions of followers, a giant Discord just for growth & marketing people, maybe exclusive live classes and a private podcast that gives a behind the scenes access to the growth of hot startups.
If a large amount of people seem thrilled to pay me $6.95/mo right now, what happens then?
If you ask me, it truly seems that a Substack is capable of creating a $29.95/mo+ subscription with a $300-$500+ LTV, 80-90% yearly retention, and a 9.0+ NPS.
Those are better “product strength” numbers than a number of unicorn startups I’ve had the privilege of working on in the past, and honestly it’s truly blowing my mind.
But how big is the market?
It seems fairly reasonable that it’s possible to create an incredible Substack that a small niche of people find super valuable, but how big could you actually scale one?
I’ve written a fair amount around market in the [Playbook] How to determine if a startup has Product Market Fit article, but my main thesis here is that a good market is determined both by size but also how targetable is it on a specific channel.
Given I built a truly amazing product, how many growth & marketing people are there who might be willing to pay $15 - $30 per month?
I would need 416,666 Substack subscribers to hit $100M per year of revenue which would create the scale needed to create unicorn status.
416k super fans? I feel like that is super do-able.
We exist currently between two moments of arbitrage, the combination of ABM email marketing with the Substack model of paid newsletters, it seems entirely too possible that if an amazing product is created there is a big enough market to support it.
Growth & marketing is simply a single publication too. Media thrives off multiple channels of distribution.
Budding Substack writers all over the world are proving you can pretty easily create amazing publications about anything - product, to growth, to eating weird kinds of food.
It would be so extremely possible to create huge communities that can cross promote each other (think product vs growth vs SWE vs angel investing, they all overlap) to build a competitive advantage, and an in house team of amazing designers whose job is to take smart talent and make their writing look incredible.
Substack has created such a vastly better model for writing than the traditional media industry provides, VC funds and Substacks at scale haven’t quite yet entered the market, but when they do the disruption is going to be incredible. I truly can’t wait to watch what happens when large $4 eCPM publications try to compete with $500+ eCPM Substacks.