What is Substack?

This week we’re breaking down Substack’s business model.

Substack is a platform for independent writers to distribute subscription newsletters. The company makes this easy, even I figured it out.

The 1,000 True Fans Business Model

Business models can be like Rorschach tests. When I look at Substack, I see author Kevin Kelly’s 1,000 True Fans. The core of Kelly’s argument in this essay is that:

To be a successful creator you don’t need millions…To make a living as a craftsperson, photographer, musician, designer, author, animator, app maker, entrepreneur, or inventor you need only thousands of true fans.

The definition of a true fan here is anyone who buys everything that you produce. Underlying his argument are two criteria and some basic algebra:

First, you have to create enough each year that you can earn, on average, $100 profit from each true fan…Second, you must have a direct relationship with your fans. That is, they must pay you directly.

The algebra is that earning $100 from 1,000 fans equates to $100,000 a year, which is a decent living. Where this idea starts to get interesting is when you combine it with internet assumptions.

The internet reshapes business rules, requiring an entirely new playbook. As tech analyst Ben Thompson notes, while the physical world is dictated by scarcity the digital world is one of abundance. For example, compare your local drug store to Amazon. One has limited shelf space, the other infinite. Additionally, geography and distribution are no longer constraints online. Returning to 1,000 True Fans:

If you lived in any of the 2 million small towns on Earth you might be the only one in your town to crave death metal music, or get turned on by whispering, or want a left-handed fishing reel. Before the web you’d never be able to satisfy that desire. You’d be alone in your fascination. But now satisfaction is only one click away. Whatever your interests as a creator are, your 1,000 true fans are one click from you. As far as I can tell there is nothing — no product, no idea, no desire — without a fan base on the internet.

There are infinite niches out there: the death metal fans, the whisperers, the left-handed fly fishers, and on and on. The internet allows these niches to connect, creating new opportunities. This is the wave Substack wants to surf.