Will Twitter Kill Substack?

A clown car that fell into a goldmine. That’s what Facebook CEO Mark Zuckerberg once called Twitter. Despite its ubiquity in entertainment and media, Twitter has perennially punched below its weight financially. Executive turnover has been high. Development velocity has been low. Yet clowns can be scary, especially when they’re gunning for your goldmine.

Twitter’s New Paywall

In a podcast last year, Substack’s co-founder and CEO Christ Best said that newsletters were one of the few places left online where readers could have a relationship that wasn’t controlled by big tech. No longer. On January 26, Twitter acquired Revue, a Dutch newsletter start-up and Substack competitor. Facebook is circling newsletters too.


David versus Goliath Algorithms

This spells trouble for Substack. Founded in 2017, the company now has over 500,000 monthly paying subscribers and millions of readers. Substack’s growth is impressive, but its numbers are dwarfed in absolute terms by Twitter, with over 180 million daily users, and Facebook, with nearly two billion. Existing networks are an advantage for acquiring readers and writers.

Source: Twitter.
Source: Substack. For more, see: Substack Blog, New! Find Substacks by people you follow on Twitter, September 17, 2020.
Source: Substack Discover as of February 6, 2021.

Damn The Torpedoes, Full Speed Ahead

More competition for hosting writers is a plus for creators, but it’s a less rosy outcome for Substack. The company’s response: bring it on.

Focus on Focusing

Goliath doesn’t always win. For Substack, Snapchat versus Facebook is an interesting parallel. Snapchat is Facebook’s R&D department. It develops features like stories and filters that Facebook copies shortly thereafter. Facebook’s user base, headcount, and cash balance are more than an order of magnitude larger than Snapchat’s. Yet Snapchat keeps innovating, driving higher user engagement and strong revenue growth.

Source: Snapchat Investor Relations, February 2021 Investor Presentation, February 6, 2021.
Photo by Dawin Rizzo on Unsplash

Finance at Indeed. Previously finance at Etsy and internet equity research at Deutsche Bank. Find me @kjlabuz.

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