Arian AdeliI recently spent a good amount of time deciding where to host a publication. It sounds like a small decision but if you run media companies for a living, you know that platform choice shapes everything downstream: your economics, your distribution, your relationship with your audience, and ultimately whether you’re building leverage.
I landed on Substack. And because I tend to overthink things, that decision turned into a full-blown analysis of the company, its business model, where it’s headed, and how to best position yourself. So instead of keeping all of that thinking to myself, I figured I’d share it.
The first thing you notice when you dig into Substack’s numbers is how deceptively simple the business looks on paper. They take 10% of what creators earn through paid subscriptions. That’s it. No SaaS fees, no advertising revenue (potentially changing), no enterprise contracts. If writers make money, Substack makes money. If they don’t, Substack doesn’t either.
The alignment sounds elegant. And in many ways it is. Compare Substack’s 10% to YouTube taking 45% or app stores taking 30%, and the deal looks generous. Creators know this, which is why the platform has attracted some serious editorial talent.
Substack raised $100 million in July 2025 at a $1.1 billion valuation. They’ve raised $220 million in total. Their estimated annualized revenue is around $45 million, based on roughly $450 million in gross writer revenue flowing through the platform. So, where is all this money going?
Email, first.
Substack is not building a newsletter platform. Not anymore. They’re building an email-first social media company.
That distinction matters enormously. A newsletter platform is infrastructure. You write, it sends. The value is in reliability and deliverability. An email-first social media company is something entirely different. It’s a network where the content happens to arrive in your inbox but the engagement, the discovery, the community, and increasingly the consumption happens inside an app and a social feed.
Look at what Substack has built in the last three years.
- Notes, which functions like a Twitter alternative for long-form thinkers.
- An app that now drives more subscriptions than the recommendation engine (roughly 3 million per month from the app versus 2 million from recommendations).
- Chat features for community building.
- Podcast hosting.
- Video and streaming features.
- Substack TV is in development.
They’ve even started experimenting with advertising, something the founders resisted for years.
They’re no longer competing with Beehiiv or Mailchimp or Ghost. They’re competing with Medium, Twitter, Spotify, and arguably Patreon, all at once. Substack is newsletters, blogging, microblogging, podcasting, live streaming, and a payment layer, bundled into a single platform with a social graph on top.
The $100 million makes more sense now. You don’t build a social media platform on the revenue from a 10% take rate alone. You invest ahead of the growth, betting that the social network becomes sticky enough to justify the spend.
What Substack gets right
And it’s more interesting than most people give them credit for.
When you join as a creator, Substack has already spent a great deal of time and resource doing the tough thinking for you.
One of my favorite features is auto-paywalling older posts after a certain period of time. This essentially means: if you’re a subscriber, indulge away. If not, pay the price for being late.
5 years ago, this was a strategy only a top-tier media company could implement.
The paid subscription badge is another small feature that reveals sophisticated thinking about the platform.
Substack adds a gray badge next to the names of people who subscribe to paid newsletters. It’s a status signal, similar to the blue checkmark on X. For creators, it’s a visible differentiator. For readers, it’s an incentive to pay for at least one newsletter, even if it’s not one they particularly need, just to get the badge.
I actually read my paid subscriptions but, heck, I’d pay just to get the badge.
Gamification
If Substack introduces tiered badges (different colors for different levels of paid subscriptions), they create a gamification layer that could meaningfully drive paid subscription volume across the platform. Imagine a badge that requires subscribing to 10 paid newsletters. For a serious creator who wants algorithmic boost and credibility, that math could make sense. And Substack could offer algorithmic priority to users with higher-tier badges, creating a flywheel where paying more gets you seen more, which incentivizes paying more.
They haven’t done this yet. But the infrastructure is there.
The economics of this get interesting quickly. Say Substack introduces a badge tier that requires 10 paid subscriptions. At an average of $10/month per newsletter, that’s $100/month per user, of which Substack takes 10%. Scale that across thousands of users who want the visibility that comes with the badge and you’re looking at a meaningful revenue accelerator that costs Substack nothing to deliver. Push it further: a top-tier badge requiring, say, 100 paid subscriptions would cost a user $1,000/month. That sounds extreme until you consider that for a serious creator trying to build reach, algorithmic priority could be worth every dollar if it translates to subscriber growth.
And this is where it gets delicate. If Substack ties algorithmic visibility to how much you spend on the platform, they create a powerful flywheel: spend more, get seen more, grow faster, earn more, spend more. But they also risk turning into a platform where reach is a function of budget rather than quality. The rich get richer, literally.
Every platform deals with some version of this (paid ads on Instagram, promoted posts on X, boosted content on LinkedIn) but Substack has built its brand on the promise that good writing wins. Introducing a system where spending power influences visibility would be a direct tension with that founding principle.
Though in fairness, of all the platforms, such an approach is the most acceptable one. It is pay-to-play to some degree but at least independent creators are getting paid for it, not just the platform.
The politics of this matter. Substack’s core audience is independent writers who chose the platform specifically because it felt like a level playing field compared to algorithm-driven social media. If the badge system starts to feel like solely a pay-to-play mechanism, the backlash from that community could be significant, even if the underlying economics make perfect sense. These are the kinds of decisions that define what a platform actually stands for versus what it says it stands for.
There’s a softer effect too that’s harder to measure but probably just as important. When someone browsing Substack sees that a large number of people in their feed have paid badges, it normalizes paying for content. It shifts the psychology from “why would I pay for a newsletter when so much is free” to “everyone here seems to be paying for things, maybe I should too.” That kind of social proof is incredibly powerful. It creates a culture of paying on the platform that benefits every creator, not just the ones gaming the badge system.
The ecosystem dynamics are also worth understanding.
Substack is designed so that when you bring an audience to the platform, those people become Substack users, not just your subscribers. Your emails are Substack-branded. There’s a button to read in the app. The design is standardized. Some creators find this frustrating because it feels like Substack is stealing their audience, converting their readers into platform users who then discover competing publications.
But this dynamic actually serves independent media well, especially at the extremes. For the biggest names, the Substack leaderboard and discovery features provide credibility and exposure that’s worth the tradeoff. Being in the top 10 on Substack is a form of prestige that compounds as the platform grows. It’s almost like an angel investment: you bring your audience, the platform grows, your position on the leaderboard becomes more valuable. If Substack doubles in size, the top 10 spot doubles in reach.
For the smallest creators, the dynamic is even more favorable. When a major VC firm or a well-known media company joins Substack, they bring thousands of relevant readers onto the platform. Those readers then discover new voices through recommendations, Notes, and the app. The big names are doing free customer acquisition for the platform, and the small creators benefit from that influx. It’s a system that ensures new voices can emerge, while incentivizing incumbents to keep earning their position through quality rather than just riding on existing distribution.
Touchpoints
The most important thing Substack provides, and the thing that’s hardest to replicate elsewhere, is multiple touchpoints with the same person.
This matters most for content that isn’t standardized. Let me explain what I mean.
I run another newsletter where I feature a curated list of interesting websites every week. My subscribers know exactly what to expect every time they open my email. The format is standardized. Even if one week’s picks aren’t interesting to them, they’ll open it next week because the format itself is reliable. Email alone works fine for this kind of content because the open rate stays consistent.
But if you run a publication where every piece is different, the odds of any single piece being relevant to every subscriber are lower.
This is where email as your only communication channel becomes dangerous. If someone doesn’t open three emails in a row because the topics didn’t resonate, Gmail starts pushing you to promotions. Then spam. Then you’ve lost them entirely. And no matter how much you talk about “owning your audience,” you’re still at the mercy of email service providers. Your emails reaching people depends on Gmail, Yahoo, and Outlook deciding they should.
Substack solves this problem structurally. If someone misses the email, they might see the piece in the app. If they miss the app notification, they might see your Note about it. If they’re a paid subscriber, they have a recurring charge on their credit card reminding them you exist. That’s three or four touchpoints instead of one.
And the credit card bill is an underrated one. Every month, a paid subscriber sees a line item on their statement for your publication. It’s not a notification they can swipe away or an email they can archive without reading. It’s a financial commitment staring back at them, and it triggers a question: “Am I still getting value from this?” More often than not, the answer is yes, or at least “I might miss something if I cancel.”
That recurring charge keeps your publication in someone’s conscious consideration in a way that no email or push notification can replicate. For non-standardized content where not every piece will resonate with every reader, that repeated exposure is the difference between building a loyal audience and slowly losing people to inbox obscurity.
This is precisely why legacy media has (almost) exclusively moved to paid content. At the scale of brands like FT and NY Times, advertising is actually more profitable. But paid subscribers have equity value.
Psychology
The psychology of paid subscriptions on Substack is different from what most people assume.
Creators often think of paid newsletters like SaaS. You need to deliver consistent value every week to justify the recurring charge. If a subscriber doesn’t feel they’re getting their money’s worth every month, they’ll cancel.
That’s not how it actually works. The more likely behavior is that someone sees a specific piece they really want to read. Maybe it’s a deep dive on a topic they care about. They think: “I’d pay $10 to read this one piece.” So they subscribe. They don’t particularly care about what comes next that week or month. They wanted that one thing.
Then, as long as one or two more pieces over the following months are relevant to them, they keep the subscription. Not because every piece justifies the cost, but because the off-chance of missing something valuable outweighs the $10 per month. For serious readers, the subscription is almost a commitment device. It’s a way of saying: “I want to be the kind of person who reads this.”
This is why paid subscriptions on Substack function as a quality filter. The people who pay are the ones most likely to actually read. They’re your real audience. The free subscribers are your reach, your top of funnel. But the paid subscribers are the ones who will open every email, read every piece, and remember your name. If relationship building and credibility are your goals, those are the people who matter.
Source: Backlink
And about that 10% fee. It seems high until you calculate your cost per subscriber acquisition on any other platform. If you’re running Facebook ads to drive newsletter subscribers, you’re paying $2-4 per free subscriber. If your free-to-paid conversion rate is 5%, you’re spending $40-80 to acquire a single paid subscriber. Substack’s 10% on a $10/month subscriber over their lifetime is dramatically cheaper than paid acquisition through any other channel. The 10% isn’t a tax. It’s a distribution cost. And for most creators, it’s the cheapest distribution they’ll ever find.
Lock-in
Now, here’s where the social media pivot becomes strategically important. The reason Substack is building a social network isn’t just about growth. It’s also about adding enough value to lock-in creators.
A pure newsletter platform has almost almost no switching costs.
Migration is straightforward. Substack uses Stripe. You export your list. You ask Substack to disconnect your Stripe account. You connect it to your new platform. Paid subscribers don’t need to re-enter their payment details. It works.
But whether this makes strategic sense is a separate question.
If you’ve been on Substack for any length of time, part of your distribution is the platform itself. Notes, recommendations, the app, podcasts, video, the leaderboard. When you leave, you don’t take any of that with you. You take the email list and the payment relationships, but the distribution layer stays behind. And if that distribution layer was responsible for 20, 30, 40% of your subscriber growth, you’ve just cut off a significant growth channel with no replacement.
The creators who should stay on Substack are the ones benefiting from the network. And the ones benefiting from the network have the least reason to leave. This is, by design, a very effective retention mechanism.
This is the playbook every successful platform follows. Start with utility, build habit, add social, create lock-in. Facebook started with profiles, added the feed, became infrastructure. Twitter started with microblogging, added the timeline, became the public square. Substack started with newsletters, added Notes, and is trying to become the default platform for independent media.
Whether they succeed depends on something that’s genuinely uncertain: can a platform built around reading long-form content compete for attention with platforms built for quick consumption? Medium tried a version of this and it didn’t work. Tumblr tried it. The dynamics are different here because Substack has payments built in, which changes user behavior in fundamental ways. When you’re paying for content, you’re more intentional about consuming it. But the question is still open.
What Substack gets wrong
And some of it is puzzling.
The $50 one-time fee for connecting a custom domain is an odd choice. It’s not a meaningful revenue stream for a company processing hundreds of millions in gross transaction volume. The more likely rationale is that it’s a friction mechanism. If creators use the default substack.com URL, every share and every link is free advertising for the platform. A custom domain removes that. The $50 isn’t about the money. It’s about making you think twice before taking Substack’s name out of your URL. It’s a rational business decision disguised as an administrative fee, but it’s not something a confident, mainstream platform would need to do.
The algorithm also needs work. Right now, Notes rewards a fair amount of generic engagement bait. Posts like “Hey Substack, connect me with people in X industry” or “If you have less than 100 subscribers, introduce yourself here” routinely outperform substantive writing. That’s a familiar problem. Every social platform goes through this phase where community-building posts game the algorithm because they generate easy engagement. But Substack should be aggressive about fixing it.
Medium had its era precisely because every article on your feed felt like it was written for you. The recommendation engine was almost eerily good at surfacing relevant content. Substack needs that level of precision. If the Notes feed starts feeling like LinkedIn, full of performative engagement posts and hollow networking requests, the serious writers and readers who make the platform valuable will tune it out.
So what’s the outlook?
There are small feature gaps that reveal how much room Substack has to improve the basics.
One I care about personally: you can’t add a profile picture to your newsletter emails. It sounds trivial but in a crowded inbox, a recognizable face or logo next to the sender name dramatically increases open rates. Substack doesn’t let you send from a custom email address (understandable given the complexity), but even with the default user@substack.com address, this should be solvable.
I actually published a guide a few years ago on a workaround that went viral. It involved setting your Substack to receive email replies from everyone, then adding your Substack email as a Gmail alias, which would inherit your Gmail profile picture. It was hacky but it worked.
Substack appears to have since closed that loophole by limiting forwarding to direct replies only. The fact that a workaround like that went viral tells you something about the demand. Creators want their emails to feel like theirs, not like generic Substack-branded messages. A native solution for this would be a small feature with outsized impact.
There are also signs that Substack has quiet arrangements with top creators that aren’t available to everyone.
Pirate Wires, for instance, has a custom website that integrates seamlessly with their Substack publication in ways that suggest they’ve been given API access that isn’t publicly documented.
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It’s possible there’s a creative workaround involved, but I doubt it.
And honestly, I don’t have a problem with Substack giving special access to high-value creators. Every platform does this. What I’d like to see is transparency about it. If API access is available upon request for publications that meet certain criteria, say so publicly. Define the criteria. Let ambitious creators know that if they commit to building seriously on the platform, they’ll get serious tools in return.
Right now it feels like a backroom deal to me. Making it a visible path would attract more serious media brands to the platform and give people a reason to go all in on Substack rather than hedging with a self-hosted setup on the side.
New avenues
Overall, Substack has more strategic options than people realize. Right now, nearly all of their revenue comes from the 10% take rate. But let’s look at what they could do…
A native ad network for newsletters. Brands paying to place ads inside newsletters, with Substack taking a cut. They’ve started piloting this and the infrastructure is being built.
Paid recommendations between newsletters. Substack could introduce a version where creators pay to be recommended by other creators, with Substack facilitating the transaction and taking a percentage.
Native advertising within the app and Notes feed. This is the standard social media monetization playbook. Promoted posts, sponsored Notes, brand placements in the discovery feed. Substack has resisted this, but the infrastructure for it exists the moment they decide to flip the switch.
A premium Substack subscription. Similar to what X did with X Business or what Meta has explored, brands could pay Substack directly for better analytics, enhanced customization, algorithmic priority, or advanced features. The precedent is established. Every major social platform has moved toward direct platform subscriptions and Substack could follow.
They can’t adopt all of these overnight, partly because the founders have built the brand on being ad-free and creator-first. There’s politics to it but the options exist. And $100 million in fresh capital gives them runway to experiment.
The fact is, we’re still very early. You can feel it when you look at the platform closely. Substack is still figuring out what it is, and that’s actually an argument for being on the platform now rather than later. The writers who establish themselves during this experimental phase will have the strongest positions when the platform matures.
Would I invest in Substack?
At the current valuation, it’s a bet on the social media pivot working. If Substack successfully transitions from a newsletter platform to an email-first social network for independent media, the 24x revenue multiple could look cheap in hindsight. The flywheel of writers attracting readers attracting more writers, amplified by a social layer that creates genuine lock-in, could compound into something very large.
But the risks are there. Creator concentration, competition from other creator tools, the unproven nature of a long-form social network, and the fundamental tension between creator portability and platform lock-in. Substack’s greatest strength (letting creators own everything) is also its greatest vulnerability (creators can leave whenever they want).
If I were writing the check, I’d want to see the creator retention numbers at the top tier, the revenue concentration data, and a clearer monetization roadmap beyond the 10% take rate, and how thought-through the dynamics of such a future are.
What I can say with confidence is that, as someone who operates media companies for a living, I chose to publish here. Not because Substack is perfect, but because the dynamics of the platform, the multiple touchpoints, the social layer, the paid subscription mechanics, the quality of the audience, align with what I’m trying to build better than the alternatives.
