Explaining a16z's Investment in Substack

“Infinite” ad inventory is an important concept created by the internet. The scarcity on the number of newspaper ads (paper space) or TV ads (commercial time) meant that inventory was limited.

Companies like Memberful, Patreon, Ghost or others could become the platform that Substack is aiming to build

Another problem with this advertiser relationship with websites was logistics. Not only was it hard to decide which websites to buy ads on, but it was hard to coordinate. Each website often had their own ad sales team and there wasn’t enough time and resources as a buyer to deal with all these sales teams.

Consumers may not be willing to pay subscriptions for writing. Or, there may not be a combined $1B/year of demand for writing subscriptions

The reason I find this company so interesting is it doesn’t seem like a venture-backable business at first glance. In order to get $100M in revenue, they would have to have $1.0B in gross subscription volume. When they went through YC, they had an average revenue / subscriber of $70. If that stays the same, Substack will need about 14.3M paid subsc... See more

Email subscriptions don’t have network effects by themselves. Right now, there isn’t a large switching cost for a creator to leave Substack – the creator owns their email list and content. The interesting part, however, comes in when the platform provides enough value that a writer would lose subscribers by switching platforms and when subscribers ... See more

High-performing creators may churn from Substack to build their own cheaper backend

Email could be the wrong entry into paid content. Audio, video or something else could be a better wedge

Ad networks, most notably Facebook and Google, provided solutions to advertisers’ buying problems. The main thing they provided was more data on consumers.