Why Substack should launch an advertising marketplace
Why Substack should launch an advertising marketplaceAdvertising models can create perverse incentives, but that isn’t a foregone conclusion.
Welcome! I'm Simon Owens and this is my media industry newsletter. If you've received it, then you either subscribed or someone forwarded it to you. If you fit into the latter camp and want to subscribe, then you can click on this handy little button: Hey folks! Today I’m answering questions from readers. If you have a question you want me to answer in a future newsletter, leave it in this thread. Why Substack should launch an advertising marketplaceI received two related questions. The first comes from Kevin Dennehy
The second comes from Joseph Choi
Substack’s founders have always insisted from the very beginning that the platform would never build out advertising tech, and I understand why they established that ethos. Substack was founded in the wake of the 2016 election, when we as a society started learning the extent to which programmatic advertising was driving the rise of fake news produced by Macedonian teens. This was also around the time that VC funding for digital media dried up, and the entire industry finally acknowledged that programmatic ad tech would never produce the kind of high-CPM inventory that could actually fund high quality journalism. It’s not a coincidence that 2017 was when nearly every digital publisher launched some sort of subscription or membership product. The emerging philosophy posited that the only way to pivot away from our clickbait dystopia was to create reader-aligned incentives that rewarded value over traffic. Substack’s founders definitely subscribed to this outlook. Here’s how CEO Chris Best put it:
But here’s the thing: while that was a perfectly reasonable position to take in 2017, I don’t think it reflects the current reality. As it turns out, the advertising model is still incredibly resilient, and a lot of publishers have come around to the idea that it can play an important role in funding quality content. Building a sustainable media business through subscriptions alone is harder than it looks, and a lot of publishers have struggled to maintain their early subscriber growth. We’ve also witnessed a veritable boom in advertising demand, partly as a result of the pandemic-induced consumer shift to ecommerce. This demand has been especially strong within the creator community, as brands have seen impressive conversions driven from podcasts, newsletters, and YouTube channels. That’s why we keep seeing more and more Substack writers embrace sponsorships. Brian Morrissey did it. Packy McCormick did it. Yes, even I did it. Right now, these are mostly bespoke products — native ads that we manually place within our newsletters. In some cases, Substack writers will leverage outside marketplaces like Swapstack to find sponsors. Others simply recruit advertisers from their own readerships. I think there’s an opportunity though for Substack to build its own marketplace and ad insertion tool. I can think of three main benefits:
So how would this ad marketplace work? I have a few ideas:
Advertising models can create perverse incentives, but that isn’t a foregone conclusion. Plenty of publishers manage to strike a balance that allows them to monetize with advertising and still maintain their integrity, and a tastefully-designed advertising marketplace won’t sully Substack’s vision to host some of the best writing on the internet. What do you think?
Quick hits"It is becoming increasingly difficult to distinguish what exactly is the difference between a podcast and a YouTube video." [The Verge] The notion of a "daily" newspaper is quickly becoming anachronistic. Most are now publishing on an hourly basis. [Local News Initiative] "I wonder if Netflix content is getting worse in the same way all video content for algorithmic platforms tends to degrade over time. A company thinks their data is better than it is and it steers them to uglier and uglier places." [Garbage Day] The significance of MrBeast’s 100 million subscriber milestoneOn its face, MrBeast’s announcement that he reached 100 million YouTube subscribers isn’t all that remarkable. After all, Pewdiepie hit that milestone all the way back in 2019, and there are now a handful of channels in the 100 Million Subscriber Club. But there’s one thing that sets MrBeast apart from all the others: volume. In the past year, MrBeast has only published 16 videos to his main channel. Pewdiepie published 16 videos in just the last two months. Pewdiepie averages a respectable 3.7 million views across those 14 videos, but that’s nothing compared to MrBeast’s average: 93 million. To put that in context: there’s not a single present-day TV show on this planet — other than maybe Netflix’s Squid Game — that’s reached that many people... Subscribe to Simon Owens's Media Newsletter to read the rest.Become a paying subscriber of Simon Owens's Media Newsletter to get access to this post and other subscriber-only content. A subscription gets you:
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