MM-Nathan-Baschez-Subscription-vs-Ads

1:13AM May 22, 2022

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alternate perspectives are what makes the world whole. In today's special episode, I have a debate with Nathan bash as he's the co founder of every and a former employee at substack. We're going to have a debate about subscription vers advertising, and what is best for a media company. Nathan's point of view is inspired by every subscription for business model. And my point of view is inspired by workweek, where we don't pay wall anything. This was a ton of fun, and a lot of lessons to take from it. Let's dive in. This is medium news, the podcast for executives to make sense of the perpetually moving media landscape. I'm Adam Ryan. Smart companies market to the smartest people in their audience. That's why I believe in what the folks that sail through are doing. Their platform is designed to build relationships with the audience who actually moved the needle for your business, instead of scaling, for the sake of scale, had to sail through.com to check out their amazing product, or via the link in our description. And now, let's get into today's episode. Okay, today, we have a totally different type of episode for media moves. Nathan, welcome on excited to talk subscription and advertising.

Thanks for having me. I'm excited to be here. Yeah.

So let's give context everyone. If you want to introduce yourself a little bit of like, and then connect that of how we met, that would be a good start. And then I can jump into how this conversation came to be.

Yeah, that'd be awesome. So um, I am the co founder and president of every which is my favorite job title that I've ever had. Because, as do you listen to dithering by Ben Thompson and John Gruber. Yes. So they have the joke where Ben Thompson is the CEO, and John Gruber is the president. And John Gruber likes it because it sounds equally prestigious, but with a lot less work involved. And that sounds good to me, too.

I was I was president for a while I concur. Yeah,

it's kind of great. You know, a lot less moral weight. So anyway, I'm the president of every and basically, we are a writer collective that's focused on business, we have a bunch of different writers that we work with, some have their own newsletters, some do guest posts. And you know, we're just really focused on the tech industry, we kind of do like think PC, long form commentary. You know, a lot of our stuff is focused on really fundamental issues of like, how does strategy work? Like, how is the industry of technology unfolding and evolving? And also kind of have a focus on how people show up at work? Right, like, how do we work together as people? How do we process information? How do we communicate, there's a lot of really interesting stuff in the realm of emotions in psychology that, you know, is impossible to get around. Because at the end of the day, we're all humans. And Dan writes such amazing stuff on that we have more people that that work on that, too. But that's, that's kind of the core of what we do. And, you know, the reason I think why it's relevant for us today is we're a subscription focused business and possibly subscription based ads, we'll get into as we'll get into. And so we have content that's paywalled, obviously, and people people have to, you know, become a subscriber in order to read it. And, you know, this was a choice that that seemed to us pretty obvious when we started because of our backgrounds. And now I think it's a lot more I think the sort of like thinking in the media industry is a lot more interesting. And there's little bit more of a debate going on. But before this, I used to work at substack. I was the first employee as the kind of like VP of product to there. So did a whole wide range of things, from coding features to designing the subscribe flow to hosting the podcast for a little hour. I talked to substack writers about how they did their stuff. Yeah. And worked at gimlet before that actually, which was an ad based business.

And when you for like, when every launched, it was like, Oh, this is like, our this is the bundling of subsidized bundling. That was like the big brand. Everyone was like, you know, that was the that was how it was branded. And you guys build your own tech stack and went from there. And like that was like the idea.

Yeah, exactly. Exactly. And how we met was basically, you know, just through that, I think, I'm trying to remember what the connection was.

Well, I was I was an early subscriber. And then, yeah, I think like last spring and 2021, we could finally like connected and you guys were raising a little bit of cash. And I wanted to support the journey and love the overall vision. But mostly just you and Dan are great people.

You love the vision of a subscription based business.

I love the vision of Netflix for newsletters. I think that was a really cool idea. I still think that's a really cool idea. And yeah, that's we've gotten to know each other since then. And so context of how this came to be. I tweeted something on March 4 That said, subscription focus media businesses are an old way to make money. Few subscription based companies are able to really scale profitably and those that have proven there as much marketers as they are content creators.

And I took that personally. Yes.

There was there was a little bit of love lost there. Were Nathan retweet did it with I took that personally with MJ with MJ mean. So

seriously though it's completely right. That was totally a joke. And I just thought it was

fun for the sake of ratings for this podcast. Let's act like we hate each other. So then the the DM happened said, Hey, we should debate a little bit about this. Because work week is all free. We have no paywalls. And I'm pretty open that I don't believe in pay walling normal content. I'm like even essays around certain specific areas, and have my reasons for that. But so two different approaches to the problem. And I think today, there's a lot of similar views that I think will overlap and share them. But it is why advertising why subscription, ours is my tweet, right? Is it wrong? Which we probably won't come to inclusion, too. But that's why you all are listening. So let's get into it. So why did you disagree with the tweet? Like what about it did you disagree with?

For us, it's been super powerful to have subscriptions. And I think there's an interesting counterfactual of like, what if we didn't? Would we have grown faster? Would we would we have had a bigger reader base, we have had more revenue, a better business, maybe. But it has felt really good to us to have subscriptions. I think the thing that one that really helped us do was for our way of running a business, which is we wanted to raise some capital, but not like tons of capital, this is great, because, you know, we have still pretty large ownership over the business, Dan and I. And when you're starting with a small audience base, you know, you can't really sell an ad against it. So you have to wait a while before you can really start charging. I think, I don't know, I'm curious if you have like a way of doing it when you're first getting started. And your audience is small. But like, you know, for us it felt like, I don't know, that seems complicated and kind of hard to do. And certainly at scale, administering a subscription business is complicated. But when you get started, you know, with off the shelf tools like we did on substack. Pretty much all you have to do is write stuff and then check the checkbox to put it as behind the paywall instead of in front of the paywall and connect your Stripe account. And you know, just make sure you're publishing consistently paid content in addition to free content and, you know, getting people to run into the paywall. But it was a great way to get started. And with annual plans. I mean, we really are funding actually for the business came mostly from customers, rather than investors. And so that was really nice for us. And then, you know, as we started to skill a little bit more on our list got to the size where we could sell ads to we were hesitant for a long time to do so because we just thought, okay, like how much work is that going to be? Do we really have the budget to like hire someone? How do we even know if like they're good, we've never hired anyone to sell ads before. And a couple of things happen that made it really easy for us to get started with ads. You know, one was just one of our writers, Evan Armstrong, who writes napkin math was like, you should sell ads, I want ads on my content. And so that's obviously a big motivator is just to like, be responsive to stuff that people we work with what they want to try, you know. And then too, we found this platform swap stack that made it really easy, where we could just basically create an account, and we had a lot of inbound demand for advertisements. So we tried it, it worked really well. We decided we want to keep doing it. Now our ad business is growing a lot beyond swap stack. And we have our own kind of like in house practice around it and it's in it feels like pretty transformative for the business because it helps us every paid subscription business has this kind of trade off in it, which it helps us solve, which is when you put content behind a paywall. It's not doing work for growth, right. And so you probably need to have some content in front of the paywall in order to give it someone that they want to pay for access to the content that's behind the veil, right. And so the problem is this content that's in front of the paywall, you're not making any money at all on and it's hard to kind of like justify it, you're a little bit worried about like having too much that's in front of the paywall whenever you're a subscription business. But then if you have too much content in front of the paywall, then you worry about, you know, subscribers, or they're going to churn like what's going to happen. And so having a way to monetize our free content, which is basically like monetizing our marketing for a subscription product really helps us solve that trade off. And just makes it much nicer kind of like more even business where, you know, we have diversified revenue streams, which is which is always nice. So that's kind of like our story with subscriptions. I think it's a little bit different than the kind of like the athletic or the information or substack that are very much like ads or or sorry, subscriptions only no ads,

maybe subscriptions based, some may say, right? Oh, yeah, exactly. Yeah, I think like you guys have just started diversifying your ads business growing. My question is like, why actually like subscription is and this is what I wrote in the newsletter that kind of sparked that tweet. But in that essay, I use you all actually as an example, like if you gonna do subscriptions on a paywall, it leads to advertising like minimum, but then I use Mario Gabriel and the generalist as the other example of like he was charging $300 a year for content and a community. And he said, Screw it. I had Mario on the puck asked recently. I don't know when this will air, but he'll talk about why he did that. But he raised prices to $500 took away all the content behind the paywall to only charge the community. And my kind of belief with subscription is like it is reader revenue, which is wonderful. But why ever gate every piece of content is potentially marketing, even if it's news base and value base and like drives the world forward. It can go viral. And like, it brings a lot of debate of like, well, when do we not pay? Well, this and when do we do pay? Well, this and then like, you're only as good with subscription content, you're really only as good as your last piece. Because like, if I'm like, did this piece suck, not worth it anymore? Like, that's possible. So like, why even still do subscription with content? Like why not look at other other lines of revenue potential or other ways to do subscription?

Right, like, instead of charging for access to our content, if we kind of like followed Mario's example in charge for a community or to do that did courses or something like that?

Yeah, it's reader revenue just on a recurring revenue basis. Right. So like, what makes you still want to knowing seeing ads growing of your platform, your writers wanting it seeing success with advertisers? Why keep content behind a paywall?

I mean, I think the main thing is, like Mario has a knack and a passion for building community that we just don't, we would really like to have a really amazing community. But it's somehow not natively in our DNA as much, it's much more natural for us to spend a lot of time researching and writing and then publish what we've written than it is to create a place where people can like, connect with other people they like, and we have a community and it's like, okay, but it's not nearly as good as Mario's if I'm being really honest, right. And that takes a lot of work, it takes a lot of focus. And I don't know, like maybe, maybe if we just took that work and like focus and put it in the community, that would be a really good move. But I think these kinds of things are like really complex. And it's easy in theory, in a business to say, this is working really well for someone else. So like, we should do it. But there's this also kind of like gut level feeling I have, I'm not sure if it would work so well for us, you know, if we did that just based on some complex combination of factors. So if it's not community, then like, what is it right, like, what else could we do to charge recurring revenue for and that I don't know, I mean, courses are definitely something that we're very interested in feels like much closer to a very

curious audience, like very much alignment of like, probably people who buy online courses for your audience

seems a lot closer to our DNA than then community. But it's hard to do recurring revenue for that, especially if it's like cohort based courses, where it's like, you go through a thing at a specific point in time, and then you're kind of like done, and it's an intense sprint that you do, might work if we have like a whole bunch of courses. But then there's kind of this blurred line between courses and content anyway, like, if it's like, pretty down the middle of educational how to content, I kind of questioned the true viral potential of a lot of those articles anyway, like, a lot of the posts that I've written that have converted the best over time are posts that didn't really go super viral. I mean, when they first came out, a lot of people sent me emails saying they liked them. And I kind of continued to get some messages. But it's like, an evergreen explainer of like a really important idea from Clay Christensen and applying it to the modern, like tech industry, you know, like, that's something that's going to be valuable for a really long period of time. It's a really long form piece of writing that's, like, pretty detailed. And it's kind of like a course, in a way. And, and I don't know, actually how viral that content, the potential of that content is, I mean, probably some, right, like, some people will for sure, have shared it with people or tried to share it or whatever. And there would have been some growth from that. But I think there's different types of content that have different properties. And there's lots of content that we consume all the time that we get a lot of value out of that we don't have this share impulse, you know, associated with it.

Yeah. And that's the, the argument that I hear all the time for subscription is, and I'll use work for example, they'll say, hey, which is a decent framework to think about, are there people that you're writing for that like buy products for some area like that, if you're writing in the b2b world, if you're writing for marketers, they buy a lot of SAS tools, that means there's a lot of advertising dollars to support that it should probably be advertising based. But if you're writing for consultants, they like don't necessarily like buy a full suite of software so like if you have a newsletter charges subscription and like that is potentially the only argument that I can like foresee of why that would make sense is like a little bit what you're saying is like if there's no actual like profile that you're creating for that like has marketing dollars that's attached to it then like you should just buy that because your LTV will be higher. What's interesting and like you guys don't do what the athletic and the information do but pay walling everything I think you just lose a massive top of funnel right like you just like you're not a allowing people in the door and you're still doing the annoying fucking tactics that like ad companies do with pop ups and everything like that you're just trying to get them in your system. And so that's where I have an issue is like, there's almost nine out of 10 times and more than that people are going to subscription because a lot of the points you just brought up like investors tend to like it more, it tends to be a simpler business model. You're like, can explain it the recurring revenues nice cash flow from for annuals, like, Oh, that's great. But I don't think it scales. And then like to scale it, you normally need like a lot of quality content, because you're only as good as the last piece like, the information athletic like huge newsroom. The information like massive quality of journalists. Yeah. Is it really like, worth it just for that? Or like, could they have a much bigger impact with the high quality journalism that they have by making it free?

I do think there's something there's different things like some things are more scalable than, than others, right. And I guess what I'm thinking about it, I think ad based businesses are probably like, at least in terms of audience, right? Like the most scalable, right? Because no, like how many millions of people read like BuzzFeed in their heyday, right? Like, you can kind of just reach everyone if you have some way of like showing up in their lives and optimizing for viral stuff. But then there's a lot of really big scaled subscription businesses where they charge for content. And I don't know, I think like, you know, the athletic would like to model themselves off of something like, you know, Netflix, where it's like, oh, wow, this is a really massive scale business. And we happen to do text instead of video. But like, whatever, we can build a really massive, and it's for sports fans, and whatever, but we can charge more whatever. Like they have, they have their own kind of like internal comparison, but I think they're hoping to be more like Spotify Netflix than they are like, you know, some very small subscription only niche product or whatever. And, you know, at the Financial Times just announced they had a million subscribers. That's like a pretty, pretty good scaled business. Yep. But I don't think that, like going back to the community thing, it's hard to imagine. It's just really hard to scale community. Right?

Totally. And I think like doing recurring revenue on anything is, I think, very tough to scale. And Financial Times, like, great example, they did hit a million paid subscribers, like they have 70, full time marketers, and they like are a marketing machine. And that was pointing the tweet is like, those that have scaled, in my opinion. They're sacrificing like most people do subscriptions out of idealism, I think and like that Jessica lesson talks about this with information like you, you can make better value choice for your readers, like you just get to prioritize your readers. I like kind of don't think that's true, because like, the Financial Times just basically does get you tactics and makes it really hard to cancel and like does all the things to like grow their subscription that like, ideally, maybe aren't good value for users.

Yeah, totally. So this is a point that I 100% agree on with you, I don't think that subscriptions is inherently superior in terms of like, more aligned with readers or whatever than advertising. There is a whole thing about this, you know, a lot of it is the sort of like religion from substack about it. And I definitely, to some extent, always drank the Kool Aid when I was there, but like, kept a little bit of a like, I don't know, kind of stance, you know, and now that I'm a few years out of being at substack. And also now that I'm like, you know, running media business, it just the incentives pull you to do different bad things. So the incentives to get clicks are like one thing. And there's bad ways of getting clicks. And then there's like good ways of getting clicks, right. And there's like, a lot of gray area. And then there's, there's the same thing for subscriptions, right. So like, the incentives to drive subscriptions are like, I will teach you the secret to getting rich, I will induct you in the club with people who understand what's really going on in society, I will reaffirm your most sacred beliefs, but like not really lead you to the question of money and maybe do it in the most inflamed possible way. There's all sorts of terrible ways to get people to become paid subscribers, right. And the difference is, they tend to be like just different kinds of bad things than the bad things that you would do when you're trying to expand and adds business. And I think the only answer, there's no perfect model, every model is going to have some bad things you could do that sort of like help you succeed within the model. And the only real bulwark against this is the people running the business have to just have some sense of like, shame and taste and and values, you know, that they're willing to live by, and some restraint and some ability to not operate their business 100% at the max pushing the limit of like, what you might do, but try and think about it like what kind of world do I want to contribute to that I live in. And that always means being a little bit so optimal in some ways on the spreadsheet in order to be more optimal in other ways that are harder to quantify, and maybe don't even accrue to you privately. Right? So yeah, 100% agree with you there.

Yeah. And if you're going to be suboptimal, which I like the thought process and like if If you're running a media business, I actually think is a great thing to live by, like making everything like 95% pushed on the type of revenue that you have, allows at 5% a question like, is this good for our audience? And like, that's what I question like all the time. Because ultimately, like that relationship with your audience, I actually believe whatever you may lose on that 5%, you actually can capture with much higher LTV downstream with like other things that you do in the future. And if you're going to do that, though, and this came from the essay that I have, but like, there are something like 38 companies that have 100,000 paid subscribers or something like that, and over half the list is over 100 years old, with athletic and substack being basically like the newest of the bunch. And then if you look at substack, like, I think they announced recently, like 25 million GMB, the athletic lose $50 million dollars a year right now. Like, it's like not proving necessarily even when you're subscription based, which I have to explain that to the audience in a second. But like, it's not proving to actually be like a scalable model. And even when it is, it's really old businesses that have like lots of brand clout. So like, how do you think about subscription? With like new businesses? The candidate actually, like? How do you oversee coming that scale problem that like so far, for the last couple of decades, it's been like pretty tough to overcome?

Yeah, well, I think that's one of the reasons why, you know, we have a lot more free content than the inflammation of the athletic does is because we think it's really incumbent upon us to prove to the world that we're worth subscribing to right for the same set of people in the world that we're targeting. And no one's going to take it for granted that our our stuff is worth it right, you have to actually show up not just with one good article, but like consistent articles over time and a consistent experience showing up in people's life in a way that that feels always high quality and reliable. You know, I think the athletic was able to get away with it and skill a lot faster than the information because they were trading on the existing credibility that a lot of writers had with their audiences. So they would take a beloved local sports writer, and then make them a better offer, get them to jump ship, and then that sports writer had a direct connection with their audience on a Twitter account in 99% of cases. And then a bunch of people would subscribe because they've been reading this person for years. So when you say that, like most of the people on your list have, like 100k plus subscribers club, we're over 100 years old. I mean, a lot of the credibility established is like connected to institutions that are over 100 years old, like, you know, but

bathetic, like, had spent like they had a huge mark, they have a huge marketing budget. Yeah. And like that growth team, originally athletic growth team are like, heroes in the growth world for how much money they were spending so fast. Oh, so like, what made them unique is they did have that organic growth push because the writers had the audience but like, they incentivize their writers through like a home run system. I heard this story one time, I think Alex Mather told a story at a at an event that I was at, but like, they had a Slack bot, where if the writers actually had a story that drove a certain amount of subscriptions, they got a single a double, triple or homerun, and they were alerted, through a Slack bot of like, hey, this story was a homerun It drove 50 subscribers, and they got bonuses off of that. And like, I've like thought about that a ton of like that as a genius way to incentivize your writers to go, but like, is that aligning value either like, then you're like, Are you falling into like, the clip? Like, even though it's not ads based? Are you like following the clickbait to like, get people to subscribe, because like, you want to hit a homerun. And like, sooner or later, like, I think actually, that just alignment of values, no matter what they end up, like being questioned, which is similar to what you said. But I think that like example, at the athletic I always think about is like, that was so interesting of a good way to drive growth. But is that like any different than like being like, hey, we need to click bait line here for this advertiser get more clicks,

right? No, it's not it's not morally superior at all in any way. And I don't think that that means that it's evil, it just means that it's not morally superior, you know, so the blue say that it is inherently so just kind of I don't think are right.

Yep. So also, I can now omit this. So the tweet that sparked all this, there's the first line says subscription focused media businesses. And then the second one says subscription based media businesses and full transparency I have a copywriter for that helps me with my Twitter that repurpose is my essay content for me on Twitter and I told Nathan this before the call, but like I didn't realize that he changed those words. And I see like subscription based, are companies that like totally require a paywall for all their content, which is like the information and athletic I think subscription focused or like businesses that can have like multi arms of revenue. I definitely don't have like issues with that. I still think like I question a lot of scale problems. But that doesn't mean like they're the better of the two choices like hands down to me and I see them slightly different so I We're like laughing. He's like, I definitely consider us this. And I don't see the difference. I was like, the intent of that was slightly different of how I how I phrased those, and they were seeing the same.

Yeah, totally. I'm curious, like, what do you feels is the more scalable path to you advertising as the main revenue driver, just simply because every piece of content can spread far and wide, potentially, like what makes it more scalable.

So I think like, advertising by itself, for what it's worth isn't like not the most scalable business, like media in general, I say this, like, on every investor pitch for work, we've got just started selling media sucks, hard business to be in. And it's true. There hasn't been a publisher that's worth $10 billion in decades, basically, besides, that, like focuses on anything related to the news or text based stuff. So history would say that, but for me, the best media companies have a connection with their audience. And I think like this idea of building fandom and getting trust, and affinity, is like what all media companies are thriving for the good ones. And then if you're like, actually, that means your intent is high, it means like, Hey, I'm like trying to, like, get the intention for you to like, love us versus like your attention of BuzzFeed, right? And there's like a shift there of like, intention versus attention. And I think what I, the reason why I'm advertising First, I would say, or marketing based first is because it allows to you to capture revenue downstream with that affinity. And you can capture more people. And so like when people say like, well, your contents great, why don't you just do a subscription, the reality is like, you're creating a huge barrier there. And you're like, not actually developing consistent relationships where people like feel bought in because I think that piece that does get missed, and what you're, what you guys do, is I'm a free subscriber of every I know, I'm a free subscriber. So I actually like there's a piece of me that there's not an affinity to that, because I'm not in, I'm not in the in crowd. So now you like actually lose a little bit of that affinity because like you're not in the highest of possibilities of connection. And then downstream if you want to monetize through an event or a course, or through a venture, like all the ways that love now you could like look at exploring to monetize you have a smaller pool of people, because you like cut that affinity off with the subscription. And so it's not that I think, majority advertising is also a rough business. But it's like if you're actually trying to build a connection with your audience, doing that with advertising is I actually think a better way to do it than just like start out with a subscription straight up. And the idea is that, or paywall, I should say, just to not confuse everyone, we're not doing a paywall.

And the idea is that, like, if I'm a free user, then I sort of have that weighing on me. And I'm kind of like, oh, every, I'm like, in their funnel, I'm not like in their community,

you know, you're missing something. And like, that could get you to subscription. But like, you're missing out on someone who like the reality could like, love what you do, right? And my thought process is like, Okay, if you have and this is just like math, but like, if you have 10 People hate your site, and one subscribe for $300 a year. And then the other nine you make in total 20 bucks on advertising, let's just say, right? So you're making $320 across those 10 people. If you made them all free, you might only be making $25 in advertising. So at first you might be like, Whoa, huge difference. Like, why would you do advertising. And this is like where I think a lot of people get stuck because they're like, the math doesn't make sense. But the reality is, if you do a good job, you actually can like, capitalize on instead of only having like that one of 10 person that like is all in on every, you now have 10 people that you can, like, monetize through a research report through a guide through an event that like you have a much likelihood and a more consistent habit to build that relationship with them to go downstream. And like my bet is that you can sell them more products, services, tools and experiences, because you've like built more of a consistent relationship with more people. One of the big marketing trends I'm paying attention to is the disappearance of third party data. Owning your audience is so important for marketers today, which is why I love sale through their marketing automation platform. digesta Frankly, astonishing amount of first party data. So executives can properly understand their audience in less time. Had to sail through.com that's sailthru.com to check them out, or visit the link in our description.

I kind of want to survey our audience somehow. I'm like figure out from three people like how they feel about every you know, like, do you feel like you're part of the community or something? I haven't figured out the right way to do it, but it goes a little bit against my intuition. In my guess about how a lot of people feel who are on our free list, there's of course, there's some people who are like, we're just something they sent it for a while ago. And we keep showing it their inbox because they haven't unsubscribed yet. But it's like, whatever, like it floats around, we've all got a bunch of stuff like that in our inboxes. Right. And obviously, we want to have a more special place in your life than that. But, you know, the only way to get there is through having an experience of like, you know, like a wake up moment, or like, Oh, this is really good. Let me like pay closer attention to that. So then there's this other set of people who maybe they've had that experience, but they've not paid yet. And how do they think about us? And what are our options with regard to like, other types of things we could do like a course or a research report, or all the things you said, I kind of feel like, there's not going to be some huge difference in conversion between someone who's on our free list, if we're trying to sell a research report, and someone who's on your list, if you're trying to sell a research report, like I could be totally wrong, there might be a little difference. But I think it was probably a pretty marginal difference. If it's like the same list in the same research report. But one list, there's a free and paid component and another list, it's all free.

I think like that kind of goes against what you just argued with athletic though, like, if you have a personality, and you're driving forward, potentially, that's yes. Right. Like if you already have a brand, and like people are like, Oh, I love every whatever. If they really are loving it, and there's a price problem like one, they're not the best of users. The other thing that like I think gets missed in the equation here is if like, let's use climate, it's example. If you like write a paid climate newsletter that you charge $100 a year for, you start to build a free list naturally, you know, you know this, but your free list is probably growing faster than your paid list, etc. But what like media companies, and this has written about a lot now, but like, I believe, like you actually make the vast majority of your revenue normally from like 1% of people in your whole ecosystem. Most traditional advertising businesses aren't like this. But if we're thinking about like modern digital publishers, they actually like if they're starting to diversify revenue, it's the same people going to the event buying the subscript like, it's the same group of one percenters. And if you do a subscription, you actually lose that chance to like, build that relationship with more one percenters. And you guys do a better job of like, getting free content out there more, but like, my whole thing is like, if you're paying along everything, you're literally just like losing the chance to find your 1% audience because like, they have to be that person the day they show up. But like, how do you actually earn that over time? And for me, we like have ways of quantitatively measuring of like, Is this person a gold subscriber? Well, how do you build that relationship? Like? Well, first, I want them refer three people. Yeah, if they do that, month two, we're gonna do this and like, you make way more with a smaller part of your list. And if you've just paywall everything, you never have a chance to, like actually build that top of funnel to find that group.

I think it all hinges on to what extent do people on the free list have a subscription based or subscription focused company? To what extent are the people on the free list feel like there's a lot of value there, and they're, they're like, kind of like, bought in and they're paying attention, even if they're not a subscriber yet. And my guess, just based on our data is that there's like a substantial percent of our freelist, who like, would self identify as loving every, but they don't feel like the urgency to buy a subscription? Because it feels a little bit like wow, you know, it's kind of like the extra stuff, you know, like they don't feel, it's like, there's always a lot of stuff to read. And it's always kind of hard to make time to read stuff. And you know, like, competing for people's attention in their inbox is just like really tough. But at the same time, they've probably had an experience that's like, Oh, I've read a couple of things from them. And I really liked them. Like, I really liked that, you know, and I don't know, but I would just guess I think a decent chunk of our free list basically feels that way versus how you would feel if you're on the athletic or the informations free list, which is, I don't know, somehow gotten these peoples funnel. I've never really read anything by them, I don't really know what their deal is, you know, because all their stuff is behind the paywall. I've never like spent and also I think another there's a huge difference between news and like essays and analysis. And our essays and analysis are much longer, they're more personality based, they could be more weird and artful. Potentially, they could be more kind of like just crazy and risk taking. And electorally, the information and athletic, they're really good at what they do. But what they do is very straight down the middle, kind of like, here's the thing that happened. That's important. We've reported it, you know, and so it's just kind of like it is what it is, you know, there's not a whole lot of like personality there. And so I think that maybe also partially explains some of the difference in how I would imagine or and how I think our free list feels about us versus how the free list at the athletic of the information might feel about them. But I do want to say the other thing you said that is really important is what I would labeled price discrimination where you're talking about with like the 1% of your audience where you earn most of your revenue from because, like for us, we have events, we have other stuff besides just writing that we put behind the paywall. We built some software tools, we might do some more stuff like that in the future. And like, we could ever sell merch or something like that if all these things were separate purchases, then we would give our most dedicated fans the opportunity to spend a lot more with us than they currently do. Right. But what we're doing instead is bundling it all behind the benefits of being a subscriber, right? We have kind of like the Amazon Prime model, almost of like, here's a whole bunch of stuff that's got zero, which like

Netflix and Amazon Prime is like, why the subscription boom happened, right? Well, they're all sick. These businesses are Yeah. Does it work in media is like I think data says, at least to get the 50 million in revenue is really hard. Like really in subscription only. There hasn't been anybody to do it, besides the athletic and they burned a lot of cash. And I think, you know, it's really ironic of like the raising for a media company, you've done it not easy to do. Because at first I like last summer when I started talking to investors, like one really prominent media person was like, just make the athletic for business like just do that like paywall everything you're doing, like niche b2b, like just make one subscription across like niche b2b, that would be I'll leave, I'll like him. Like, that was great idea. And then like six months later, the athletic sells. Everyone finds out the numbers. And then people are like, Well, are you paid? Well, like is this like athletic for business like cringy? Or, and it's like, it's it, I think people are kind of coming to a little bit that like, the athletic model is not meant to scale, at least profitably. And that was like the whole point of my tweet. It's like the information and athletic, you know, debatably, it's an old model to just pay wall everything and hope for a subscription. And the last like piece, I would say that's not like financial related. And I'm a pretty hungry capitalists. So like, You very rarely hear me talk about what's better for everything. But like, the reality is, I do think there's something to say about like, right now. So many amazing writers and thinkers and journalists alike. In general, there's so much amazing people out there finally, creating content, because the barrier has been lowered to like, write a newsletter on subject that takes like 10 minutes for the first time, right? Like, there's so many great people like, are we doing a complete disservice to the world by like, not allowing people to get access to that without paying for it? That's a different debate and question, but like, I do think that's part of like, what work week is, is thinking is like, we want recurring revenue to be in our revenue stack. But like, are we doing a disservice to climate to like keep people from wanting to enter that space by like, pay walling the content? And like, maybe Are we under monetizing it then for something like climate maybe, but like, it allows you to, like educate more people in the space? And I think like, if you look at the disinformation happening in Ukraine, on the new side, like having ethical questions, also question your business model is like, not a place I want to sit. And like, it's really hard on the news side, but then even on like, the thinking side, which I think you and I both have, like couple of people that would like relate to that, that that work at every and work week, but like, I'm like, damn, I wish like more people could read this, this is so good. But it kind of goes against, in some ways competes at least in some ways with like the main business model.

It's interesting, I kind of think about it, like, a lot of the content that's behind the paywall is not the stuff that anyone would read. And that's kind of why it's good to be behind the paywall. The stuff that is like top of funnel to getting into our world is in front of the paywall. And top of funnel doesn't just mean where it sits in like a user's journey of becoming a subscriber. From like a financial point of view, also, from an intellectual point of view is what it means it means that our free content and I'm really only speaking for us, I think there's probably a lot that's true about what you're saying about people who are putting, like content that probably should be in front of the paywall behind the paywall, right, like on their sub stack or wherever else. But um, I think Ben Thompson does a great job of this. The behind the paywall stuff is like it's the deep cuts. I think people a lot of people don't understand that. Like, it's not, it's not like content is content. Like there's, there's the big idea that you might want to share with everyone that's like a sort of shareable thing that's like, that's, you know, whatever. Like, it's, it's timely, or it's, it's a new perspective. And then there's like the working through the implications of that big idea for the people who liked that and want more and like, that's the kind of stuff that should go behind the paywall, you know. So, yeah, I think there's at least inherent in the subscription model, a lot less risk of that than the picture, you're just painting. But at the same time, I do think there's a lot of people who just like put stuff that shouldn't be behind a paywall behind a paywall, you know, so like, yeah, in reality, the damage that you're talking about is, it's probably being done to some extent, it's just a question of, does it have to be done? Is that actually what people should be doing to make their subscription business grow or are they actually they're not even just doing their stuff? scription model in a more optimal way. And like, when I was a sub site, it was a thing where we were always like, the number one mistake people make is under investing in free content. Like they have this idea that because I'm a paid newsletter, I need to make all my stuff paid, or like the vast majority of my stuff paid or like my best stuff paid. It's just the wrong mental model. It's not the best stuff. It's the deepest part of the funnel stuff, which better or worse for the reader, depending on the day, depending on the topic, it doesn't matter. It's like, once you get this stuff, then you can go here, and you can read that. But before that, when you're kind of learning about what our whole worldview is, in general, you get that here. And that's free.

I think that's like, just really hard to like judge of like, which one is which. So like, there's, that's hard. And like, this is I learned, the first subscription for news was in Germany in the 1600s. And the kind of higher authority folks in the space would actually have a piece of paper that they would pay a certain amount for. And that was the newspaper and they would pay a flat fee every time it was delivered. And basically, the next tier lower of economic class wanted access to that information. And someone would basically put, summarize what the newspaper like news was on a handwritten note, and those people paid a subscription out of their paycheck. And like, I think it's like really interesting to think like, at one point, the model was to think like, wow, for like, our 1%. Audience, we sold one off things because we made more money. And then for everybody else, we actually like lowered, like, created more access through subscription. And like, somehow, through the last 500 years, I think, like subscriptions been like, well, avoid access, avoid Act, the more we can avoid access, the more we can, like, avoid them having benefits, then the more subscriptions we can sell, and it's like kind of like not, it's not in the spirit of like, I think their original intent. And you know, now we have like people saying, like, no ads have part of it. Well, now you like have conflicting business models, even like within yourself, right. And like, it's a big piece of it, too. So I think the, the multi multi prong approach is like for sure the right way to go, but still struggle even like scaling, decision making and judgment of like, is this piece for your service paid?

What do you think about metered paywalls? Because this is, I think, solves a lot of the issues with it, which is basically what people are paying for is convenience. So like, if I'm a repeat reader of the New York Times, eventually I'll just get annoyed at hitting the paywall, and like, I know how to get around it. But I might think, Ah, why I mean, I should just pay them, it'll be a lot more convenient. I have like, a better form factor for my experience. So it'll be more pleasant and, but the information is still there. It can still spread, they don't have a hard paywall.

The New York Times though, like, is inexpensive, like it's basically like, almost $200 a year. Just like if we take like average, I just like think about this way. Like, if we're talking b2b, there's like a different story there. But like the New York Times is made to be like an every person newspaper, like they cover like news that's critical. Not necessarily sure how, how that's beneficial for like, what they're doing to charge 200 bucks a year for access. But I think with metered it just proved not to be the best business. Like we're in it to make money. And like, I do think they solve a lot of like the access problems, like okay, you get three a month and five a month. And like, I know, I understand it, but like, there's also like, look at the failures happening right now with like, a lot of the newspaper businesses that went to meter to like solve that. It's not really working. And like that's what I'm not a believer. microtransactions either, because like, right, you also have to balance like as much as you have to balance accessibility and quality. You also have to balance making money and the metered one. You need a lot of eyeballs to like make that work. A lot, a lot, a lot of eyeballs. And so like when I think about like digital media startups, I would never recommend anyone doing meter because like, you're basically like, not going to have the math be in your favor. But do

you think it's that you need eyeballs or like affinity because one way of thinking about a metered paywall is like, oh, some percent of just this mass of people will convert and it's a very low percent inevitably and so you just have to have so many eyeballs. But like, I don't know, Patreon is in some ways, kind of like a metered paywall. Like there's a lot of people that can consume stuff from a creator and you know, like a YouTuber or musician or whatever, and like really enjoy it. And basically, you get very light benefits from the Patreon but it's like a way to support it and I feel like the metered paywall is kind of like a way for the New York Times to almost have their cake and eat it too and like be that have their own little Patreon and you see it with the Guardian too. Like they pit I'm not saying that these are like, you know, incredible scale businesses or whatever but they're like, decently

the times is the big iRobot times definitely the biggest one right but they're also like 130 years old and have like the cash from the they were most profitable media company for almost a century and that built up a watch so that they could like make strategic moves. And so that's like, is it just an old business that like they've been able to thrive on? Because they've had that network effects already? Like potentially? I think like, the in terms of like, is it fan affinity? Like, if you have the affinity, is it just there? I would just like go back and say like, well, then you're just like, basically, like, that is an interesting, like, math problem. But like, is there better ways? Like, could you find recurring, other ways of doing that besides just like doing the paywall? Like, can you keep your content free, and then, like, take advantage of that, of that actual affinity through something else? Rather than like, I don't think tips chaired, like donation or those aren't like, unless you have huge amounts of eyeballs. It's normally like, not in like, statistically like Patreon, like all those, like, most people don't make enough money to like, even remotely live on. So like, maybe supplementary at best, but most of those, like aren't business models that I think like are actually like meant to support an ecosystem,

right? What kind of like things besides charging for you know, convenience if it's if it's the metered paywall model, do you think are good because like in the b2b context, events and you know, data or research reports or whatever, like maybe, you know, in a more consumer a business context like courses or kind of like, context where people it's like, stuff that people want to do like a cooking related thing, or like a crafting related thing, like a course type thing might be good. What other things like like, let's say you're the New Yorker, right? This is an interesting example to me, because a lot of people really love the New Yorker, you know, like there's very strong affinity there. But it's less obviously like there's I'm not sure what they could do they have the New Yorker festival I think it's probably a blip for them revenue wise compared to subscriptions, but like an ads but like, I don't know, what, what would you do in their case where it's not like there's this obvious like thing that you could sell? Yeah,

so Austin refund time and I had this conversation when the hustle launch trends and for context, hustle free newsletter million in million and a half or subscribers pretty engaged high affinity audience in general trends was our subscription product we launched which was like a community and free research content to like start business ideas. $300 a year upfront annual spend. And when I talked to Austin about it, he was like, you know, I think it's like great, I'm sure you had like huge success immediately. But he's like, you probably like could have potentially you launched and sold like one off trends reports for $100 each, and like capitalized way more on revenue per user and made more and you look course lose the recurring then right like that's, that's the problem. But like you're capturing way more cashflow, than actually like doing a one off subscription. Because like that audience was eager to buy anything. And so even though like trends was successful as a subscription, is it actually like a product that like we could tap into? Like what, you know, how does that repeat over time where like, if you actually have like an organized process, where you're like, hey, we have the data of like, these type of audience like they would buy this Trends report about like the plant industry that's like how to how to crack this industry and you charge 50 bucks for it, could you like have as much cash flow, which is the point like one of the points you made earlier, like it's a great cash flow to get started, like debatably you could start to do that like with one off products, and like make that and then over time, you could like bundle all that up if you have like hardcore fans and charge like a way higher amount. But like having if you're going to like monetize content, I've actually kind of like fallen to the belief and think Austin was right. It's like if you have that high affinity audience I just like do one off pieces that are like super high quality that like have very bottom focus to use your words like very bottom focused audiences and sell them for like high price points and or like high price points compared to your audience. And if that's the New Yorker, I mean, honestly, maybe it's like a writing class like everybody loves you know, an illustrator class, like, it might be like the things that people love about you. The Hustle is like entrepreneurship, like, you got to find like thing that people love, but might be one off stuff instead of just like bundling behind a paywall immediately, which comes with a ton of complexities.

I think also the New Yorker could do like it's like a weird idea, but like books or something like that, like yeah, all their writers like write books, for the most part, like the vast majority of the writers are, it's the kind of writer that they attract. They could totally just go direct and work with those writers rather than Penguin Random House or whoever else. And I mean, that's an interesting example of a one off purchase. That's like right there with the thing that people already want from the New Yorker.

I think about this a lot like let's think about universities. They have a recurring revenue piece of like being part of alumni network, right? But everyone gets that content for free everyone like they send everything in the mail of flyers I'm not sure like what universe but elite universities, public universities with football team send you should all the time, right and they make their sports content free like everything they basically have to consume around the brand They make free and then they monetize. And like one off ways of like buying shirts, buying tickets to a game, making a donation, like they have a whole ecosystem that like, they really like use that brand as like an entry point as an alumni. And you know, I think that's like an interesting way to like, approach and think of you have that much affinity. They're not just being like, Hey, give us like $200 a year for this like thing, right? That they hide all the other stuff. They keep all the other stuff out there and they do one off purchases. Yeah.

It is an interesting hot take that user revenue is good. But subscriptions are overrated and one off purchases are underrated.

Yeah. Because if you actually have an audience that's like, has high affinity, it is recurring. You can predictably talk about that. And like people want to talk about recessions and like all that stuff. Sure. But like I can tell you as someone who had a subscription product through COVID people cancel, it's not like they just like are like sweet. I don't care because I signed up for this. It's like no, you get like devastated with cancellations. Yeah. So like, no matter what, like no business is safe, unless you want to use like unethical tactics of like, like the New York Times. And like, make you go through a terrible, yeah, maybe impossible cancel. So I think there's actually like a larger possibility to build like deep relationships by doing one off purchases. And if you actually have high affinity and high quality, they'll just keep coming back to buy those things.

Fascinating. Fascinating. I mean, it's definitely something that we thought about our default has just been packed everything behind the paywall, but the big place where we probably won't do this is with courses when we get around to it. Yeah. Because courses are just such a different category of you have actual cogs there, right? Because like you have a limited number of you basically have to have like a student teacher ratio, you know. And so, you know, that would that would be tricky just to bundle in subscriptions. But, yeah, that's an interesting, interesting thing. Why do you think more people haven't experimented with it? Like, do you think it's basically just everyone's been blinded by subscription hype, because of prime and Netflix, like you said earlier? And then at this point, this sort of like tides are turning on those?

I mean, the New York Times leading vignette company by revenue in the world does subscription. Netflix has had massive begger best media company in the last like five decades basically created Amazon Prime like the flywheel of their businesses prime. So I think, yeah, people got like really obsessed with subscription. Also, then like the run of Dollar Shave Club, and like, all the things that everyone was like, oh, people are willing to pay subscription, because like, they just put in their credit card, because it's like, we've lowered the barrier. You don't need to swipe anymore. It's like do do done, right. Like, all those reasons were the push to subscription. And I think people got lazy in their thinking of like, is this actually like the best business model? Like, really? Or is this just like the easiest one to copy because like, it looks like what everyone else is doing. And like, the times does it but like, The Times literally has a newsroom that no startup will ever be able to compete with. It's just not possible to do. They have so much cash and so much history. And so much like reach out organic reach that like it's just brutal. And so then if you like, or like, take that out of the equation, because it doesn't work, Netflix, good example of like, I do, like hope one day, there's like other mediums that can compete with Netflix. But right now, like video is really like dominating, because cable was such a bad experience. And I think they capitalized on that, like, their owning cable was so bad. This is so easy. It wasn't necessarily like the choice of like, I like paying a subscription, it was the choice of like clear pricing, like your cable bill a subscription to just knowing that it was always over all over the place. But with text, it's like, it's just really difficult to scale. And I think people got lazy in their thinking and didn't realize that like most of the most successful people have, our companies are like really old and have been out a long time and have a big war chest have not only writers, but cash. And they're like marketing machines. And I think very rarely do organic, paid subscriptions just naturally grow 30% a month, like it just bear very rarely happens. But if you have a free product that can happen. And so then like how do you capitalize on that?

That seems like the kind of fundamental force is for new startups that have to Grow audience. How do you if you are charging for something, not charge for so much that it capture growth? Right? Because you need to fill your top of the funnel, The New York Times already has their top of the funnel is the world already. And so they don't have that problem. But you do. So how do you solve that you need to have something good that's free. And I think the question is, how far do you want to go with grappling with that for us where we've chosen to go is we're going to have a lot of really good free content. We're also going to have a lot of paid content, and we're going to structure it as a subscription. And our free content is going to have ads on it. And where you've chosen to go is different but kind of similar. You're going to have more free content, and you're still also going to have paid content But it's going to be one off purchases. And it's going to be something like a research report and event, whatever. And your goal is to keep getting recurring purchases from people, even if they're not subscription auto recurring by focusing on creating really high affinity fans. And that allows you to price discriminate, which is great. And it allows you to have more of your free content, do more of the work of creating high affinity fans and creating growth for you. And so those are kind of like the differences in bets. And I think the key question is, does the sort of like stability in the compounding nature of auto recurring subscriptions outweigh the extra growth you get from having more stuff be free? And I think that's like sort of the bet.

There's obviously scale of advertising industry dive is a good example. No one knows them, they bootstrapped $100 million in revenue this year, like industry drive is twice the size of athletic and revenue. Like that, it's crazy to think about, and no one knows them, because their ads based and like they're not, it's not like a sexy business. So like, Yeah, I think like question of scale, and profit, like, in the end, like that's, that's what makes it interesting, I also think is my like, my tip that I would do, if you like, are getting started, is write a fucking amazing piece of content that like is bottom tactic, like a mate like that you feel like you can charge your audience a premium price for whatever you're doing, whether it's like in cooking, sport, or business, and then charge five bucks for that piece, and use that cash flow, like start to promote it, make some money, and then start to put ad dollars behind, it doesn't have to be a lot, because what's gonna end up happening is like, you'll actually immediately find your 1% audience who by the $5 piece is like a lower barrier, they're gonna love you, because like, they just got a ton of value. But then everybody else you like collect an email address, when they sign up, it's already high intent, like, they're like I wanted this, I actually don't wanna pay five bucks for it, like fine, but like they already put in their email address. Now you are building like a free list, that's like a one off purchase that now you have a newsletter, the next day that hits their inbox, it's like around that piece of content that you charge $5 for, and like, it's a growth tactic, but it's actually a value driven growth tactic that like allows you to immediately understand the quality of your audience. You also get cashback of your user growth of Elise, you get five bucks. And so that's like something that there's a few companies that I know that have done that. And I think it's a really smart move.

I think it's interesting, I think it's kind of like almost a meta point. For this are like a almost like, so what is kind of like, the really important thing is just is the content good. Because like, I think you're basically going to be fine. If you charge subscriptions and your content is amazing, as long as like enough of it is free, that you're not kneecapping yourself too bad. And you're basically going to be fine. If you you know, maybe charge for one off pieces, and you have a high enough affinity audience that they keep buying stuff, you know, and people actually want to buy things and are currently even though they don't have to, it's not an auto recurring thing. Like, if the content is great, that's gonna be fine. And like, the hardest thing in the world to do is like, have consistently amazing content that like scales you to like lots of different audiences, because there's something it's like, at the end of the day, it's just like a talent business, kind of. And so that's almost the more important thing here. And I think the two sort of like different strategies that we've chosen for what to do with great content is like, I think either are probably pretty close. I think there's, there could be really, really huge differences. But it seems to me like, given that we've got a lot of free content. And given that you're charging for stuff, you know, like, it's pretty, I think it's relatively more marginal than the figuring out how to have consistently amazing well, but

I mean, like 99% of content we put out as is free 99.9 Right. So there's like a stark difference there. I don't know what yours is maybe 20%. Ish. It's higher industry. Yeah, that's great. I didn't even know that was a good question. 50s Hi, I'm gonna start asking people that question.

Yeah, the way we think about it, like a bicycle, it's every other one pedal stroke down is grow the audience, the next pedal stroke down is converted into paint.

Yeah, and I think like, that model could get to 50 60 million in subscription, probably at scale, and like 150 to 200 million in ADS. But, you know, like, there's like, interesting, a difference there of like, that's what I would like, question next is like, how do you actually go down that funnel? And where's the addressable market to scale and that's like, the thing that I've been trying to push a lot of the audience that I have forward is like, there are really good 10 to $40 million media businesses to build and like I don't hate anybody that's done that but like, I want to push people to like think bigger and media because like we've been lazy in our thinking as an industry for like decades. Like just put a banner ad on the side of the internet, like just like we did with magazines. Let's like just put this thing in front of this content to get a subscription. It's like just not innovative and It's not like creative. And like because of that, like our outcomes have been lower. Our like, values have been lower on the public markets. And like we fall into traps like clickbait and misinformation and like all this other stuff like media culturally can like change all that I just like want people to push themselves forward with with creativity and innovation of how they make money. Interesting. I love it. Sweet. Well, as much as this was a debate, it was an awesome conversation. And I really appreciate you, you coming on. And if you don't already go follow Nathan on Twitter at NDAA Sha. And we will we will pick this up next time.

Amazing. Thank you so much for having me a lot of fun.

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