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Substack’s Biggest New Competitor Has Creator Monetisation Figured Out

by | May 2, 2022 | Writing

Making money as a creator has radically changed.

The downsides of traditional platforms like Twitter and Facebook have got exposed — random bans, random moderation, zero transparency.

As a result creators have figured out they have to own their audience. Around the same time this epiphany happened Substack came on the scenes.

Their pitch was “bring your audience over here and own it! Direct all your online channels to us and we’ll take care of you.”

It’s worked great. But the market is shifting…

The new kid on the creator block

In my spare time I spend many hours looking at creator tools.

A friend of mine, Jack Raines, introduced me to a new one: Beehiiv. He uses it to run his Young Money newsletter that I freaking love, almost as much as my baby due in November.

What’s special about Beehiiv based on my research is the founder Tyler Denk.

Most of you haven’t heard of him but he is responsible for the breakout success of the Morning Brew Newsletter. Many creators, including myself, seek to build newsletters similar to theirs.

While working as employee #2 at Morning Brew he was responsible for their famous referral program that led to an explosive growth from 30K to 3.5m subscribers. He also looked after the Morning Brew website, templates, ad network, and content management system.

Now it seems he’s quit Morning Brew to run Beehiiv.

A reimagined form of monetisation

The Creator Economy is up and down.

Most of us have figured out that we can’t rely on Youtube, TikTok, Twitter, Facebook, Newsbreak, or Quora to pay us.

Platform money is lazy money. And lazy money is dangerous money that destroys creators’ dreams. So many of us have turned to the newsletter world, looking for answers.

I began to analyze Beehiiv creators. I noticed something different: most don’t charge a subscription fee. When I asked Jack Raines he told me that charging a subscription for your content limits shareability.

Think about it — if I email you a killer piece of content, then you click it, and it leads to a form asking for your credit card, it’s too much friction. And even if you do hand over your hard-earned cash, the next person you share it with may not be as kind.

So a paid newsletter can make subscriber growth harder.

Beehiiv creators do it differently. They all use ads. But it’s not traditional ads that they’re showing in their newsletters. No. They allow one ad at the top. It’s typically for a product or service they use and it’s spoken about in a subtle way. It looks as if Beehiiv is helping these creators find ad sponsors.

The next logical step would be to automate the placement of ads in newsletters so creators can have full control.

With tiny ads a creator could potentially keep their newsletter free. This would allow shareability and the opportunity to monetize on the back-end.

Newsletters without all the added plugins

Substack is what my Canadian friend Karlene calls “a basic b*tch.”

It looks like it was made for 5th graders. There’s not a lot of customization, and if you want to do anything fancy you need 3rd party tools.

The biggest new trend right now is called referral paywalls.

It’s where access to newsletter content is blocked or reduced by the creator until a subscriber refers a certain number of people to their newsletter. On Substack that requires using a plugin like Spark Loop which Morning Brew used.

In the Beehiiv world it looks like they’re quickly building all these tools into the platform to reduce the friction of integrations.

The referral accelerator

Morning Brew made it seem like the best reward to give someone who refers readers to your newsletter is merchandise. Wrong.

After talking with a few creators it appears the best gift you can give a referrer is either an eBook or a course. No surprise there.

Formula to steal: Refer 5 people to the newsletter and get an eBook.

The biggest thing that pisses off big Substack creators

I monitor platforms like Twitter to listen in for issues with Substack.

The bigger creators seem upset with Substack’s push to promote their brand and siphon off their readers over to other creators.

This problem was amplified when Substack launched an app. It’s clear they will help readers more and more find new newsletters. The issue is hard to understand. Let me break it down.

Substack got loads of buzz because many famous journalists and writers from Forbes, Vice, New York Times, Vox, etc left their jobs and went full-time on Substack.

What isn’t widely known is these people left their job and got paid a huge advance upfront (similar to a book advance) to reduce the risk of quitting their jobs. The deal they got required them to pay back the advance with money they earned from reader subscriptions.

This clever trick led the media to write headlines claiming Substack was attracting all the best writers. But many of them were paid to go there.

As the discoverability feature of Substack gets better, the concern amongst creators is that the platform may choose to artificially promote the writers they gave advances to over everyone else.

I for one am skeptical of that but it’s a possibility.

Successful Substack creators want their name front and center without any platform distractions. Seems kind of selfish to me, but with other options such as Beehiiv, they now can have their fat cake and eat it too.

Money talks

The other pain point for Substack creators is the 10% (plus Stripe fees) that get taken if you use the platform to charge a subscription.

Revenue sharing can feel a lot like the terrible monopoly of Visa and Mastercard which invented the model and made billions because of it.

Giving up a percentage of profits for simple newsletter software can be difficult to say yes to.

Beehiiv (and the other competitor Ghost) only charge a flat monthly fee.

So if your newsletter gets massive, you don’t have to pay thousands for the privilege. Platform competition always lowers how much businesses can charge. I’m a fan of lower fees for creators. Bring it on.

The trade-off that Substack critics miss

Beehiiv is cool. But what’s missed about newsletters is one tiny feature: discoverability.

If all you have is a newsletter and no social media accounts with an audience, no one will find or read your newsletter.

Substack is slowly starting to help generate additional traffic to what creators already get by directing people from their personal Twitter, LinkedIn, and Instagram (and others) to their Substack. Is it worth it if they take 10% but give you access to more readers?

The jury is still out.

One creator friend I know, who has a smallish Substack, said 8% of his traffic is now generated internally by Substack and that’s only going up.

The two best Beehiiv newsletters to watch closely

If you’re like me and intrigued by the new monetization options Beehiiv is building then it pays to, at the very least, keep a close eye.

The best Beehiiv newsletters I’ve found are:

  1. Milk Road by Shaan Puri
  2. Young Money by Jack Raines

Final Thought

Everything has trade-offs.

I still love Substack because it’s simple for dummies like me to use and helps give my newsletter free traffic.

But I’m keeping a close eye on Beehiiv because creator income streams will change as the social media monetisation model continues to have issues and evolves.

Bottom line: start a newsletter and experiment yourself while making money from either ads or subscriptions.

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