Thread by @UriBram

people have asked me about Substack's business model. Obviously it's impossible to know, but my best current guess is:

1) they only make ~$4.2mil a year from their 10% cut of publisher revenues

2) they'll soon make the majority of their money from "Pro"

First: Substack self-reported "more than 500,000" paid subscriptions (not subscribers!) in February. Obviously "more than" could really mean "more than", but from experience Substack also counts comped subscriptions as "paid", so it might also be way less. I think =500k is fair

How much is a subscription? @daveambrose found this useful credit card panel data suggesting $18 average transaction value on Substack.

But note that that's a mix of monthly and annual subscriptions; from surveying publishers, 2/3rds annual and 1/3rds monthly seems common

Backing that out, Substack would be making $4.2m a year from its 10% revenue share.

A sense check / alternative calc: if we just assume $100/year/sub for 500k subs we'd get $5m instead.

Looking at the leader boards, $50 a year seems more common but some big tech and finance publications are $150+. I'd guess $5m is a little high, and our ~$4m figure looks good

ok, now: how much is Substack making from "Pro"? They famously won't say, but Matt Yglesias says they've made $400k from him so far. How many deals have they inked, and how much revenue? I truly don't know, but I'd personally guess 10-20 deals making them $2m-$3m so far

Upshots:

1) Substack's business is really about "Pro", more than most people realise

2) Substack's total revenue is probably $6-7m, much lower than (I think) people think

3) Substack's valuation at $650m is probably ~100x revenue