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Yahoo Finance Presents: Chris Best, Substack Founder & CEO

Yahoo Finance’s Akiko Fujita sits down with Substack Founder & CEO, Chris Best, to discuss the platform’s business model, the media landscape, and three of Chris’ Substack subscriptions.

Video Transcript


AKIKO FUJITA: This is "Yahoo Finance Presents." I'm Akiko Fujita. And today we are joined by Chris Best, the CEO of Substack. Chris, it's good to have you on tonight.

CHRIS BEST: Thanks for having me.

AKIKO FUJITA: I want to start by looking back at the company's fairly short future. You started in 2017. And you've certainly had a huge growth spurt over the last few years. Where would you say you're in your journey right now? Where do you put yourself among what feels like an increasingly crowded space of content platforms?

CHRIS BEST: The way that we think about this is that we are at the very early stage of a big transition that's happening not just on Substack, but kind of across the information ecosystem as a whole. So Substack is a platform where as a writer, you can go independent, you can own your own audience, you can own your own content, you can connect directly with an audience, get their emails, they can pay you. And it's really a fundamental shift in how we consume and value media on the internet. And we think that we're kind of-- in the broader world, just sort of in the neck of that change, and that Substack is one of the companies that's helping shape and bring about that future.

AKIKO FUJITA: As you pointed out, your platform allows anybody to really publish. It's up to the publisher to determine whether they want to be behind the paywall or not. We journalists have been subscribing to a lot of newsletters. I know that's a big audience for you. But how have you seen that audience evolve over the last few years? Who's on Substack?

CHRIS BEST: It's really interesting. There was a question we had early on. When we started it was, hey, we think this will definitely work for a business audience. Our first publisher on Substack was a guy named Bill Bishop. He wrote a newsletter about China for international business and government audience. And that worked astoundingly well.

And we sort of had this question of this will work for business audiences, but will it work in general? And since then, that answer has kind of come to be a resounding yes. We've had everyone from opinion columnists, to sports writers, to culture writers, to fiction, to, like, all kinds of interesting consumer things. And now we're actually seeing a pretty big growth spurt back in, like, the finance and investing and markets world.

But I think there's-- the power of this model works across a lot of different domains. It's not like there's one section of the world that this applies to. The principle of, like, I want to take back my mind as a reader, I want to connect directly with and support directly voices that I trust, things that I want to have in my mind is kind of broadly compelling.

AKIKO FUJITA: Let's talk about an announcement that recently came down. A few weeks ago, you announced you're going to be laying off 14% of your workforce. 13 out of 90 employees. And you said that in part that was so that you wanted to be able to fund your operations through your own revenue without relying on additional financing. What does that revenue picture look like right now?

CHRIS BEST: What does that revenue-- so first of all, this was, like, a super tough thing to have to do. I mean, we let go of some people that are great. The good news for Substack is that we do have a business model that works. So our business model, in case you don't know, is it's totally free to publish on Substack. You can start tomorrow, publish to whatever size audience you want. And then we only make money when you make money.

So once you start, if and when you choose to charge subscriptions, we take a cut of the revenues. And that means that our incentives are aligned with the people on the platform, which also means that our revenue grows as the business-- as the market value of all the writers on Substack grows. And that does continue to grow strongly. So we have a business model that makes sense at kind of the unit economics level and is growing strongly. So there's no reason why we can't fund the company out of revenue, which is, of course, a good thing to be able to do when you're in a tough market.

AKIKO FUJITA: You know, that announcement of the layoffs obviously came down after you announced you're going to be dropping your fundraising efforts. The last funding round, as I understand it, last year $65 million was raised there. This is obviously something so many startups are going through right now. What's your sense on how long this winter, whatever analogy you want to make, how long this downturn lasts?

CHRIS BEST: I think the honest answer is that we don't know. I don't think that anyone knows. And the question that companies like ours have to deal with then is given that we don't know how should we plan and what's the right way to operate and the way that we've approached it is kind of like, look, we're not going to have any plan that involves wanting or planning on a fund raise for at least two years, maybe ever.

And that doesn't mean to say that we wouldn't consider that if the situation changed and the markets were in a good place. It's not like we don't necessarily don't want to. But we kind of want to have a plan A that does not require it. And I think a lot of companies are coming to that similar conclusion.

AKIKO FUJITA: And so you may not be relying on funding for some time, obviously that raises questions of is there a way to expand your revenue base. I know you've really been focused on subscriptions, not necessarily an advertising model. Is that something that you now have to consider, given the current environment?

CHRIS BEST: I actually think our decision to focus on subscriptions to the exclusion of advertising is one of the strategic strengths of the company and one of the reasons that we make as much money as we do and the revenue continues to grow. Because although it seems superficially like subscription revenue is money and advertising revenue is money. And if you did both, two monies is greater than one money.

I think the fact of the matter is that the kind of business you make and the kind of work you do as a writer on Substack-- when you want to win at the subscription game to appeal to earn and keep the loyalty of an audience that deeply values your work and make something that's so good that it's worth paying for, the kind of work you do when that's your only goal is qualitatively different and better than the kind of work you have to do if you want to, like, get to a lot of clicks and a lot of views and please advertisers.

And so that focus on subscriptions is actually our biggest differentiating factor. So I don't think that we'll change that, necessarily.

AKIKO FUJITA: As you laid out, the main business for Substack has been these newsletters. We've come accustomed to reading every day. But you've also expanded into Substack for podcasts. You've also got video player for creators that you've been testing out. How do you see this all evolving? I mean, what does Substack look like a few years from now in terms of how much of it is the newsletter that we know, how much of it is podcasts, how much is video?

CHRIS BEST: Yeah. People have often thought of Substack as a platform for your paid email newsletter. And I think that that's a useful conceptual handle for it because it sort of captures the essence of it. But the reason that that's a winning formula is that an email newsletter gives you a direct connection with your audience. So when a reader subscribes to somebody on Substack, they don't subscribe to Substack. They subscribe to that writer who has their own business, who has their own-- owns all of their work, owns their connection with their audience.

They can bring their email list to Substack. They can take their email list away from Substack. And that's actually not only exciting in the medium of writing. The same thing applies for podcasting, the same thing applies for high-value video content. We've seen a lot of writers who want to do a podcast.

We've seen a lot of writers who want to host their subscriber community. We think that the set of formats that work under this model is actually quite large. And the magic of it is in that direct connection with your audience that you own.

AKIKO FUJITA: I know you get this question a lot, but given the growth of your platform, it's raised questions about what the traditional media model-- is that outdated? We've heard, increasingly, writers wanting to take their own content and own that as well. I'm just curious how you look at the traditional model right now and whether, in fact, it is evolving with the broader landscape.

CHRIS BEST: I think it's a big and complicated question. I think undeniably there are parts of traditional media that have been struggling and have been struggling for a long time, long before Substack came into the picture. At the same time, I think there are parts of traditional media that are likely to work very well and continue to work very well.

And we don't even necessarily see ourselves as being in competition with other forms of media companies. I think the thing that we aspire to do at Substack, in our broadest sense, is compete with the attention economy. Compete with the idea that the state of nature is that we all are going to give all of our attention for free to the most addictive feeds and that our attention has so little value that we should give it away.

And I think that model played out in the first generation of the internet and is kind of coming to an end as people realize my scarce resource is no longer my money, it's my life. I only have so much time to spend thinking about things, caring about things. And if I can spend that time more wisely, that's actually valuable.

AKIKO FUJITA: You referring to the attention economy immediately had me thinking about Twitter. And I'm not going to have you weigh in on what's playing out between--

CHRIS BEST: Good, because I have no idea.

AKIKO FUJITA: --Elon Musk and Twitter. But there does feel like a real fragmentation here. And there's users who say, look, I don't want all this noise. And yet, it feels like we still continue to go to the same platforms that have dominated the space for the last several years because that's where the audience is. Are we starting to see that break apart? And where does Substack see itself in that space?

CHRIS BEST: The way that I think about this-- and it goes back to your question about advertising. When your business model-- if you're a network, a social network, any kind of a network where your business model is advertising, and specifically it's, like, commodity advertising where you're slicing the audience into its smallest thing and selling it, you're sort of inevitably pricing people's time as a commodity, right?

You're aggregating as much people's time as possible and then selling it off in slices, which means that you kind of can't value quality in the same way because it doesn't show up in your business model. Whereas on Substack, you might find that there's a writer that's so valuable and maybe especially in a business context might be particularly valuable because you don't have to spend too much time with it to get what you need. And it might be 10 or 100 times more valuable than something else. And so a business model like Substack, where you're actually paying for things, can unlock a type of value that just can't really get economically rewarded on a platform like Twitter or Facebook or TikTok.

AKIKO FUJITA: We can't let you go, Chris, without asking about what you subscribe to on Substack, your top three subscriptions or recommendations.

CHRIS BEST: [? Cool. ?] Well, I can't-- I won't get into all of the things I subscribe to on Substack because there are too many. And I love all my children equally. I would give you three that I think might be particularly interesting for this audience.

One is The Bear Cave by a guy named Edwin Dorsey that started the newsletter fresh out of college and writes about-- he's usually exposing corporate misconduct. And so he's read by tens of thousands of people, both like journalists and people writing about it, and of course, short sellers and people thinking about what to invest in. There's Joey Politano who was a recent college grad.

And he came back from the Peace Corps. And he started a Substack about economics, just to sort of, like, brush up his resume for his job hunt. And he's now making enough money that I think he's not going to get a job. And this is the thing that he's doing.

And the last one, if you haven't checked it out, is Doomberg, which was started by a former Wall Street executive from the energy sector. And they're sort of writing about what people are missing about the fundamentals. And they've remained anonymous. But they've grown based on the quality of the work. And it's actually one of the fastest growing publications on Substack.

AKIKO FUJITA: Yeah, Doomberg one that I've heard of a lot. Chris, it's great to talk to you today. Chris Best, the founder and CEO of Substack.

CHRIS BEST: Thank you.