'Ad models break everyone's brains': How Patreon and Substack are trying to make the internet a better place with membership and subscriptions

subscription service

  • For digital creators, Patreon and Substack provide an
    alternative model to making money on the internet.
  • Both platforms allow users to pay monthly fees to support their
    favorite artists, writers, podcasters, and gamers through
    subscriptions and membership — as opposed to relying on the
    ad-based revenue model from larger social media platforms.
  • As larger platforms become overrun with toxicity and spam, and
    because ad revenue is dependent on engagement and virality, some
    creators and users are turning to Patreon and Substack for a
    healthier, more sustainable internet experience.

Last year, Facebook made $55 billion in advertising revenue —
about 98% of its total revenue. Most social media platforms
generate a vast majority of their revenue from advertising and
decide to keep their service free. But free isn’t always
better.

The advertising model relies on engagement, and in recent years,
this relationship has proved problematic. Research has shown that
many of these platforms are
designed to facilitate addiction
and are
potentially unhealthy.
They can
amplify hate speech
and have been criticized for struggling to
curb
harassment and abuse

Or, as Substack cofounder Hamish McKenzie puts it, “Ad models
break everyone’s brains.”

In 2017, McKenzie and Chris Best founded Substack to provide an
alternative to the advertising model. They believed that internet
users were overwhelmed with the sheer amount of content and
disillusioned with the spam and toxicity on ad-based platforms, and
would be willing to pay a small monthly fee for quality content and
a healthier experience.

They also believed that creators, especially writers, needed to
build a direct relationship with their audience and monetize their
expertise. Many journalists had started their own email newsletters
to build readership, and Substack provided the infrastructure for
writers to launch newsletters and make money through user
subscriptions. 

Best and McKenzie said they quickly saw that when they changed
the incentive structure — replacing quantity with quality, and
free with paid — they created a new kind of online relationship
between writers and their readers. 

“Twitter tends to be full of vitriol, performative outrage, and
confrontation, while people tell us that the response they get to
email newsletters feels more personal, thoughtful, and lovely,”
Best told Business Insider. “You take away the incentive to be a
jerk and you get a different kind of way to connect with your
readers.” 

In July, Substack raised $15.7 million in Series A funding led
by Andreessen Horowitz. With thousands of writers and more than
50,000 paying subscribers, both creators and users are proving
their desire for an alternative to the ad-based online
marketplace. 

Following Patreon’s success 

Substack’s subscription model was inspired by a company with a
similar approach: Patreon. 

Six years ago, Jack Conte and Sam Yam founded Patreon to give
artists an opportunity to monetize smaller fan bases. On Patreon,
users — called “Patrons” — buy into a membership by paying a
monthly amount to access the creator’s work along with special
benefits and merchandise. 

For creators like Heather McDonald, who funds her Juicy Scoop
podcast through Patreon, the membership model provides a direct
audience relationship and source of income. 

“I’d rather have 4,000 patrons than 4 million Instagram
followers,” McDonald told
Patreon
. “On social media, there’s always haters and trolls,
but my patrons on Patreon are there for a reason: to support my
work.”

Today, there are
more than 3 million patrons supporting some 100,000 creators on
Patreon, and the membership platform has facilitated more than $1
billion paid to creators
. Patreon recently raised $60 million
in Series D funding — it’s raised $166 million in total — and
earned a spot on the Forbes 2019 billion-dollar startup list (its
most recent valuation was $450 million in 2017). 

Subscription-based models provide tremendous value for digital
creators. But there is a reason the ad-based platforms are used
more often. 

Patreon and Substack are not discovery platforms. Wyatt Jenkins,
Patreon’s head of product, says that many creators ask for help
growing an audience, but it’s not what Patreon is built for. The
membership model is geared toward sustaining loyal, niche groups
— not scale or virality. 

Creators will likely still need to rely on the ad-based
platforms for reach, and for many, the prospect of going viral and
gaining influence on Instagram or Twitter is more alluring than
developing a smaller, dedicated fanbase. However, advertisers will
always be the priority on these platforms. Patreon is looking to
offer creators a sustainable business model.

“If I were talking to a 19-year-old YouTuber, I would say, ‘Hey,
you should have your distribution channels and get good at those,'”
Jenkins told Business Insider. “But if you rely on those for
monetization, it’s going to be volatile … Always remember to take
your top fans and have a membership that you work with. That’s how
you make a sustainable living.” 

Subscriptions, membership, and limitations 

Digital content is less free than it once was. Subscriptions
have grown across streaming and journalism, and most people are now
accustomed to paying a few bucks a month for Spotify or Netflix,
and maybe The New York Times or The Washington Post.

But is there a limit to how many subscriptions users are willing
to pay for? 

Best isn’t too worried about subscription overload, and thinks
Substack has a number of ways to creatively avoid the issue as it
grows. For example, Substack could explore bundling similar writers
together in a larger subscription package, not unlike a traditional
Cable TV model, where users can access a wide range of content for
one monthly price. 

The free, ad-based model has been able to support an enormous
amount of content, making social media an unparalleled platform for
discovering creators and engaging with other users.  

But the disadvantages of this model have also become clear, and
Patreon and Substack believe there is a more sustainable way for
digital creators to support themselves — and a healthier way for
users to experience the internet. 

“Everything I open on my phone is like a feed of shit that’s
just pummeling me. I don’t know that human beings were designed to
digest that much information,” Jenkins said. “We’ve swung the
pendulum so far in one direction with discovery platforms, and now
I think the pendulum is swinging back.”


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'Ad models break everyone's brains': How Patreon and Substack are trying to make the internet a better place with membership and subscriptions