Substack's founder argues that online spaces become "heaven or hell" based on their core business model. Ad-based models optimize for attention (often leading to outrage), while Substack's revenue-share model forces its algorithm to optimize for the value creators provide to their audience.
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A16Z invested in Substack believing that providing writers with a monetization tool would unlock a new supply of high-quality content. This new supply would, in turn, create its own demand, rather than competing in the existing market for free content.
Effective content moderation is more than just removing violative videos. YouTube employs a "grayscale" approach. For borderline content, it removes the two primary incentives for creators: revenue (by demonetizing) and audience growth (by removing it from recommendation algorithms). This strategy aims to make harmful content unviable on the platform.
Limitless's subscription model is a strategic choice to avoid the pitfalls of ad-based platforms. By not needing to maximize engagement for advertisers, the company can align its incentives with user well-being, avoiding the need for 'rage bait' and other dopamine-hacking tricks that lead to negative outcomes.
Substack's growth wasn't just a "COVID blip." Its continued success is driven by a fundamental shift in the economy of attention. As attention becomes our scarcest resource, we are more willing to pay to curate it with high-quality, trusted content.
Substack's founder doesn't see it as replacing other social networks but as a distinct "city" with a unique culture—intellectual and cosmopolitan. This framing attracts a specific type of user and creator, differentiating it from "cities" like TikTok or Twitter.
A16Z's Substack investment was a bet on a 'supply-driven market.' By providing a monetization mechanism for writers, the platform brought new, high-quality content into existence that previously couldn't exist, which in turn created new consumer demand that wasn't visible before.
People claimed they would never pay for online content in the abstract. But when founder Chris Best asked if they'd pay for their *single favorite* writer, the answer was yes. This specificity proved the model's viability, showing people pay for trusted relationships, not generic content.
Avoid building your primary content presence on platforms like Medium or Quora. These platforms inevitably shift focus from serving users to serving advertisers and their own bottom line, ultimately degrading reach and control for creators. Use them as spokes, but always own your central content hub.
The 20th-century broadcast economy monetized aspiration and sex appeal to sell products. Today's algorithm-driven digital economy has discovered that rage is a far more potent and profitable tool for capturing attention and maximizing engagement.
A huge portion of the market, dominated by social media and AI companies, connects shareholder value directly to enragement and isolation. Algorithms are designed to sequester users and serve them content that confirms biases or angers them, keeping them engaged.
