It can sometimes feel a bit nerve-racking being a journalist at an established newspaper these days. Not only does one constantly fear being caught on the wrong side of the fuzzy and fluctuating line that separates acceptable ideas and words from wrongthink, but amid steep falls in print circulation and shrinking ad revenues, it seems there are constantly new digital challengers out there desperate to eat our lunch.

We wrote a Notebook column about the latest challenger, Substack, for last Thursday’s print edition. The Andreessen-Horowitz-backed company is doing very, very well. Last week it confirmed it was raising $65m in a Series B, which Axios reported will make it worth $650m. To put that into perspective, that’s almost three times what Jeff Bezos paid for the Washington Post back in 2013 (though it’s still only half what Nikkei paid for this newspaper in 2015).

Substack has also seen a more than fivefold increase in its paid readers in the space of 11 months — between March 2020 and February — so that it now has more than half a million paying subscribers to at least one of its newsletters, each charging a minimum of $5 a month (or $30 a year). Oh and Patti Smith — yes, the actual Patti Smith — has just launched a newsletter on the platform, promising “weekly ruminations, shards of poetry, music, and musings on whatever subject finds its way from thought to pen, news of the mind, pieces of this world, free to all”.

Substack’s top writers are doing pretty well for themselves — its top-ten publishers are grossing more than $15 million annually between them. One of its top earners is Glenn Greenwald, who we spoke to last week for the column, and who told us he has been 20,000 and 40,000 subscribers, which he has built up in the space of about five months since leaving The Intercept, the media site he co-founded. We used Substack’s handy calculator (we will come back to this in a bit) to work out that meant he was already bringing in between $80,000 and $160,000 a month, or about $1m to $2m a year. And he only joined the platform less than six months ago.

With the money he’s making, Rio-based Greenwald can now afford two copy editors as well as a research assistant. He’s been talking to some freelance writers about contributing regularly too. Basically, on this income (which has been growing rapidly), he is now able to start work on creating what he calls “a mini media outlet” on Substack.

There wasn’t space to include her in the column, but we also spoke to former Guardian journalist Suzanne Moore, who left the paper in November after 338 colleagues wrote to the editor to complain about a piece she had written on trans issues. She now has her own Substack newsletter, “Letters from Suzanne”, and although she is not a top earner yet, she comes in at number 21 on the “culture” rankings, with a few hundred subscribers each paying at least £6 a month. And Moore says that every time she publishes something she gets roughly ten more paid subscribers.

With the money she makes from a new weekly Telegraph column, she says she this means she is already better off financially than before. And if her current rate of paid subscribers continues, she would be better off even without the Telegraph column. She told us it suits someone like her because of its ease of use:

Moore also told us that she felt “liberated” by being able to write and say what she feels like without restriction, and that she enjoys being able to talk to readers who have actually chosen to subscribe in the comments section (only paid subscribers can comment) rather than trolls:

The 10 per cent fee that Substack charges, and which Moore refers to, is what the company indeed takes for itself. But we’re not sure all Substack writers are aware quite how big the “credit card fees” that are also taken from subscription payments via Stripe, but which Substack isn’t very specific about, are.

Writer Freddie deBoer, for instance, whose paid subscribers are in the thousands, and who ranks at number 14 in the “culture” rankings despite having only set up his newsletter a month ago, told us he believed the Stripe fees came out of Substack’s end so that he was only actually losing 10 per cent of his earnings in total. But unless he has some kind of special deal, that’s not how it works.

On top of the 10 per cent that Substack charges, Stripe charges 2.9 per cent plus 30 cents per transaction (no wonder its valuation has soared to $95bn eh?). But we find all of the fee structuring a bit confusing, to be honest, because according to our maths, if you have 100 subscribers each paying $5 a month, that’s $50 to Substack, $14.50 to Stripe plus $30 in transactions, making a total of $94.50 in fees (or 18.9 per cent of your revenues), and leaving you with $405.50 in income from your $500 in revenues.

And yet if you use the Substack pay calculator that we referred to above, you can see your estimated monthly total is $396, and so the total fees that you are charged are in fact 20.8 per cent when you are charging on a monthly basis (we tried this with higher numbers of subscribers too and it always came out at between 20.7 and 20.8 per cent in fees, depending on how much you are charging per month).

We feel like Substack should really be a bit more transparent about this, and so have asked to talk to them about it.

Even Greenwald didn’t seem to be fully aware of the fees when we spoke to him — as you can see from what he says below, he seems to think 10 per cent is already high enough (though he later clarified that he believed Stripe was charging an additional 3 per cent):

We asked Greenwald whether he would be willing to leave Substack and go to a different platform if they were charging less — for instance to Twitter which recently acquired newsletter company Revue, and has promised to take just a 5 per cent cut from subscription payments, though there will surely be payment processing fees on top of this — but he said that Substack had already established itself as a kind of brand, and that was worth the extra money:

Would everyone feel the same if they knew they were actually paying quite a lot more than they realise in fees? It’s not clear.

As we wrote in our Notebook column, the fact that Substack has already fielded some attacks on it and has declared its commitment to free speech, having been called to deplatform some of its contributors for “hate speech” and “transphobia”, means that it has indeed started to become a brand name, and a brand name is an important component of a moat.

And Twitter’s brand reputation is not, at this point, particularly gleaming — Moore told us: “I wouldn’t go near anything by Twitter because I think they’re pretty disgusting.”

But how long will it be before another competitor arrives that offers just as user-friendly a platform, and the same commitment to neutrality and publishing diverse viewpoints? Either Substack will have to start offering more generous terms to its writers, or the first droplets of the moat it’s been creating could rapidly evaporate.

Related links:Substack’s success shows readers have had enough of polarised media — FT