Originally posted in Category Pirates: it’s not a long newsletter, it’s a short book—delivered to your inbox each week.
Dear Friend, Subscriber, and fellow Category Pirate,
Business media “platforms” and social media platforms have a problem.
The way content gets created, distributed, and monetized today is being radically transformed—and most people haven’t noticed yet. So hop aboard the pirate ship, grab a cocktail or a coffee, and let’s talk about the profound media category change that is going to affect every business, brand, and business person of influence.
We’ll start with Substack.
Do a quick Google search for “Substack”—the venture-backed paid newsletter startup whose “mission is to democratize publishing tools to help writers manage their own subscription-based businesses”—and you’ll see the category battle happening in plain sight:
- “Journalists Are Leaving the Noisy Internet for Your Email Inbox” (The New York Times)
- “Why We’re Freaking Out About Substack” (The New York Times)
- “Substack Offered 6-Figure Advances to NY Times’ Liz Bruenig, Taylor Lorenz” (The Wrap)
- “Substack Is A Scam in the Same Way That All Media Is” (NY Mag)
- “What Substack Is Really Doing To The Media” (Slate Magazine)
In 2019, Substack raised $15.3 million with high hopes for redesigning the way creators monetized their email lists. Even just two years ago, creating a paid newsletter and running your own content-based subscription business was very difficult (Category Pirate Cole tried, and ended up having to duct-tape a handful of tools together). This was before Twitter jumped on the bandwagon and acquired Revue, a newsletter platform they’re working on integrating into their ecosystem, or before ConvertKit (another email newsletter platform) launched a paid newsletter function. Substack saw a “missing,” a hole in the market caused by the neglect of the media and social platforms, and created a new category out of that neglect.
And they’ve done a legendary job marketing their radically different POV.
So much so that in March of 2021, Substack announced its Series B: a whopping $65M raised at a $650M valuation.
The TechCrunch article announcing the investment refers to Substack’s category as “alt-media” (probably because it would hurt too much to call themselves “legacy media”). Others refer to Substack as Independent Journalism opposed to “Professional Journalism” (whatever that means anymore). Or, more broadly, Substack is one of many new tools and innovations spearheading what is being called The Creator Economy: the part of the Internet where content (and therefore attention) is paid for directly by customers, not indirectly via advertising revenue.
Up until now, creators have not been paid (fairly) for their work. The platforms have been plundering the booty.
There is almost no finer (or more overt) example than pornography.
There’s a quote that has long gurgled in the underbelly of the Internet that if you want a signal for where technology is headed next, just follow porn and gaming. Well, since the dawn of the Internet, porn has been a rough industry for creators. Category Pirate Christopher had former adult actor and now digital media star, Mia Khalifa, on his podcast where she explained how she became one of the most-watched adult performers on the Internet amassing hundreds of millions of views—for which producers paid her only $12,000. Economic servitude is just one type of exploitation that happens in this “behind closed doors” industry.
Now, if you were a savvy porn creator back in the day, you might have launched your own website, served your own content, and processed payments directly. But similar to the problem Substack saw in the world of writing and publishing, the tools for managing a subscription-based video content business have never been easy to use. Instead, many porn content creators have turned to the social-media-equivalent for their industry: cam sites.
Being a porn creator reliant upon cam sites isn’t much different than being a business writer or photographer reliant upon Twitter or Instagram’s algorithms, or a musician relying on Spotify and Apple Music to be discovered. These cam sites do what every other social media platform on the Internet does for its creators: promise exposure (while taking all the cash). It’s then the creator’s responsibility to discern what to do with that exposure, and how to leverage it for their own personal gain—very little of which happened on-platform.
And for a long time, this was seen as the trade-off.
Until OnlyFans came along.
Porn paved the way, but now everyone else is following.
OnlyFans started in 2016 to fix the monetization problem for creators—and successfully created a new category as a result. Since then, OnlyFans has become one of the fastest-growing media companies on the planet. With more than 90 million registered users, 1 million creators, and more than $2 billion (yes, with a B) paid out to creators directly, OnlyFans (according to The New York Times) has already Changed Sex Work Forever.
While cam sites take 80% of creator earnings, OnlyFans pays out 80% of earnings to creators.
A flip in economics like this is not just Category Design. It’s Category Violence.
No different than what Substack is doing in the written media space, OnlyFans made it possible for creators to launch and manage their own subscription businesses. Creators can collect monthly subscriptions and tips, as well as income on pay-to-view messages. Most importantly (like an MLM company), creators on OnlyFans have a referral code where they can collect 5% in lifetime royalties on earnings generated by any new creator they bring to the platform. (This is a brilliant business model innovation, paying early Superconsumers to be the leverage needed to tip the category.)
Furthermore, OnlyFans did a “Dam the Demand” move that revealed all the underlying problems with the legacy category’s business model away from advertising (transactional focused) and moved it to a new & different model built on recurring subscriptions (lifetime value focused).
Instead of exploiting creators, OnlyFans empowered them.
Creators own their audiences, allowing them to build their own individual “data flywheels” and achieve a completely different level of personal agency and financial freedom. From a career perspective, we would go so far as to say that OnlyFans built a mechanism for helping creators execute their own Personal IPOs.
And while OnlyFans leans “adult,” the platform’s functionality can be used for whatever type of content the creator wants, including: cooking, music, beauty, comedy, etc. (Remember, once you “Dam the demand” you can expand it).
As a result, it’s common for emerging creators to earn upwards of $10,000 or $20,000 per month on OnlyFans, with the highest-grossing creators bringing in millions and millions of dollars—not from ad revenue, but from customers paying creators directly.
Patreon. Cameo. Gumroad. Mighty Networks. Shopify.
Today, there are dozens of tools creators—ranging from writers to educators, artists, musicians, and beyond—can use to turn themselves and the content they create into independent businesses. As a result, the way creators think about, prioritize, use, and remain loyal to media and social platforms is changing.
And the legacy platforms are teetering.
In the past, these platforms were seen as an end in and of themselves. “I have 10,000 followers on Twitter. I’m a columnist for Forbes. Cool!” But over the years, creators have learned (the hard way) they don’t take followers as payment at the grocery store. In fact, you need hundreds of thousands of followers, if not millions, to earn a minimum wage monthly salary from influencer/brand sponsorship deals. And creators are slowly waking up to the fact that while they’re getting wrecked at sea, the platforms are getting rich. Facebook is now worth $900 billion off advertising revenue generated on the consumption of free, user-generated content.
Wired editor Kevin Kelly’s groundbreaking piece, “1,000 True Fans,” spoke of this Great Awakening all the way back in 2008. (To which Andreesen Horowitz’s Li Jin responded last year with a piece titled, “1,000 True Fans? Try 100.”) When payments go Direct To Creator, you don’t need hundreds of thousands or millions of followers to earn an income—because you are no longer a cog in the machine chasing your sliver of advertising revenue. All you need are a couple hundred Superconsumers paying you $10 to $25 per month, and voila: you’ve now surpassed the income of your day job and can become a creator full time.
This is a life-changing outcome.
As a result, big name social media platforms and Tier 2 business media publications (like Inc, Forbes, Fortune, etc.) that have built businesses off the exploitation of creators are being devalued by the day. Every hour, every minute, every second, another creator somewhere on the Internet gets introduced to this idea of monetizing their content and reputation directly, changing the way they value and use these media platforms from being destinations in and of themselves, to using these platforms for free marketing—from which they can siphon customers, attention, and revenue.
Creators are now doing to platforms what platforms have long done to them.
This is what we call a FROTO: the way category designers educate customers to move from the old category to the new.
The New York Times vs Substack, the porn industry vs OnlyFans, these are only the beginning.
This category violence is happening everywhere.
As creators ourselves, specifically within the niche of business wisdom & category design thinking, we see this Direct-To-Creator evolution happening rapidly in the category of legacy business media. For the past two decades, conventional wisdom has said that writers should submit their content for free (or close to it) to major publications—the trade-off being the creator gets to tap into the publication’s wider audience, while the publication acquires one more asset they can monetize with ads.
We are watching the entire legacy business media landscape (and maybe soon the entire social media landscape if platforms don’t act fast) collapse.
Let’s take a quick look at how we got here:
How Business Media Plundering Became A Historic A Self-Inflicted Blunder
In 2005, Andrew Breitbart, Arianna Huffington, Kenneth Lerer and Jonah Peretti founded HuffPost.
The “innovation” here was, instead of being a publication reliant upon staff writers, editors, and the occasional byline submitted by a business executive or political leader, HuffPost was built to be a news aggregator and community blog. Instead of being in the business of creating content, HuffPost was in the business of curating content. As a result, HuffPost grew like a California wildfire. In 5 short years, the site had more than 37 million monthly visitors, 1 billion page views, and was generating roughly $60 million in revenue per year with a valuation just shy of $100 million—before being acquired by AOL in 2011 for $315 million.
HuffPost set the trajectory for what it means to build a “successful media company” in the digital age. And in 2012, almost the exact same story was repeated by Elite Daily: a community blog/content aggregator for Millennials that leveraged free, guest contributed content. Two short years later, the site had more than 41 million monthly readers, generated $7 million in advertising revenue, and was acquired by the Daily Mail for “$40 to $50 million, all cash,” according to Business Insider.
Turns out, banking beaucoup bucks is easier with slave labor.
Almost every publication that grew quickly in the 2010s adopted this model.
BuzzFeed. Refinery29. Thrillist. Observer.
They all saw what HuffPost and Elite Daily had done and attempted to replicate their success. Staff writers were slowly replaced by free, “contributing” writers. Editors (many of whom were fresh out of college) were given carte blanche to approve submissions. (Pirate Christopher experienced this when he became a contributor to Fortune, and was assigned an “editor” who was so green, she didn’t know what a category even was. Christopher quit instantly.) More content meant less time to give critical feedback and improve quality. Decreased editorial standards led to an acceleration of a “volume wins” approach to publishing. And all of a sudden, the entire written media landscape was in a race to the bottom where only three metrics mattered:
- How many pieces was the publication publishing per day?
- How many page views was that generating?
- How much high-margin ad revenue could be generated off those page views?
Things like quality, cohesive voice, and a differentiated point of view became things of the past.
Here’s a little inside baseball as to the inner-workings of the legacy business media category:
Category Pirate Cole witnessed this first-hand as one of roughly 400 contributing writers for Inc Magazine at the peak of industry-wide desperation for free content in 2016. Of the 400 or so writers contributing to Inc, only a small handful were paid—Cole being one of them.
The model was intentionally designed to avoid rewarding creators financially for their work. In order to qualify for payment, you needed to be writing and publishing more than 8 pieces per month for the publication (2x per week)—and for the vast majority of contributing writers, this wasn’t feasible (Category Pirate Eddie fit into this bucket for only a short period of time). Anyone of merit building or running a company wasn’t going to be able to create 8 new pieces of content for Inc Magazine per month, month after month. So most contributing writers took their trade off (“I get exposure in exchange for my free content.”), while Inc (and many other publications) focused on scaling their contributor base by targeting credible writers and thought leaders who failed to meet Inc’s paid tier requirements.
If you were one of the writers producing more than 8 pieces per month, like Pirate Cole, you were paid on performance—approximately $0.01 per page view (which was considered “industry standard”). On the surface, this sounds like a terrific deal because the perception is that these publications generate millions, or even tens of millions of views (which is the number editors luring “free contributing writers” tout as the primary benefit of publishing there instead of somewhere else).
What doesn’t get shared with creators are much more important metrics like Bounce Rate and Average Visitor Duration. According to SimilarWeb, Inc Magazine today has an 84% Bounce Rate with an Average Visitor Duration of 47 seconds (not to mention their total monthly views has fallen from 20M in 2018 to 13M in 2021). What this means is, when a reader comes to Inc Magazine, they spend 47 seconds reading and 84% of the time, they immediately leave the site after reading just one page.
As Pirate Cole wrote about in his book, The Art & Business of Online Writing, of the 409 columns he wrote exclusively for Inc over the course of two and a half years, only 44 of them exceeded more than 10,000 views. And of Cole’s Top 10 highest-performing columns, nine had to do with personal development (the widest, most general and undifferentiated content type on the Internet).
As one of Inc Magazine’s Top 10 contributing writers, using an average of 30,000 page views per month multiplied by 30 months at a penny per page view, two and a half years of obsessive content creation = $90,000. Divide $90,000 by 2.5 years and that’s effectively a $36,000 per year income—or approximately $17.30 per hour. (Minimum wage in California, where Pirate Cole lives now, is $15.00.)
Meanwhile, doing some basic math using Inc’s media kit here, 2.7 million to 5 million total page views driven for the publication means Inc made anywhere from $400,000 to $700,000 in ad revenue using their CPM of $147. If Pirate Cole took home $90,000 over the course of 2.5 years, that means he received 12% to 22% of the revenue generated off his content. And if we use Inc’s top CPM of $250, then Cole generated anywhere from $680,000 to $1.25 million in revenue, meaning he received 7% to 13% of revenues.
Here’s a headline: the economics of being a paid contributing writer for a legacy business media company are worse than that of an adult performer on a cam site.
How Business Media Neglected Its Category
For the past fifteen to twenty years, very little about this model has changed.
Media platforms of all shapes and sizes have treated content creators the same way the porn industry has treated adult performers: mercilessly and without concern.
Creators have never had the out-of-the-box ability to turn attention, impact, and content into a business. Best-case scenario has always been churning out YouTube videos or Inc Magazine articles and hoping your share of the ad revenue pays the rent. Furthermore, these platforms have reinforced the narrative that creators should be happy with this arrangement.
And like a prisoner struck with Stockholm syndrome, creators and consumers have become addicted to short-term vanity metrics like views, followers, Likes, and so on—all while receiving pennies on the dollar (or nothing at all) for the value created.
But now, the jig is up.
Or, as The Boss sings, “Come on for the rising!”
Go explore any Tier 2 business publication today and almost all of them are copies of each other—aggregators and curators that have outsourced their product to the lowest common denominator of lousy content creators. Put a Forbes article beside an Inc article beside an Entrepreneur article beside a Fortune article beside a FastCompany article, remove the logo, and you have no idea which is which. There is no unified voice, no recognizable editorial guidelines, no differentiated point of view. Which means these publications have all chosen to compete on one metric and one metric only: volume.
As a response to this Great Awakening in the Creator Category, legacy business media publications are scrambling to find their way back.
Both Inc and Forbes have quickly pivoted to paywall models charging subscribers for access to their content (the same undifferentiated content they’ve been publishing as fast as possible). But consumers are getting hip to the scam. For example, when Forbes pops up their paywall, savvy consumers say to themselves, “You want me to pay $75.00 to read articles that are written for you, for free, with little quality control or fact checking? And I get no direct relationship with the writers?…I don’t think so!”
Forbes has even gone the extra mile with its “Forbes Agency Council” program (positioned as “Invite-Only”) where “business leaders” can pay a fee to publish whatever they’d like on the site.
This is HuffPost squared.
They’re just trying to scratch out a few more notes on the violin as their ship sinks.
We have a Pirate recommendation (which the legacy media brands will never implement).
For those of us who remember the days where landing a piece in Forbes magazine meant something, we are saddened by the fact that legacy business media is committing category suicide.
These publications are already dead. They just don’t know it yet.
As we have written about in previous letters, this Direct-To-Creator tailwind and the headwind of undifferentiated business content is creating a perfect storm of either opportunity or ruin. If you follow the direction Substack, OnlyFans, and others are pioneering by putting the relationship between creator and consumer first, you will likely survive and emerge a stronger, even more profitable business. If you double-down on your existing content & business strategy of aggregating en masse and then trying to charge readers for access (unless you’re a Tier 1 business media platform like The New York Times, The Wall Street Journal, The Economist, or Harvard Business Review), you’re probably going to sink.
The same, by the way, is likely true for higher education, where the very top tier of schools with strong graduate schools and a heavy research & development focus will survive and innovate because they can attract the best professors (the creators). But great professors will also soon realize they can go Direct to Creator too, and earn more money, working fewer hours, with more career autonomy. University of Toronto Professor, Jordan Peterson, has become a controversial digital mega star by building his own Direct To Creator relationships and monetizing directly. Now he even sells t-shirts, stickers, and posters. This will be the nail in the coffin for the many undifferentiated colleges/universities that are overpriced and deliver poor outcomes. But this is a topic for another letter.
If we were the category designers for Inc Magazine, Forbes, or even The New York Times, we would encourage these publications to let go of “the way things have always been” and to start empowering their highest-performing creators. Help these writers become independent. Help them leverage the audience of the publication to build their own recurring, subscription revenue streams—and then, similar to OnlyFans or Substack, take a *small* piece of the action (not the entire pie).
There is a world wherein the front-end of The New York Times becomes no different than the home screen of Netflix: a curation of all the most prolific, most popular creators in the business/news media world. But the back-end of the publication becomes a combination of Mailchimp, Stripe, Substack, and Medium. Writers can build their own email lists, their own paid subscriber bases, accept tips, sell additional content/research, and build a library of content that earns dividends well into the future—all while continuing to write for the publication. (Meanwhile, Pirate Cole’s library of 409 Inc Magazine columns continues to generate 20,000+ views for the publication month after month, year after year, of which he receives $0.)
In this world, The New York Times or Forbes operates closer to a record label or even an investment fund for writers and creators than an attention-starved, advertising revenue addicted publication.
But that doesn’t seem to be what’s happening.
Instead, even the most prestigious business and news publication on the Internet, The New York Times, is prohibiting its writers from starting Substacks and monetizing their content elsewhere.
We’ll see how long that lasts.
These very same headwinds and tailwinds are coming for the social platforms too.
Every time you see a creator with a Linkedin post that says Link in comments,” what you’re witnessing is the creator fight the power being exerted over them by the platform. This is why LinkedIn and Twitter are starting to experiment with new monetization opportunities for creators (albeit however small, like Twitter’s new Tip Jar feature). And who knows if Facebook/Instagram and TikTok are even considering putting the creator at the center of their business model instead of the advertiser.
We think they should.
The seminal question of course is… “Is it too late?”
Savvy creators are increasingly using social platform reach to move people from the walled gardens to the tools that empower them to communicate and monetize their audiences directly, reducing the long-term value of social media in a meaningful way. (Remember: social media platforms are only as valuable as the number of people spending time consuming content there. If all the good creators leave, the quality of the content goes down, giving users less reason to stick around, which impacts advertising revenue, and so on.)
In a sense, these “free” social media sites are slowly becoming “content dating” sites, where consumers and creators can get to know each. Then, when the relationship starts to blossom, the consumer and creator can disintermediate the platform.
As we reflect on this massive category change, we also wonder what this will mean for brands and how they choose to access audiences who are moving from free, wide-reaching media publications and social media platforms to paid newsletters and private communities. At a minimum, marketing investments will continue to shift, further driving the demise of media platforms and challenging the ad supported models of legacy digital media platforms.
After almost two decades of this insanity, it’s abundantly clear that being a low quality content puppy mill is a bad business model for everyone involved: creators, consumers, and every other platform in the category.
Legendary, missionary businesses create abundance. Dying, mercenary businesses fight over it. For a business to thrive, the ecosystem needs to thrive as well. Exploitation doesn’t work as a strategy.
If you win when your ecosystem loses, you are not long for this world.