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I’ve only worked in programmatic contexts and never had the right frameworks / vocabulary for talking about this stuff, so this post was extremely useful for me! I think you know where my priors are here: I’d love to be in a ~70% subscription / 30% β€œother revenue” world, with eg Meetings and direct sales / sponsorship type ad revenue helping expand the number of ways you can make money on Substack.

Very lucidly explained and presented man!

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You the best, thank you, Mills.

I wrestled with the terminology quite a bit and not sure I totally got it. But it helped crystalize some loose stuff in my head.

Re: Substack, I totally agree. I think there's a huge opportunity to help people publishing on Substack monetize a great share of their audience with other revenue streams. There's kind of two ends of the spectrum too: stuff that helps you make money from the top 1% of your most passionate fans (e.g., merch, live events, 1:1 consultations, founding tiers) vs. stuff that helps you monetize the majority of your audience (e.g., ads).

All that stuff needs to be balanced properly, so that the revenue streams complement each other, and don't create too much extra overhead. But I think if done well, it could totally expand the number of people who could earn a living on Substack (or the internet more broadly).

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God, that's an awesome point: we can work on both ends of the market with these kinds of features. More money from less-committed fans is awesome; more money from more-committed fans is awesome. Ah, I hope we can get to this stuff soon!!!

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Great article. I wonder if comparing LTV between paying and β€œfree” is right in a hybrid model. The LTV of a subscriber will be higher, but the absolute number is a fraction of the audience. I don’t understand extracting no value from people who aren’t paid subscribers. The complexity and tension is real, but that’s media. I just believe it’s common sense to make money in multiple ways and use ads as a reasonable value exchange with 90%+ of your audience.

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> I wonder if comparing LTV between paying and β€œfree” is right in a hybrid model.

Yes! It’s a great point. In a hybrid model, there will be way more free subscribers. Free viewers were 75% of total viewers at Crunchyroll (and probably roughly the same at Hulu when it had a free tier). To your point, in the newsletter world, we usually see 5% to 10% of subscribers pay, or 90% to 95% that do not pay (though I would note there’s a wide range).

Ads help monetize a broader audience that would otherwise be less likely to pay, so the expectation should be that free subs have a lower CLV than paid subs. I’m not sure we nailed it at Crunchyroll with the 15x spread between free & paid. I think we could have better monetized free viewers, but as noted above, that also came with tradeoffs.

But the ratio should never be 1:1, where CLV is the same for free and paid. That would probably indicate some kind of mismanagement of running the paid tier: bad pricing practices, too much value being tipped to the free tier (vs. paid tier), or just not investing enough in making the paid product valuable.

So yes, I agree with the essence of what you’re saying. But I also think there’s value in comparing CLV b/w free vs. paid subscribers to ensure we’re properly balancing the free tier relative to the paid tier, including the value proposition, investment in growth, etc.

More than anything, thank you for dropping a comment! :)

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I think the ideal revenue mix is actually 50% subscriptions and 50% advertising.

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