Monetizing Podcasts and Newsletters - Chris Best of Substack and Jonathan Gill of Backtracks

So Chris, what do you do?

I'm the CEO of Substack. We make it simple to start a paid newsletter, and also you can put audio in it now.

And Jonathan?

I'm Jonathan Gill, co-founder and CEO of Backtracks. We help audio content creators know and grow their audience and the revenue.

And you guys have two different strategies, paid versus advertising?

Yes, what's your take, Jonathan?

I think, from the current state of the podcasting market, ad-supported sponsorship is one way forward. When people are used to free products, versus television and cable where they're used to different tiers, there is subscription revenue; there is a la carte. But from our view, the podcast ecosystem at large is not really ready for subscription content.

I think there are alternate viewpoints of that.

Yeah, I think that's actually an interesting way to put it. I mean, obviously we think that paid content, paid relationships even, is sort of the way to go. It's a huge missing force in media in general. We started with newsletters; we think the default assumption that everything has to be free is kind of something that's like breaking the world in a couple of important ways.

It may well be true that with the existing podcasting ecosystem, especially in the U.S., that it's really hard to do paid stuff in a compelling way just because of the way that it kind of evolved and the way that the people control the ecosystem. But I think that the podcast market that can be supported by advertising is small and sad compared to the audio market that could be supported if we had an effective way to pay for it. The kinds of things you're seeing happen in China right now sort of hint at that.

Yeah, and in terms of the Chinese market, the Chinese market is a little different than the U.S. and worldwide in that they're used to paying for audio content. Some of it is richer in quality; they pay for educational content. The ecosystem for podcasting and paid content in China is much greater than ten times your size.

Exactly, yeah. It's different historically. I think there's a good blend of content that works ad-supported. There's directly attributable and even see it through Patreon sponsorships, where people are paying for that content by being a fan, by being a patron, by the direct payment systems.

But then I think there can be a mix. I think in the U.S. market, in the current state, sponsorship is one way. There's private paywalled content; there's the blend of the two. And our viewpoint at Backtracks is upon the advertising standpoint: people don't like advertising when it doesn't fit with the content and the messaging. But advertising can add value if it's actually in relation to the content, if it's not in the creepy factor that Google and things have. You can basically blend the two for a healthy ecosystem; it doesn't need to be one way or the other.

Can I ask a question that I'm genuinely curious about? Are advertisers today overpaying, underpaying, or paying about the right amount for podcast ads in general?

So it depends on the particular piece of content and the particular advertiser. One of the problems in the industry is measurement and how to uniquely measure a listener and how do you know engagement. It feels a little bit like podcast downloads are almost like the banner ad impressions of the early Internet.

So we have a spec and technologists around measuring the actual engagement. Should you base your advertising spend on a metric like downloads or more engagement or others if you're doing advertising? In terms of the industry, the metrics aren't there in the same way video and text are. And that's part of the tech stack that we have; you can directly measure how long someone listened to a podcast.

And in certain cases, we okay. But we saw that change a few years ago with the biggest podcasts anyways because a lot of these companies are using like affiliate codes now.

Exactly, so that's how they actually track it, right? Because, you know, you're just like, "I'm gonna sponsor Joe Rogan," and I think, "Are you willing to pay for like whatever, 10 million downloads?" Or I don't know how many it is.

Yeah, and those direct response codes—there are certain types of advertisers and sponsorships where it doesn't apply to everything. Some things, maybe from your viewpoint, advertising may not be the way forward for that. But there are also brand awareness campaigns that are harder to do if you can't measure the metrics. Podcasting, in general, despite its popularity, still has a lot of growing up to do. People like us can help make the way forward a little bit different than some of the problems of previous industries.

Do you encounter any resistance from people who have ads today and are sort of charging based on a download metric, that if they had more accurate measurement they might not be able to charge as much?

Yeah, we have people that use us because we detect fraud; we remove things. But in the ecosystem, it's healthier—and this is a biased viewpoint—but if you can actually have an ecosystem where the advertisers, the publishers, and the audience are better off because you're not doing things the same way as before in terms of that measurement statistic.

People don't like that our numbers in general are lower, I will say that. But for the long-term health of the ecosystem, some parts of it are the quality of the content, which you can have in various ways, whether it's behind a paywall, how it's paid for can be various mechanisms, as well as just getting accurate measurement for the ecosystem. It's one of the core tenets of our business: you need to know that audience in a way that's not there. You're not selling on download metrics; you may be selling on other metrics.

Yeah, but on the paid side, Chris, what percentage of the market do you think it's going to end up being? Because right, I think obviously the answer to this question is it's gonna be a blend, right? There's just gonna be a bunch of mass market stuff, and then, like just happened with cable, people are gonna want to pay for HBO, and they'll go that route too, I assume. So where do you think it's gonna ultimately fall?

It's a really interesting question, and it sort of gets to like the root hypothesis of Substack. I mean, we have this kind of radical idea that in the future, people are gonna pay a lot more for a lot more content overall. One of our core hypotheses is that if you look at sort of the amount of culture in the world and the amount that we're investing in it as like a proportion of our overall GDP.

You know, what we're paying for it, you know, is that too low, too high, or just right? We think it's way too low. We think there's basically a market failure where all of society would be richer if there were more efficient mechanisms to like allocate more resources to creative people that are making kind of culture writ large, whether that's writing, whether that's podcast or other audio content, whether that's videos, whether it's like lectures or entertainment or whatever.

You know, we think there are kind of like a few places where the business model really works, and you see a flourishing of like serial TV and stuff. But overall, we're paying basically way too little. There's a massive market failure. People would feel richer in their lives if they could pay and have more better stuff.

So, whatever the proportion of it, we think there's going to be kind of this massive area of culture that people are paying for. And I think that's especially interesting in podcasts because of the amount of time you invest in podcasts—you know, podcasts tend to be like hours long. If you think of like, it's like a book in this way; if you think of how much of your life you're investing in a podcast and then how much money you ought to invest if you could like make that relatively better, you'd almost be really irrational to not want to spend money to make it better if there were a way to do that.

So in terms of kind of payment mechanisms and how that exists in other parts of the world that or not the U.S., there are micropayments, there are ways to facilitate that sort of ecosystem. How do you view that just in the current infrastructure for direct payments to the creators and or subscriptions that aggregate that? How would you solve that in the U.S. market?

I'm not trying to be eccentric, but I mean some parts of our way of consuming content are maybe reverse the rest of the world.

And some of the— I mean, some of the sort of laws of nature are different, right? Like, in China, everyone has payment, like we pay and all the stuff in there. The friction for payment is much lower. So the thing that we've been doing with newsletters, to sort of a shocking degree of success from our perspective, is charging subscriptions.

So saying, "Hey, you know, this is going to be five bucks a month," or whatever. And the unit of value that you're subscribing to is the individual sort of creator, a culture creator. So I'm saying, "I really like Craig Canon's viewpoint of the world. I get a lot of value out of his podcasts." You know, "I want him to be independent and be able to like make the best kind of possible." And so I'm willing to go and fork out five bucks a month for that relationship, basically.

And subscriptions are kind of magical because they both feel a little bit less expensive than they are. Look, if you ask someone to pay five bucks a month or pay like a $20 flat fee, like more people would pay five bucks a month, but then they wouldn't actually quit it. They keep doing it, so they'd end up paying a lot more.

Are there like weird perverse anchoring issues around, you know, Netflix being 10 bucks a month and my newsletter being 15 or something?

It depends on the content, so you'll see more technical content, more niche content that people will pay for—not just in podcasting but just in general. I'm sure on the newsletter angle that if you have very particular niche content that is not widely covered but is of extreme interest to people, but in general pay more.

But that basket of collection, in terms of anchoring, can be hard depending on how you judge the quality of the content. Some part is you want the long tail of any content and you want as much of it as possible or do you want a curated experience that could be subscriptions that you're picking and choosing?

It can be podcasting, in large part, is people picking and choosing what they listen to, and that's part of the power and the magic of it—of it's not someone leaving YouTube on and just autoplaying the video. They've chosen the podcast that they're listening to, and they're very engaged. You can do it without a screen. You can do it in all these ways.

And just when you hear someone talk about a podcast—and even in the advertising side of it, they can remember the ads—but it's not just the repetition, and it's the connection with the audience and the voice. Sometimes the host will read an ad, and it's not what the sponsor exactly wanted, but that's part of the magic of it. People remember the storytelling aspect, which I'm sure is the same from these letters and writing, where that deeper connection is more direct.

Where the creator to the audience, there are fewer middlemen involved. Whatever you can support that ecosystem, a blend of ads and subscriptions or however it's done, I think is healthy. And to your point, I think we do underpay for content, however it's paid for. When you think of the time and value people get from the business of culture, people on the advertiser as well as direct consumers would, in general, pay more if they think about the value they derive from all that content.

Especially if you take kind of a long view. Even if you think today we pay the right amount for culture, if we're moving to a future where more and more of the physical economy gets automated over time and there's an ever-increasing number of things that are like the things that are people's jobs now that can be automated, surely in the future, if the things were not automated, our culture creation—as long as that's true—surely we would hope that we would spend a larger and larger percentage on the kinds of things that people are then unlocked to do. But if we insist that sort of cultural output can't be monetized directly, we kind of break the future economy in an important way.

Yeah, I’d buy that. So do you feel that it's going to be more of these like individual brands, individual people who are striking out on their own who are making a sizable income? Or are there gonna be like YC-type things where YC podcasts are paid for or whatever, and it turns into its own business?

I mean, I'm sort of biased on this. I think we will see what feels like a shocking increase in the number of people who are kind of atomized and unbundled. Like this idea that almost this is the part of this whole thing that kind of is new is for the first time you can effectively subscribe to a person.

Yeah, where, you know, there's been paid subscription publication; that’s not a new thing. That's been around forever, yada yada. But this is kind of like because we have this internet technology and all that stuff now, it's a relatively new thing that it's like, "I'm a person. I'm gonna write this newsletter. I'm gonna produce this podcast. I'm gonna sort of like have this." Yes, it's a brand, but the brand is like a very direct expression of who I am. And people can kind of like pay to subscribe to that as like a human-to-human, very direct relationship.

I think that is very valuable to people. People love that—both the audiences that feel like they have this direct human connection and the creators that feel like they have this sort of like unmediated thing where they're answerable directly to their audience, where they get to have intellectual freedom, where they get to kind of like be as weird as they want. That thing is very powerful, and there's a huge amount of energy of people that want that. There hasn't been a great mechanism in the past.

So I'm not saying that everything is going to be individuals and there's not going to be any big sort of media things. But I think it's gonna look like there's a meteoric rise of individual creation.

Well, because I’m curious about that hypothesis, because if you look at YouTube and who's actually earning a living on YouTube, not that many people right now. YouTube is a terrible form on it.

Like, this is the whole thing. This is where this energy comes from: YouTube is terrible for making money as a person that's more famous than Brad Pitt, right?

Yeah, I mean, like Casey Neistat does okay, but like some other people not so much.

Like if there is, say, he's number 10. Yeah, like someone who's number a thousand is not earning a living. And especially if the shape of it—like if you're someone that has a lot of people that are like a little bit into you, that's great. But if you're someone that has, let's say, 10,000 fans that find you completely irreplaceable and wouldn't want to go on living without you because you're the most amazing thing in their life, but there's only 10,000 of them, you're never going to make money on YouTube.

Yeah, whereas if you could charge subscriptions, it's easy, right? If you tried five bucks a month on 10,000 subscribers, it just works.

There's an alternate model. Sometimes in advertising and podcast specifically, it's not the size of the audience; it's the quality of the audience. So if you are selling something to a very niche audience and you're sponsoring a show of a particular content, you may disregard the numbers in terms of absolute size of the audience.

But you know if the quality of the audience for your fit is the right message, the right time, the right audience, you're not going to pay correlated to the audience size. You're going to pay correlated to the audience quality, where if you sell one of your widgets or one of your things or even just the connection of your brand with that content is worth far more than the audience.

That's definitely true. And that's true too—even to the point where big podcasting studios will tailor their shows, like, "Oh, we're gonna make this show because this show is going to attract this audience of people that's very valuable to advertisers."

And so if you're, you know, in a demographic where the things you like are valuable to advertisers, that's a great deal.

Yeah, if you're someone that isn't in that or doesn't want that arrangement, you're kind of out of luck because if you have ten thousand really dedicated fans that have some money but they're like aren't, you know, aren't good for this kind of average—like that—whatever, you're just not connecting those dots.

There's no way to bring that content into the world, and I think there's a lot of that.

Yeah, and we see people using the data that Backtracks provides in ways that they're producing very on-topic, trendy content for that particular purpose. And it doesn't age well in terms of evergreen useful content.

And then you can be so data-driven that the creativity is removed from the process. The part of the magic of newsletters, the direct relationships between a maker and the audience, is that you can make things they didn't foresee they would enjoy. And then the data doesn't force—there's the magic of that creation process.

And there's a philosophical thing: who should be choosing what podcasts get made? Should we be making the podcasts that advertisers want or should we be making the podcasts that people want?

Yeah, and I think there's a big difference there. There can be sometimes people are the advertisers sometimes wanting the same, sometimes when it works. My philosophy is if you make what people want, everything else falls in place.

And they basically—I see that philosophy, that's why. I mean, I think you can treat product and content in the same way, absolutely.

But like there are people who have been pushed off of platforms who are making something people want, but the platform doesn't necessarily align with them, right?

That's the problem with the centralization or the perceived centralization of things. So YouTube is absolutely centralized and controlled by the big G. And then podcasting is still largely decentralized. And while it appears centralized through the view of a listener, how do you maintain the control of your means of monetization?

That connection, while the phone or device—people think about it as it's coming from Apple, it's coming from a certain podcatcher, but it's all these independent brands and creators getting their voices into the world.

How do you maintain that health so a strangle on the ecosystem doesn't boot people from their freedom?

So some people will tell us that podcasting, and even I probably say newsletters, is one of the last ways to get direct free speech from someone's mind out into the world.

And people will say things in a podcast they couldn't print, or they can do something in a newsletter they couldn't do in a certain publication. And your independence and your control of your means of monetization, whether it's through sponsorship or subscription basis, right? How can you maintain that?

The strength of you as a brand and you as a company going forward, however you can do that is in your best interest. And it's way less mediated by other people's algorithms.

Yeah, right. Like when somebody subscribes to your podcast, if you make another episode, they're gonna get it in most good podcast players. Whereas if someone follows you on Twitter, are they gonna get your next tweet? You never know.

Yeah. How freaked out are you about Spotify? I'm curious.

Well, we're an official partner with Spotify; no, not at all. But in terms of freak-out from the general idea of public strategy—people that have consumers' attention and that can window that down and that can create content similar to other content—the Netflix-ification of podcasting can be good or bad, depending on how you view it.

And just from a personal standpoint, I like niche topics. I like the freedom of podcasting that you can literally be in an office podcasting about anything you want—be it home or whatever.

What I don't know from the consumer standpoint is, well, do people want fairly highly produced content all the time? Meant to meet certain metrics, because metric-driven content production that's very professionally done sometimes loses the magic of podcasting.

I think that's why YouTube's in many ways become really shitty on the popular side, because oftentimes I think that people don't even know why they're doing certain things.

It's just the algorithm has favored one thumbnail style or one titling style, and then it becomes a trend across all of YouTube. I could see that very much happening with Spotify podcasts, where like, we know this show is popular; we're not really sure why, so we're just gonna keep knocking it out.

Yeah, but on the podcaster side, the discovery is so valuable for us. That's why we do YouTube. So one of the problems that people constantly bring up is discovery—podcasting and newsletters, I'm sure it's even. I mean how did you discover newsletters in a better way? Or discover podcasts?

It's a very hard problem both ways, but I'm curious.

Your newsletters are a lot easier.

Oh, kind of weirdly. I mean, just because text is really easy to—like, you know, if you have a webpage, you can share it. And if you get an email, you can forward it.

And so we often see this is something I think you don't see in podcasting, but if you have a newsletter that people are consistently reading because they like it, if you do nothing, it kind of will grow at some rate because people will tell their friends word-of-mouth.

But they'll also like the forward an issue or they'll like there's a share button; they can link to that on the webpage or tweet about it or whatever.

There's kind of like a built-in sort of mechanism by which people who want to share something can in a really low-friction way.

You can do the same thing about podcasts—like people meet up and like, "Oh, I'm losing this podcast. You've gotta listen to it." And you're just like, "The amount of time I'd have to have in my life to like try the podcast you're recommending to me is so much higher than like, oh, you just tweeted this link and I clicked it, and now I'm reading and I love it."

And we have a solution for that.

All right, well it's the year of ed. But I do think it's different, and I think it's something that we have to do even more.

Like obviously discovery is kind of like the biggest thing. And if you're charging for it, it's like, well how many people discover it and then how many like it or then how many of those people pay is tricky.

So you have to like, you know, you have to have that whole funnel. What do you advise writers? So like, yet they have all this private content. Like how do they build their newsletter?

Yeah, so the way Substack works is every time you choose to publish something, you either can make it subscribers-only or you can make it public.

And so it's kind of like the Ben Thompson model where he has some stuff that's free and some stuff that's paid. And the advice we give people is basically take your best, most accessible, most focused stuff and make that free.

Right? Like make your sort of like your very thoughtful essay on a specific topic free because that's how people are gonna share it. That's how people are gonna find out about it and learn that they like your stuff and want more from your brain. And then you can take your like sort of like more inside baseball stuff or your wonky or stuff or your like less filtered, more raw stuff and send that to subscribers.

Because those are the people that love you the most and they're happy to get the unfiltered, unpolished stuff.

Do you have people running multiple feeds on Backtracks?

Yes, okay. So basically if you're a brand, you have multiple podcasts. You can see all your data together and separate, and you can do private and public content.

How common is private?

I don't think I've subscribed to any private feeds.

So private, in terms of Backtracks terms, you can be behind a paywall for like a traditional publication, which is not so traditional that it's online. So imagine you log in to a newspaper; the same concept is present there.

And there’s public content, private content, but who has access to the private audio you will see public and private feeds, or within the same feed, content that's pulled out that becomes private. And that means monetization is subscription.

And it's a mix and a blend of what do you allow into the public ecosystem of podcast discovery? What do you want behind your paywall or your login?

Some of those same decisions come in of, well, do I want the incendiary content behind the paywall because I know someone's going to share it and then come back in? And then everybody wants to get access to this content that they need to pay for.

Do you want it public to grow the audience, to engage the funnel-size?

So how common is it, the private feed? For us, it's not very common.

Yeah, in podcasting currently, it's not that.

Yeah, I think in podcasting in general, there's kind of like this pent-up—we wish we had other monetization mechanisms. But because of the historical context, like we call it podcasting because we used to download it to our iPods when we connected it to our computers, right?

Like, it's this very legacy kind of a thing. And the world that it's in now is kind of a tough place. It's hard to do; it's hard to create a good, consistent user experience for subscription podcasts, even if you do it really well, which I'm sure you guys do.

And you know, we probably will at some point, you know, do more of the actual podcast feed stuff—it's just like it's not that many people are doing it yet in general, even if it would be a good idea for them.

No, and there's even, you know, simple problems/solutions of, I'm interested in this topic of podcast; I don't care what series it's in or what show exactly. Give me a fix about this that are curated to my taste and based on some criteria. I think I will like this. Send that to me, and that's a discovery problem, but it's harder than people realize.

But I would say find someone that loves podcasts and would want that slot, and then it's like give me my feed that's personalized for all the content, but not in an algorithmic, you know, big company way.

Right, well even just in the beginning, listen notes was so valuable because you can just do search.

Like what, it's weird to think about, but like Apple released their product without any kind of search, right?

Right. Well, for a long time they had like three people on that team or something, really.

No, don’t quote me. Don’t call me; I don’t know if that’s the exact number.

But for—I think it's a little bigger now, but for a long time it was shockingly small.

Yeah, and the way that as outsiders we viewed it was podcasting was a way to sell devices. And then the way they viewed the market, despite that Microsoft lost that name, "blogcast" could have been what we're talking about.

But that team was highly effective, but they were small. And then, depending on how it's viewed, with Apple maybe that's changing. But it's also people have their gripes with every interface to every piece of content, right?

But it's still 60% of podcast plays, something like that, Apple.

VI, yeah. And then kind of the view into that can change depending on if you have your own podcatcher. But a lot of people use defaults, and then Google Podcasts exists now, but largely is catching up on feature set and what needs to be there.

But kind of feature parity is what people are going for. But Apple control is a large part of the distribution to the listener.

Have you used Himalaya yet, Chinese, the podcasting app?

Not, it's wild.

Yeah, and so it's a big—you know about the company?

Yeah, yeah, it's a huge company. So they've grown through a lot of educational content, which has got me wondering like is that maybe the angle people start taking right for this paid small?

I like—I’m wondering about what even the content is for your average paid newsletter? Like is much of it paid, and is that the path forward for a lot of people? Is it just educational?

I think education is a big area that people are willing to pay for. I mean, you see people paying for like sort of—you know, do people won't pay for videos, but they'll pay for online courses, which are just like a couple of videos, right?

Yeah, masterclass or whatever. I think in general, people are more willing to pay for something that they think is going to like make them better in some way. Like if I'm sort of like this by having this in my life, I'm gonna be a better person for whatever value of better I care about.

That's something that makes me automatically more willing to pay, and education is obviously a big piece of that for a lot of people.

I don't think it's the only thing, but it's definitely like that we see that instinct being very powerful.

Mm-hmm. And when you see that as well—coming back to the Chinese market, one of the reasons it's so big is they value educational content, right, at a higher price point than maybe other parts of this distrust-free content.

I've heard so. This is a sense of like, oh, if it's free, it must be like for the rubes, which they're not necessarily wrong about. And if it's paid, it must be good, kind of thing.

And again, it's part of the kind of marketing aspect of it that is marketing—getting people to want a better version of themselves or to improve themselves. And so whether that's done with paid-for content, content you listen to—a lot of podcasts' consumption is for learning purposes—which is odd when you think about it.

People still consider podcast entertainment, but it's learning entertainment. And then even on the narrative podcast, kind of the highbrow, lowbrow dividing line, people place podcasts a lot higher in how they view it in their entertainment and media consumption versus what they listened to in podcasts and what they watch on television or movies.

They tend to not be that closely correlated, but there is some overlap. But I think in general, the educational content—and you'll see it with Audible, with Great Courses—podcasts can actually get longer.

So Joe Rogan may be three hours, and you can actually get longer, more well-produced content that people will consume in chunks because they don't need to consume it in the same day.

And then it becomes: well, is it actually worth hundreds of dollars for this piece of content? And how will I pay the hundreds of dollars? Will it be their grades of tiers of entry of how you consume it?

Is it released on a course that happens every week? Is it released all at once, binge style? Is it that I can pay a mix of I get some advertising, and then I get a reduced cost on the subscription?

Is it a try before you buy sort of scenario? All of that is still wild in a lot of ways.

And then put the educational content angle, I think it's that same marketing, the same angle, same presented a different way. Let's people think about it in a whole different light.

Yeah, because I've just been so fascinated by like V.M. like the Dan Carlin phenomenon. Like you've rested for history before, like he does it windowed right? Where it's like they're all free, but if you beyond a certain period, you have to pay to get the back catalog, right?

Yeah, so every time I break my phone, I lose all the old ones and have to buy them again, but that's a business model.

Yeah, that is! My Apple’s real business follows me breaking my phone.

But yeah, I've just been so curious and wondering, you know, as colleges change, you know, things like Lambda School start, where are all these professors going to end up? It feels like there should be way more Dan Carlins, yet there aren't.

So I'm wondering if you guys are noticing these people cut, like kind of come out of the woodwork and build audiences?

Yeah, so not to push too much on China, but there have been basically professors that have quit their teaching positions to be full-time podcasters because they quite literally make millions of dollars podcasting.

And when you think in the U.S. market to make millions of dollars podcasting requires a certain style content, a certain size audience. And then to say that for educational content in the U.S., that you could make close to double-digit millions a year would be pretty hard to foresee right now.

But in a future with multiple modes of monetization where it's really a brand—and then maybe it's educational content—imagine professors as the sports stars of the future, where, oh yeah, what are you wearing? What are you sponsored by?

But that sort of means the monetization and where it's going for educational content, we think that that personal brand will become more important. And whether that's your own site or you band together and essentially you're a group of professors that have started your own mini-university as a brand.

And then it has to be paid in that world or for almost all of it. I think it has to be paid.

Like there's some stuff that's maybe mass-market enough, but just the value that you can give to like a small number of people, like the best way to capture some of that value is to just ask them to pay you.

And I think this is something that like used to be the case, that we had this weird cultural moment where everything on the internet has to be free. I think like a huge sort of cultural misstep with the early days of the internet was like, let's not bring effective ways to monetize into this.

And I think the pendulum is really heavily swinging the other way now—like people that were sort of like my generation, we're like the least likely to want to pay for stuff.

Yeah, and we are getting increasingly more likely to want to pay. And then younger generations are even more likely still. And there’s kind of this rising idea that it's okay and even smart and desirable to pay for like high quality education and cultural output—all the stuff we care about.

As soon as you have that cultural shift, there's huge swaths of content that could not otherwise exist that become not just possible but like massively profitable.

Yeah, and you know, the world gets richer and everything's happy.

Yeah, yeah. So I was curious about you guys in terms of where you're seeing growth happen: how are your newsletter writers and podcasters getting growth, especially in the context where maybe they aren't that big, so they can't do paid campaigns?

Yeah, so newsletter growth—like make good stuff free and like make it easy for that to share on the web. So like we send emails every time you publish a free thing; we'll send the email to everybody, but there's also like a version on the website that's like searchable, that's got the right share metadata for everything.

So that if people do want to like share it on social media or on wherever, it can kind of like make the rounds. And then just have like effective calls to action. When someone shows up, like let them see the content they’re there to see that they like but then also ask them for their email in a good way.

Okay? And then the other thing that we're doing a lot of newsletters grow by is by some sort of referral program, right? So having some explicit way in which people that are like your super fans of this newsletter can easily and effectively share it with other people.

This is how like The Skimm and stuff grew—they had a really cool referral program. We're trying something very similar, but on the paid side. So we're, you know, with some newsletters, we're doing a trial where if you're a paying subscriber, not only do you get to have all of the paid content and you get a member of this community, yada yada, but you also get a certain number of like free gifts that you can give out.

That's like a couple months of subscription, which is actually quite valuable. Sometimes like worth 20, 30 bucks, but you can like give that to your friends, who they might not have like gone from zero to subscribe, but they like, yeah, sure.

Like if you're giving me something that's worth something, it's you're saying it's good, like I'll give it a shot. And then those people subscribe, and some of them are like I really love this, and I'm happy, and I'm gonna subscribe, and then I'm gonna give the gifts to my friends, too.

Hmm, I think from our perspective echoes that. And don't forget your other channels and means of distribution that it may be outside of the podcast.

So if that's newsletters, that's tweeting, that is that whole cycle of how you interrelate and share your actual content.

So the ability to preview the quality of the content—and one aspect that people forget in all content creation is there are large amounts of copycats in content creation. But also like quantity is not always as good as quality.

And don’t forget that if you drop on quality, people will notice. And one way to grow your audience is to actually spend time designing your content, designing your show, producing it well.

It's not always by the most expensive equipment, have the most expensive way of doing something. At the end of the day, there's many great stories that are very simple, very low-cost to produce. And podcasting as a medium is a storytelling medium, and don't forget to have a good story.

So, and that's in everything—from startups to podcasting to all content. What's the actual story? Is it good enough for someone to tell someone else about?

Mm-hmm. And when you get there and you can find a way to summarize that, it's a part of it for us; a lot of podcasts just start and there's no lead-in, and you're not someone that does that.

But in particular, actually having a quotable, shareable summary as a Balcontent that people can share.

Oh, you mean like the little clip in the beginning?

The little clip in the beginning, the intro summarizes the end and summarizes the entire show, and that intro and lead-in depends on the style of content. But it's very useful for shareability—for just people remembering the story.

And just from our standpoint, people actually do remember what they hear 36 to 39 percent longer than what they see in what they read, which is actually a video advertiser, like, hidden piece of research. But that auditory component of storytelling is very powerful.

And don't forget that even when you're a content creator, quality can really trump a lot of quantity for sure.

And then don’t forget where your audience is—they don’t live in one app.

They don’t! No one uses the Internet by pulling up 500 different websites and different browser types.

I do, but I got to find higher controlling attacks.

So Chris, Jack Ryder asked you a question. Huh, this might be a softball, but he says, in five years' time, are personal newsletters going to replace social networks like Facebook?

That's a great question. I actually think no. I think probably he was like maybe Chris will think yes. I think the answer is it won't replace the social network aspect of it.

The thing that Facebook and the social networks are great at is having the relationship between you and like the people you know in real life, and having like those sort of like rewarding, real-world relationships mirror—that's the grain of truth that makes Facebook what it is.

The part of it that should absolutely be replaced is where we're conducting our culture in there. So the idea that the place where not only do I get my updates of baby pictures but I'm gonna get my news from Facebook—that should a hundred percent be replaced because it's a disaster for the world.

And it's, I think, increasingly a disaster for individual people that kind of feel bad about it. Like the number of writers, our Twitter power users, and the number of writers I talked to, that’s like I'm addicted to Twitter, and like it’s actually really bad for my life.

Mmm, like I’m not joking; it’s like I actually like, I use it too much and then I feel terrible. Like there's a lot—that's a real thing that happens.

And so I think that, yes, the way that it's, yes, is will it replace how people consume a lot of cultural content—that's news, that's public intellectual thought, that's storytelling, that's entertainment—that's sort of like at a cultural level rather than like, hey, I know you because you're in my family level, that is what should be replaced.

And what I think newsletters and things that have this aspect of a direct personal connection will replace it.

So we have a question about advertising, and actually advertising spend. Sodata Mukerji asks, do podcasts actually work?

And is this in the context of advertising? If so, how do startups calculate the ROI and the CAC? And I guess that also means a startup potentially doing a podcast, like you guys have done, so maybe you can shed some light on that as well, Chris.

Yeah, so podcasts, you actually work for all those reasons, but I don't have a biased answer at all. So how they generate the ROI and the CAC—so if you have a direct response, enter offer code XYZ at checkout, that enables people to track the effectiveness without measurement.

Like Backtracks has in place, you can also tie things together, and depending on what you want to do, brand awareness, the same way that you would for a radio campaign, you can actually measure how your overall conversion is growing based on what you're doing and your marketing and your ad spend.

So in a radio sort of corollary, people may not be able to directly attribute that radio advertisement correspondent with increase in sales, but stop your radio advertisement and then see what happens.

Which is a dangerous game to play, but one way to calculate it is to eliminate the variable from your current ad spend—if you can do it.

So if you know what your mix of marketing is in a podcast is a branded piece of content for you, as a startup in terms of this question, if you stop doing it and you eliminate it, there's a risk to your business, but you can, that's the only one variable that you're changing.

You can isolate its contribution to your particular CAC or ROI in that case. So some of it is direct, some of it is indirect, and some of it is there's value in perception.

So the way that the audience of the podcast perceives the company can be increased for all those reasons. If it's a well-executed piece of content, they may think, "This company is well-run, full of smart people."

And then how do you actually correlate what that means?

And then, yeah, we have very biased viewpoints on. You should absolutely podcast for your company; get your voice out. It's your direct line to your audience, whether the audience's potential customers, investors, the industry that you're in.

There's no filter when you produce the podcast content, and that's a great place to be for your brand.

So you guys are a startup. Do you buy podcast ads?

We have, yeah, we do buy podcast ads. Are they worth it? They are worth it. And then sometimes they're underpriced; sometimes they're overpriced, but they are very much worth it.

And if you stop doing it, you notice. But we are not podcast producers because we are not skilled in the art of content.

But you guys are.

I guess we are a little bit, yeah.

That's an interesting question. I think I'm—I mean, obviously I'm a little bit more skeptical about podcast advertising. You know, I would be—like to me, if you're a startup that's thinking about doing it, I would want to have a really good thesis for why this would specifically work for you.

Yeah, like I am a podcast company; it's probably a pretty good one—not to say that it's never worth it, but it's hard to make good use of just raw advertising money as a startup. And if you can figure out how to do it, then great.

I suspect, as I kind of hinted before, that there's a lot of podcast advertising that's in a little bit of luck and emperor’s new clothes state where like too much is overpriced and because there's just not metrics there.

It’s just like waiting for someone like the other shoe to drop and like some—the per download rate is going to go down a lot at some point, which as an advertiser, a single signal maybe do less of that.

You mentioned that we did a podcast, which we did. And this was actually maybe related to the reason why advertising would be good, which was we found the trick with Substack when we were bringing writers on, especially in the early days, was we had to like meet with people in person to just sort of like tell them what we were doing and why.

And when we were doing that with writers in the early days, we had like this really good rate of people sort of like seeing why we were doing what we were doing and getting excited about it and buying the religion and being like, "I want to do this."

"This is so exciting; of course, I'm gonna make all this money," and then going on to make all the money. We couldn't convince them to do it over like email and stuff, and we're like, well, there's only so much of us, so we're gonna have to at some point do this at scale.

We're gonna have to be able to tell this emotionally resonant story at scale, and one of the best ways to do that is probably not a shock is a podcast.

And we were like, even before, this is before we even had an audio feature, we're like we should just do a podcast because it's a way for us to like give this message in an emotionally resonant way that we believe in without having to like individually meet with thousands of people.

Yeah, and as a founder, how do you go budgeting for that?

So you did it in-house, right?

Yeah, and we—you know, we're fortunate—we had one of our first employees, Nathan Bashaw, who was previously head of product at Again Media. He’s like a podcasting guy, and he’s like, here's how you do all of this.

And one of my co-founders, Hamish, is like a journalist and has done tons of interviews, and like just they kind of knew a bunch. We sort of had in-house a bunch of like the pieces you would need to do it well, which we were just fortunate, I guess.

Mm-hmm.

Yeah, I don't know. Did you put a monetary value in like, this is how much we're willing to spend on this. Because we expect a conversion of—why?

No, I mean that's maybe—maybe people run their companies that way. I don’t; we're not at that level of sophistication for like quick things like that, right?

Well, because I think that this is a really common question that I get.

It's like, I'm gonna do a podcast; what should I expect? So in terms of measurement, so a portion of Backtracks is the analytics and the measurement, and we do that in various ways.

And then if you have an existing podcast and you're doing maybe a new season or you're rebooting, you can have comparative metrics.

But then you can actually know if you're trying to target certain markets, if people are listening in those markets. You can change your basically run A/B tests on release cycles, content structures, so all of that's in our product of, "Well, are we doing a three-person panel?

Are we doing a one-on-one Q&A? Is that—what's the structure of the content that's working?" And then you analyze as metrics—not just downloads—but playback and then where those playbacks are occurring.

Depending on your company—if it's a startup that has a very social media focus—and your audience is on Twitter, is that audience listening to your content on Twitter? Are they coming to your site? And what's your metrics?

So one thing is to know your metrics when you start before—don't wing it afterwards or kind of reverse your way into it if you're thinking about it that way.

One part is podcasts are a good way to sell yourself, sell your product, and then do you need to actually concretely measure that?

You'll probably want to know how you're doing relative to are you improving or is your audience growing?

There are ways to do that, but very like fine-tuned, metric-driven way of producing the contents where there's absolute correlated CAC and some way that we think about it is there’s a difference between attention and opportunity, and sometimes, at the early stages of something, being able to measure it at a certain absolute way is not always the best way to treat it.

And how do you guys—both for newsletters and for podcasts, like a lot of the questions we also got are about people who are curious about getting started. And so I think like best practices on like how to actually get going and what to expect would be worthwhile talking about.

So if I'm, you know, we were working with you guys pretty early on, so I had done a podcast before the YC podcast, so I just kind of winged it. But someone comes to you and says, "Hey, we're gonna do a podcast or we're gonna do a newsletter."

What do you tell them? Like you have to start with these things, like this many episodes or whatever you might suggest?

So it's a simple answer, but why and why you want to do the podcast. What is your podcast about?

Now, if you can't answer that, that's a bad sign. But also that helps dictate how many episodes you can do based on the topics. Are you going to exhaust the topic? Is it a frequency that you want to do? One a week, you want to do one a month, or are there monetary constraints?

Are there? So you can first start with the content and then how professional do you want to get on scheduling?

So are there certain things in your industry or in your company or you as a person— I want to get out an episode before this holiday? That helps—you can back your way into what you need to do before then.

So the most important thing to us is always why do you want to do this? What do you want to do this for? And what are the topics? And then people always ask about equipment and things like that, but there's lots of answers on the internet for them.

You newsletters are great because for newsletters, when people are like how do I start a newsletter, we like to start it just goes. It’s not like, especially, you know, we tell people like if you're not sure you're doing like start a free one.

You can do it in Substack, we don't try to do anything. Just like literally make your first post.

Yeah, and then like tell people about it and like add your mom and a few other people from your Gmail contacts like into your list and just go, you know?

It's good at some point to develop like an edit or strategy, but like here's what I'm doing and here's why people would listen to it.

But it's kind of like startups in that it's like you have one idea and that's not what works and you change a bunch of stuff. And for us, the one reliable predictor of success we see is like do you do it consistently?

And if you do then—and you know, pay any attention to the feedback you get, you're gonna eventually find something that's good.

And the way that most people fail is the same way they fail when they're doing like a blog or something is they do one post that's like I'm starting a blog, and they do one other post, and then there's never another one.

Right, sorry! It's been a while.

Yeah, six years ago, yeah. But for newsletters, it's literally just do it. Just just do it! And like, you know, if it's good, people will give you the feedback you want, and you can—and it'll grow.

And the other cool thing we found is if you find that if you get to a place where you have a newsletter that people are regularly reading—like if it is regularly opening it, chances are you'll be able to charge for it if you want to at some level, because it's actually harder to make something that's good enough that people regularly want to consume it than it is to like convince some fraction of them to pay.

That's a great takeaway!

Yeah, so yeah, for newsletters, if you think about starting a newsletter, just start it. Go to Substack.com, hit this button; it’s real easy.

And then in podcasting as well, if you've never done it before, you can get a few practice episodes, and no one has to know that, you know, you're just learning those mistakes.

Some people just start it and need to be perfection from the beginning, but treat your content strategy when you're just starting in a new medium like you would a startup.

You don't know exactly what's gonna work, but start and have a thesis and try it, and then no one needs to necessarily know the first iteration. But they'll say, "Oh, this is the greatest news that I've ever received. This is the best podcast." They don't know that you've been practicing doing this for so long and you've improved over time.

But part of that is— it is just going. And then as you get going, you can change your structure based on what you've learned, and then, yeah, I think that's great.

All right, thanks, guys. Thanks for coming in!

Thank you!

Right, thanks!