Yes it can work

No you don't "need" a built-in audience

Casey Newton made big news yesterday after announcing he was leaving his comfortable editor spot at The Verge to go solo. His new company, Platformer, will be a subscription newsletter hosted by Substack and will cover “social networks and their relationships with the world.” In a time when media companies are failing left and right (see., e.g., McClatchy), it’s no surprise that more and more writers are going independent. What makes Casey’s leap especially interesting is that The Verge, by all accounts, is relatively healthy; unlike other writers, Casey took the leap by choice rather than necessity. In investing parlance, he’s nevertheless “shorting” big media and going “long” himself.

The irony, then, is that in their attempt to save journalism, Substack is now detracting from it by plucking top talent away from incumbent media outlets. For certain writers, the prospect of Substack’s easy-to-use publishing platform, of being one’s own boss, of building something they own (rather than serving, say, a private equity overlord) is an exciting breath of fresh air. For their employers, the prospect of Substack, of writers being their own bosses, of writers scratching the entrepreneurial itch (rather than serving, say, a private equity overlord) is a new headwind that they surely hadn’t modeled just three short years ago. One has to wonder whether, just a few years from now, we’ll see chapter 11 bankruptcy papers for a media company that blames Substack for a loss of talent, diminished revenue, and, in turn, an inability to service expensive debt.

All of which turns a lot of attention to Substack and their ability to not just provide the tools that writers need to actually build companies but to build and sustain their own. Given their model — they take a 10% cut of all publisher revenue — Substack needs numbers for that to happen. And to get those numbers, they need existing talent, sure, but they also need to service those with nothing more than an idea and the desire to build a business off of it.

There are a lot of naysayers who question whether this can happen and whether Substack only enables those who have “a huge audience” or are “already famous”:

These comments — from respected folks in the media industry — are, of course, massive buzzkills that very well may discourage anyone who doesn’t have a pre-existing audience or isn’t famous, i.e., anyone who isn’t Casey Newton with his 106,000 Twitter followers. So, allow us to provide a counterpoint.

PETITION is a newsletter about distressed investing, corporate restructuring and bankruptcy. Sexy right? To add some flash to that and expand our coverage universe, we decided that we wanted to focus on “Disruption from the vantage point of the disrupted.” While Clayton Christensen (RIP) or Ben Thompson might cringe from the way we abuse the word “disruption,” the basic crux was that we wanted to highlight how today’s innovations (may) lead to tomorrow’s bankruptcies; to note while celebrating the “revolutionizing of Industry X” we’re all, as a society, neglecting those on the backend of that revolution. By way of example: it’s great that wind and solar are now powering a significant amount of Texas’ grid but what about all of those bankrupted oil and gas exploration and production companies and all of those lost drilling jobs? Or all of those bankrupt coal companies and those lost mining jobs? Here’s another one: it’s wonderful that we’re moving towards a cashless society powered by POS innovators like Square Inc. ($SQ), but what about the manufacturers of ATMs (i.e., Diebold) or cash register receipts (i.e., Cenveo)? Last one: isn’t it amazing that you can order a new shirt on your iPhone and have it arrive at your doorstep in 24 hours? Of course! But how’s that local mall doing? Your favorite department store? Where are your teens getting summer jobs these days? These topics merit discussion. They deserve an audience.

Except we didn’t have one. We were new. And to complicate matters further, we’re anonymous. That’s right: we specifically elected not to leverage networks, a potential “built-in audience” or any footprint on other platforms. We just wrote. And over time, our snarky “a$$-kicking” newsletters began to find an audience.

When, roughly a year later, we first (anonymously) spoke with Hamish at Substack he nearly laughed us off the phone. Never in his wildest dreams did he or his co-founder, Chris, think that an anonymously-written media company focused on bankruptcy would be among one of Substack’s first paid newsletters. Still, we had some subscribers and high open rates (we also had a whopping 200 Twitter followers). That was enough for them to realize that maybe — just maybe — there was something there. And it was enough for us to, months later, say ‘screw it,’ we’re adding value and we should get paid for it. In February of 2018, we toggled to a twice-weekly model: a free edition on Wednesday and a longer, more robust, subscriber-only edition on Sundays.

Here’s what our subscriber graph looks like now:

Pardon the lack of hard numbers but, frankly, it’s irrelevant to our point: suffice it to say we have built our list to (many) thousands of readers. Despite being anonymous. Despite having no sales function. Despite not ever spending a single dollar on customer acquisition. And yet:

Wait. What? An unknown with no pre-existing footprint in the same ranks as prolific stalwarts like Judd Legum, Andrew Sullivan and Matt Taibbi? How’s that possible?

This gets us to another bit of conventional wisdom that to date, thankfully hasn’t applied to PETITION:

This may be a total aberration, but our conversion rate is currently above 20%. The question is “why?”

Of all of the recent comments, we thought this was the most constructive:

“You have authority and expertise on something that’s useful.”

We are niche and it helps that, at least 90% of the time (😜), we actually know what the hell we’re talking about. After all, we were the first to predict that Toys R Us was going to liquidate. While the Twitterverse was losing its mind in outrage, we very quickly concluded that a bankruptcy judge would, in fact, approve Hertz’ equity issuance shenanigans on the basis of ‘business judgment.’ We’ve highlighted a large number of companies that could — and eventually did — file for bankruptcy long in advance of the actual catalyst. And, in doing so, we filtered out the technical financial and legal concepts and made what are often complex business transactions accessible to a broader audience. Unlike other companies in the space, we aren’t ‘enterprise’ so people affected by these unfortunate situations can now have access to critical information about the events affecting them. We democratized this information. And we did so in an educational and entertaining way.

So f*ck it. If you have a good idea — a differentiator — and you have the stamina to give it a go, you should. Be the exception to the rule (if it is even, in fact, a rule). Don’t listen to the naysayers. Follow Casey’s lead and go long yourself. You may find yourself in great company…


PETITION is a twice-weekly newsletter that discusses disruption from the vantage point of the disrupted. We’re not for everyone but what we write about impacts many. Check us out here.