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[upbeat music] Welcome to the Rebooting show. I am Brian Morrissey. This is a bit of a different episode. It is gonna be a two-parter.

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Uh, the first part was a conversation that I recorded in the wellness room, oddly enough, at a media party with Anonymous Banker. And, and the second part was done the next day as part of our recording of People vs.

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Algorithms. That one is with Troy Young and Alex Schleifer as well as Anonymous Banker.

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But in the first part, you know, I had co-hosted this salon at Casa Comos in New York City last week to discuss media in a post-traffic world.

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We had a great group of, of media and marketing executives that came to the offices at Human Ventures.

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After the group discussion, Anonymous Banker and I steered ourselves away to record a little impromptu episode with unfiltered views of the discussion. Anonymous Banker has a clear idea of where...

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I, I think where the media business is going.

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And as luck would have it, we discussed the prospects for Substack, which we've done over the last several months, and it happened to be the night before Substack finally closed this funding round it's been out raising for a little while, and it closed at a hundred million dollars at a one point one billion dollar valuation.

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That makes it a unicorn, which used to be a major mi- a milestone for startups, but it's lost a little bit of its luster in a, in a world where AI researchers are getting a hundred million dollars a year.

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But AB and I discuss why Substack is full of potential, but has often fallen far short, at least in his ex- estimation and mine, on execution.

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But it's clear that it has all the pieces together to create what would be like an everything app for creators.

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The Substack app is, it's hardly perfect, it's buggy, and talk to any Substack writer, and they would prefer better email tools.

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You know, there's a lot of frustrations at least that I hear as from, from writers on Substack, but maybe that's just the people I talk to. But Substack's going far broader.

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And I think, you know, the second part of this conversation really brings this home where, you know, Alex brings up OnlyFans, and I think OnlyFans is actually a really good, you know, marker to think about when you, you're talking about Substack because Substack founders have talked about being OnlyFans for a little while, and that doesn't mean that they're gonna pivot into naughty content.

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It's mostly about how successful OnlyFans has been in creating a wildly profitable content platform that creates a close connection between the audience and the quote, unquote "creator."

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You know, OnlyFans obviously a different type of creator, but, you know, the differences are, are not that great when, when you get down to it. And Substack for a while has moved well beyond email.

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I know that for me, like leaving Substack, I guess it was a year and a half ago, which really came down to the fact that it, it hadn't evolved an email product.

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And I, I think that Substack is a lot of, you know, kinda half-built products and, you know, hopefully this funding, they can use it to finish building a lot of these things.

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But, you know, it's gone, and I think this is part of the overall shift from relying on text into, into multimedia. They've added podcasting.

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They've added video and live streaming, and I think it's seen some, some traction i-in those areas, and clearly its investors saw that.

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So we assess like where Substack is because I do think it's a consequential company when it comes to thinking about what the future of the media business is and, and what this funding round means and maybe what it doesn't mean.

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I hope you enjoy this conversation, so always love to hear your thoughts, and you can send me a note to brian@therebooting.com. And also, if you enjoy this podcast, leave a, leave it a rating and review.

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And also check out People vs. Algorithms. That's the other podcast I do. It comes out every Friday morning.

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It's a bit of a broader picture look at the patterns that are affecting media technology and culture, joined by Troy and Alex and usually AB too. So here's our conversation.

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[upbeat music] AB, thank you for joining me in the wellness room at this party. We just had a, uh, staffer who came in and thought we were doing something more illicit than a cheeky podcast recording at a party.

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[laughs] She looked alarmed [laughs] when she came in to see two dudes- Yeah... just hanging out in the wellness room together face to face. Anyway, this is a gathering. It's at Casa Comos. We're at...

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Just to set the scene, there's probably like, like 75 like people in publishing and advertising here. Joe Marchese puts together a lot of these things. He's been on PVA.

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We had a little discussion, little baby discussion about AI and media. It's like a constant conversation. You had kind of a more like negative viewpoint of this. See, I'm like sort of... I'm used to it.

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I got name-checked a few times- Yeah... so I was just happy to be... I was happy to be mentioned. [chuckles] I appreciate that Joe hosted us, and I...

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The nice thing is I think he's trying to be a thought leader and bring together people to talk about these harder issues.

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My negative p-perspective was it feels like people are still talking at a very high level when the ground is really starting to shift in terms of traffic, how consumers are consuming content.

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And as a leader of a publisher, I think that you wanna have very specific understandings of where tra- how traffic is changing and how you're orientating your go-forward strategy to continue to get traffic, how to also tailor your content to the LOMs, and then also I think when somebody mentioned this really interesting term, which is like this asymmetric approach where it's like I wanna not worry aboutThis, the, the Google traffic, how can I get traffic other ways, right?

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Which is a really picture that hopefully have traffic, you know, newsletters and, and social media- Yeah... and things like that.

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I mean, and the problem is, like, to me, like, most of the people in this room are operating an old business that's in terminal decline, and they're trying to build a new business that isn't in terminal decline.

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And, like, step two is hard no matter what, if you're starting from scratch in this kind of environment. Yeah.

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But if you're trying to operate a declining business while you're do- trying to build the new business, that's hard. Yeah. Super hard.

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And, but you know, someone made a comment tonight about building and trying to create- I like that, and then you, like, poured, like, cold water on it. Evangelism. I was like, oh my God, let's go get them.

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I think the trouble is- We can do it... the companies that are actually AI companies are putting so much money into building these models.

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You, you saw that news article where Google is spending, like, $100 million per person between task and sta- It's really a far- For Meta... Meta. That's Meta. Meta. Is Google doing that too?

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Yeah, yeah, and then they just bought that- They're all doing it. Yeah, they, they just bought that business, that OpenAI Windsurf, right? Oh, the Windsurf. Yeah. They swooped in. Yeah.

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And what's super interesting about that deal is, so they bought 49% to basically get underneath the rules around, it's called HSR, yeah, it's that trust.

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And so they're, 'cause they're worried about getting approved by the government. At some point, the government is gonna change this rule because- Yeah...

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it's, it's way more- This is like de minimis, but for, for, like, engineers. Yeah, it's...

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But what was really interesting about that deal, they did- That was, that, that was, the de minimis was the, whatever, the thing that, like, who's doing it? That cheap... I've already forgotten them. Which one?

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The cheap e-commerce company from China that were using the de minimis, uh, loophole. Oh, the exclusion to push the goods through Me- Mexico, yeah. Shein or whatever. Yeah, or the, there's another one.

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But what was really interesting about that deal is they basically had to double, they didn't completely double pay, but they pay...

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So if you think about these companies, especially the startups, are giving a lot of equity out, right? But when you buy 49% of the company, there's not a change of control.

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And so what Google or Meta or any of these places have to do, is they basically have to compensate the employee stockholders separately from the equity owners of the business.

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And so they're paying a lot of money, but it just shows you that talent is really critical.

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And when you think about media companies trying to build any sort of AI element to their website, and they have maybe a couple million dollars to throw at it, I don't think that's gonna get you much of the talent.

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Yeah, but I think the question ends up being, what, what do you do, right? And I think this is the essential question for all publishers.

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'Cause I always ask someone, like, "What is your business gonna look like in three years?" It was, like, mentioned here. Like, nobody can answer. Like, nobody can answer. We don't know. Yeah.

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And so what I, my follow-up question to that is, okay, fine, but then what do you build? Like, what are you building?

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And, like, that's the sort of paralysis that I see, is that publishers don't re- even know what to build. They don't know what the, their, the market is gonna be. Yeah, just think about it at a high level though.

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It's like if for, you know, take, go back a number of years and a publisher's like, "Oh, we see Facebook getting big. We're gonna double their own social business."

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It doesn't make sense because their reach is ring-fenced by their current distribution, and it doesn't really work.

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And I, I appreciate that there's, like, onsite opportunities to service customer and consumer needs, but to me, if I was sitting, uh, I would not be spending any money trying to build AI stuff at my company.

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I would be going to OpenAI and asking them for engineering talent and things like that to basically figure out new and interesting things to go on my, on my site.

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So the simple example that Vox did in collaboration with one of the AI companies is make a gift guide where you could go to it and, and type in very specific things about your wife, and it would surface ideas, right?

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And so that's, like, a very applicable thing where- Yeah. I mean, I don't think... Nobody's gonna be trying to, like, build their own sort of AI.

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I mean, they're gonna be general contractors, and I mean, at best, they're gonna be, you know, shape the direction of the product, but all the technology is not gonna come t- within these, these publishers and these media companies.

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They can't compete. What have you heard about... So one of the topics he talked about tonight was this idea of brand safety. Do you hear that a lot? Oh, God. It gets waved around by, like, every...

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It's like, it's very handy because publishers hate brand safety because it's been used against them so much. And, you know, it sounds great. Like, who's against brand safety? It's like being for the children, right?

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But it's gotten stretched to such degree, and particularly as politics become so polarized, to make m- publishing news content almost an uneconomic activity.

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Now, my sort of response to that is, well, that's too bad, so sad. However, if this was literally, like, economically... It just shows that there's no economic function for this content.

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Like, literally, if, if bus- businesses are rational actors, and if, like, if they needed to be on this content in order to make their businesses go, they would figure it out. But the reality is they don't need to be.

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Uh, YouTube had all of these brand safety issues over the years, and they just muscled their way through it a- and there's a reason.

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And there is a really good book on YouTube which describes sort of the evolution of the algorithm, and what you see is the r- the way that in the decisions was how do we distinguish our watch time, right?

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And then Susan had to basically go out and do these PR press tours whenever they were serving up crazy stuff to kids, but they never changed the algorithm.

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They'd sort of refine these, so kids weren't getting shown- Yeah, they would just slow walk it. They would, they were like, okay...

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It was like the political equivalent of, like, doing one of those blue ribbon commissions when the politicians don't wanna deal with an issue. They're like, "Well, we'll have a commission to look into it."

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Nothing ever happens. At the end of the day, they, they're now the biggest video platform, right? Like, it's, in terms of watch time and, and it's like- Yeah, they're TV. Yeah, yeah.

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And so-I think that's if you should... I don't, I don't think bra-brands are doing it for their spend 'cause that's where all the money is, so. Or, sorry, where all the consumers are going to go. Yeah.

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And also, like, I think, but I think for publishers, you know, they don't wanna-- I think they're so scarred by the last generation of, like, you know, going along with the tech companies and platforms and getting screwed, but they kinda, kinda have to do that now.

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W- and they're gonna have to cut deal. You're seeing it now with the deals that, you know, Amazon is cutting for, like, Rufus.

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Uh, you're gonna have to do something with all that commerce content because people pretended that their commerce con- their...

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When people said commerce content, they meant affiliate, and when they said affiliate, they meant SEO. Yeah. And [chuckles] so without the SEO, I don't know what you're gonna do with your affiliate content.

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So- Actually I... So that's sort of...

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I did a bunch of work today on this question of what's the future of publishers and AI, and I think 'cause people talk about how media use still been falling, I think what you see with these headlines, like, news content, news sites are seeing these massive traffic drops.

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I think some of their service level, their service journalism actually is still getting traffic because even though AI will summarize the best acting, in order to purchase it, you still have to click off and then go to that next page and then make...

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It's like there's still a purchase journey. At some point they may collapse it, but high intent searches are still giving a lot of traffic.

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The other thing that's really surprising is now that Google has, like, turned back on their focus to AI, what we mean then, they're trying to lead in terms of how they service advertise.

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So what I mean by that is they're trying to make ad units similar across both search experiences, so there's not, "Hey, advertiser, here's the AI ad unit and here's the, or, you know, or the typical search result."

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They're basically saying, "Buy this unit and it will, it will appear in both."

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And the reason why-- and then the, the, the good thing is on, on AI-assisted search, consumers typically get to that, those ads with a much more th- informed perspective and so they convert higher. Right.

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But it's just everything, everything gets compressed. Everything is smaller, everything is lower, and that's the, that's the reality, right? So, like, will traffic, this was made, this point was made tonight.

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Does, does traffic go to zero? Does, you know, does search referrals go? No, they're not gonna go to zero, right?

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But, like, everything gets compressed and everything becomes smaller, and it's already a tough business, so that's, that's the reality. You ever learn anything at these events? Do I learn anything?

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I mean, I, I pick up- Not that I make it. I was just curious about, like, if you learn anything tonight. It was mentioned about... I didn't really think through the implications of, like, AI browsers and, like, ad fraud.

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I thought that was really interesting. Yeah. 'Cause just, like, I think the overall thing that nobody is really focusing on is literally all the metrics in, in digital media are worthless now.

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Like, they're all worthless. Email metrics are worthless. I don't even report email metrics to clients 'cause they're, they're lies.

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Like, there's so many bots that are clicking things, you d- you have no idea what is real and what's not.

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And so, you know, when, when AI browsers really take off and there comes a point where display advertising itself gets called into, like, question.

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Like, I don't know how you have an impression-based ad system when none of... The bots are not getting filtered out, and the bots are disguising themselves to look not like bots.

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And so publishers are, are counting all these impressions that they know are not, like, real.

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And then there's a question that was brought up, like, does, does an agentic bot visit, like, count because it's on, it's on behalf of, like, a person? And then how do you, how do you advertise to bots?

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The whole thing is just... I understand why publishers are just like, "Oh, screw it. We're just gonna put on parties." [laughs] Like, so much more straightforward.

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Well, that was a funny comment when someone looked at what's hot about the events. Yeah. I mean, there was this really interesting, or not... There's a, a good question that actually opens up.

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I think we'll look back in five years and be like, "Oh, wow, publishers misperceived the value of their content," meaning they thought it was worth a lot more than it actually is.

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Someone asked, "Do you think Sam Altman cares about VE?" And the question is, even someone answered it, yeah, like, that maybe- That was a person from a PR firm. Yeah. [laughs] Nothing against PR firms.

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However, when they do s- I, I realize what I'm gonna get. But if you think about, like, ask that question ten years ago, do you think Google and Facebook care about publishers?

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The answer is no because the, there's a misperception of value where it's everyone, publishers think they're super valuable, but what they don't realize is there's so much other content out there. Yeah.

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And this is all rooted in newspapers, which basically, I think everyone's giving itself the dues about is newspapers, there's this term that they would write the news, and what that news is for two hundred years and, and more relevant and more recent is, like, when other forms of media started to pop up by TV, the reason that term was relevant is the people that were broadcasting news would read the newspaper and figure out what to report on, right?

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But today, that doesn't happen. Like, if you look at a show like the CPN, right, the guys that are on Twitter every day for three hours, like, they're writing the news now. Some of the substacks are writing the news.

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And so meaning, like, they're meeting the stories, which is completely different than it's, uh, how it has been in the past.

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And I think a lot of this perception of value is rooted in this idea that all of these publishers actually really matter.

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I'm not saying that they're irrelevant, but I think that the perce- the misperception of value is gonna actually cause value destruction even more because I don't think tolling is gonna work.

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I don't think a lot of these things are gonna work because the publishers think that they are owed all this money, and they're not.

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Well, I think it's generally, it's the, the difference between the bid and the ask, really.

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Like, I mean, 'cause, like-Publishers have always sort of overrated the value of their content, you know, on a unique basis, on an aggregate basis.

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That's what I was trying to make the point, like, media has itself has never been more valuable. The media business kinda sucks. Yeah.

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That's just because the econo-economics are broken because it's like it's completely decentralized, it's totally fragmented. It's like everywhere. There's no cost to, of creation. It's gone to zero. And so,

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yeah, I mean, for publishers, like, that's, that's just the reality. Yeah. They're not gonna be able to get around that. And there's always gonna be this, you know...

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They're like, "Pay us for our content," and most people's content, it's not, it, it doesn't have, like, as much value probably as, as they think it is.

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I think the reason why people reacted to your comment in a weird way is because they, they think media is them. It's not. Right? Media takes on so many more forms.

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When you say media's never been more valuable, you're not saying the media on X, Y, and Z publisher. You're saying across the spectrum.

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But the problem is, again, it goes back to the what publishers, who they think they are versus the reality, and you can earn media in so many ways.

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Someone made the comment about, you know, "I want this direct relationship." That's so much more valuable than paying some PR firm to go get an article written and now you, and you hope it gets some traffic.

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It's way better to have a direct relationship with the consumer. What, for like a company? Or like- Creative or for advertiser.

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I mean, that's why you see them turning on their own substacks, is like, they see the value in, in, in media. They wanna own it, right? But when you... Let me ask the question the other way.

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When you say media's, media has never been more valuable, who is earning that value? Where is that value getting distributed?

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Yeah, no, I think the way the value ends up getting created is different, and then the way it gets realized is different, right? Like, I mean, just to use tech as an example, like the all-in guys, like they create...

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That's incredibly valuable. Media's incredibly valuable to them. Yeah. Right? But they monetize it through deal flow, through ego, through- There are, that thing is becoming-... expensive tequila. Yeah, yeah.

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Their events, like, the... You know, these are, this is a different type of business model than... The typical media mindset to me that needs to change is it's always about adjacency, it's always about inserting ads.

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It's either there's two ways to make money: you either put ads against the content or you sell subscriptions. And the reality is, the ways that media is going to realize value is gonna be completely different from that.

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That'll exist, but to me, the most interesting media properties make money in totally different ways than that. Yeah.

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And that's what I think the people in this room need to do more of, is instead of mourning for the past or saying, "This is so unfair," is figuring out ways, you've got brand, you've got an asset, it has some value in the, in the marketplace, and figure out a way to like, leverage that value.

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And it's most likely not gonna be display advertising on web pages. [laughs] I just don't, I don't believe there's a future in that business.

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But when someone says, "Yeah, we wanna do events," it's a completely different muscle.

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It's not gonna reach as many people as you can Well, also, by the way, like, you know, uh, these, a lot of these, these, these brands threw away their brands in chasing...

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I understand why they did it, but when you were going into the SEO fighting pits or on Facebook, you saw everyone was rushing to do the same Game of Thrones recap. Doesn't matter what their brand was.

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When it goes into commerce and then that, they stretched that as far as it goes. Like, I mean, about like, what they had, quote unquote, permission to do.

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So that kinda made the brands mean not that much, and I think the problem when you wanna go into, like, real-world experiences is it tests whether you really do have a tie with a specific group of people that wanna show up.

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Yeah. And a lot of brands, I think that's gonna be tough. Like, take like a Business Insider. Business Insider now wants to do events. Well, guess what? Business Insider ran away from events like, a decade ago.

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I know because, like, uh, they wanted Digiday to do their events. They wanted nothing to do with it. Uh, it was just a pain in the ass. They just wanted to put ads on web pages.

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And it's gonna be really difficult to make that work because I think the brand probably got neglected in trying to build like, a scaled display ad business. And they tried to turn on subscriptions.

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Okay, I wanna ask you one question. Pretend you work at Digiday, running it. The, the question is written, you see all these esteemed journalists leaving their, these amazing newspapers.

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People can debate if they're amazing, but leaving and just hopping over to Substack or hopping over to Beehiiv, right?

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And in the back of my mind, I'm like, why didn't The Washington Post say, "Go publish half your content on Substack. I really don't care"?

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So when you were at Dig-Digiday, if you had a really good writer and they came to you and said, "Would you let me publish a separate Satan on Slide day on Substack?" Would you have let it?

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Because it seems to me that a lot of writers are gonna run at some of these different independent publishing platforms, and I feel like there used to be like, a one foot in, one foot out strategy where you let them.

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'Cause like, in, in the sports content category, writers have developed sig-significant followings on Twitter and X, right? And I think that that, to me, Substack is just a better version of it.

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It allows you to write more. But it's, it's similar 'cause you can push that audience still back to the, the main, right?

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Like, if you like what someone's writing on Substack and you see this person writes one day a week on Substack and three days a week at the Washington Post, why wouldn't people go subscribe to the Washington Post?

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So if you were at Digiday and you had esteemed writers, would you let them give both?I mean, at the time I wouldn't have, because, I mean, that's just not...

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You know, you put your full faith and effort into, like, the company's work. I didn't wanna hire someone to, like, be building something on the side.

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But I think that's the reality, is that particularly really talented people are gonna have different types of arrangements with...

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And I think, and I think that's an opportunity for publishers, honestly, is most of the people who are, you know, going off on their own and going to Substack don't wanna do the s- what's needed to build a real business.

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There's only so many subscriptions to go around. Yeah. Work you did at Big Idea, you would still be advertising it over the Substack. Which is also another thing.

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Whenever any journalist sort of like talks about it, they're like, "Oh, can you make..." Like, they ask us, like, "Can you make six figures?" Like, I'm like, "You're setting the bar, like, extremely low [laughs] like..."

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Yes. Why don't you become a real estate agent? Like [laughs] what?

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It is, and it's interesting to think that, think about, like, what in the future as, as s- as some of these platforms get more diluted, is like what are gonna be the job combinations between of the Substack writer and what else do I do to basically, uh- Well, I find that in places like this, I can't really describe what I do to people.

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Like, I'm like, "I don't know." I'm like, "I have a little- What do you say?

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Well, I like try to go, like I don't know if I say, like I, oh, I was like, I have this little like B2B media company that sounds like a little, I'm like, but I'm not like a podcaster. I'm definitely not a creator.

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It's very difficult to describe. Yeah. I mean, and I see that out of your business is even though you think it's small, in the B2B space, there's a lot of trade publications that are of all sizes.

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Like, it's like size doesn't necessarily... The amount of revenue doesn't matter, it's like you're relevant to your audience, right? Yeah. I go, that was the whole bet. It's like you can...

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And I think more publishing is gonna move in this thing, where it's like an influence business versus like an impressions business. Yes.

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And that, that came up here, and that's a difficult transition to make, 'cause a lot of these businesses were architected for impressions.

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The, all of their processes, all of their infrastructure, all of their talent- The way they measure the ri- everybody gets- Everything... measured on impressions, yeah. And it's really difficult.

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I think B2B, uh, has been easier because it's always been indirect business models, impressions never mattered, you never thought about Comscore. Events were always like you're always making money

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separate from what technically your product was. Yeah. And so everyone's gonna have to do that. Give a wrap-up question. Do I have a wrap-up question?

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I was gonna ask you for three businesses I might- Three businesses you liked? Can I tell you a funny story? So I mentioned one of the businesses without naming it. I'm probably gonna get in trouble again.

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And the business I'm mentioning, I went to lunch with that guy and he goes, "Do you know who this person is?" [laughs] Oh, shit. That's awkward. He's a really good friend.

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And I was like, "Look, nobody knows of your bi- I didn't say anything. I mean, he doesn't... And it was just, it's just funny how small this world is, so.

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I told someone tonight that AB was here, and they were, they said they're a big fan of the [laughs] Evil versus Out here, this podcast. [laughs] So I'm not gonna tell anybody who I named there.

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[laughs] I was like, "Somewhere in this room is AB." Final question. Oh, I wanna get your thing on, on Substack, on, on where they go as a business. We talked about it a little bit. Yeah.

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I'm such a big fan of the company. But I can't tell if you're a fan of the company or not. Think about this. Let me just tell you my own personal take.

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I, I've never wr- my comment at the bottom of the New York Times and the Wall Street Journal in terms of articles, right?

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But the level of engagement and the way that you feel connected to some of these different Substacks in the, in the sense of two ways.

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One, most of these Substackers, you can reply to their emails and actually talk to them, which is pretty wild, right?

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I've, I've tried to do that with the New York Times person, I never get a response back, 'cause they're busy, they're doing other things.

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Whereas the Substackers have to rely on that community to con- the, the, the connection is so much tighter. The second thing is the comment section is actually really valuable.

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I don't think any publisher has ever fixed their comment section, whereas I think there's actually a pretty viable, healthy community around some of these Substacks.

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And so you, you say, okay, they figured out things that publishers have never figured out in the past.

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They have done what Medium wanted to do, and it's the reason why they haven't been able to raise money at the levels they should and they want to, is purely because of execution, and you have two executives, one who randomly decided, "I'm actually gonna go write on a different platform, media commentary every week."

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So- Terrible look. I'm not in the banking business. But the problem too is that he has to comment about deals that are happening on his own platform, which is even weirder because it's like he can't share any data.

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It just doesn't make sense. If I was that guy, Hamish or whatever, I would've used an opportunity.

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If you're gonna partner with a platform, why don't you pub- partner with a publisher, go to the New York Time and say, "Here's the coolest thing we're talking about on Substack this week," versus going to a beehive distributed newsletter and then talking about, like, basically talking your own book.

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It makes no sense. Yeah. And that's the problem, is he put himself in this box, and so, and on Lockwoo's first newsletter, he was asked about the Free Press, and the quote there is literally like a horoscope.

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It doesn't say anything.

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Like, it's just, it's the weirdest thing, because the point of him writing anything and why you should have a writer is like you have a perspective, and you have the point of view, and the problem is he can't share that.

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So- Yeah, yeah, no, I get it... which is funny, because he's supposed to be a writer, and you should know that going into it. So I think, again, it continues to show the failings of the leadership.

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What's amazing is they've built something, and they did it at the right time to capture this unique thing that's happening in publishing, and I think it's just a real opportunity to continue b- to grow it. Okay.

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They, they keep coming into our wellness room. We gotta r- we gotta wrap it up, AB. Someone needs to do some milking, so, okay. Sorry to be graphic.Okay, so that was part one.

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Now, in part two, uh, recorded the following day, I am joined by AB, as well as Alex Schlafer and Troy Young, and we get into what this funding round means and what Substack has to do to live up to.

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All right, so let's, let's, let's pick up on this because, AB, one of the things that we, we, you know, we talked about, about Substack there, and they-- subsequent to this, they, they closed their hundred million dollar funding round.

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Chernin is involved, which is really interesting 'cause Chernin has, has had a rough go of it with some of its content-to-commerce investments. They got it across the line.

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I, I think what's interesting to me out of this is that they got people to buy into the fact that they are a consumer app company, and that is what they're gonna be.

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They're gonna try to build a YouTube-like, OnlyFans-like model, which can be good. They got a lot of work to be done to, to pull that off. I don't know about being... about their, quote-unquote, writers on that platform.

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What, what's your takeaway from the funding, AB? So I, I know that's what they said in The New York Times, but the bond and TCG investing are not high-growth venture investors, right? They're more growth investors.

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So I think if the app and creating this sort of next Twitter or X experience was really what people believed in, you would've seen Andreessen continue to lead or other investors that are interested in that.

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I think the reason why you see TCG coming in is they're gonna, similar to sort of what happened at Barstool, is it's, it's the time now for this company to grow up and for the current team to probably step back and some newer operators who understand how to really monetize the audience step in.

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So I, I think the app is, is a good path to do that. They need to fix the feed.

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They need to fix a lot of things, but to me this signals, like, this is the next evolution of Substack, so it's beyond just the money raised, but how they're gonna evolve the company.

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I think the one question that I have is how much of that money is primary investment versus how much went to founders and- Yeah, and what is, what does the pref look like on something like that?

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'Cause if some of the money went to founders- Unpack that, unpack that for those, for those of us who are not as deep into the finance world as you guys.

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Obviously, this data is not publicly available, but I think if you saw the guys cash out for a little bit more money than...

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Normally, you're not gonna see people kinda show if this happened during a last upswing where people were able to cash out larger amounts of money.

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But I think if you were able to look at the split, and if there is any sort of secondaries where they got to sell some of their stock in this transaction, what that would signal to me is, like, they're, they're open to moving on, right?

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'Cause you always have this issue with founders in the business and bringing in your management and sort of getting everyone aligned on the go-forward strategy.

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Right, but AB, also with a big headline number, like a billion or whatever, raising a hundred, if there's one or two X pref on that, it just, the, it kinda makes the big number irrelevant. Completely agree.

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Yeah, that's the problem, right, is like, there's, there's... Like you said, is even though you see the bigger number, the m- the new money coming in could require two to three X in an exit, right? Yeah.

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So they're not gonna get back one dollar on a converted basis. They capped it, but they're gonna get multiples that. So is this an endorsement of the model, or is it, like, a mixed verdict?

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'Cause I guess this is what I'm trying to get at. I think it's an endorsement of the model, but it's a recognition that there's op- room for improvement.

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It's like a, a gr- if you were rating the company, it's like a C or a B, not an A. How would you grade the company, Brian? I mean, l- we don't need to ask the banker about the company. We're experts in media.

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What do you think? Well, I mean, I, I'd like to know what AB thinks as far as, you know, the, what the market is, is saying. I think that, that matters.

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I mean, I think with, with Substack, I, again, I've, I've said it, I think they have a lot of, like, half-built products, and- Yeah...

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that I think is, is the major issue, and I don't think that they've made enough obvious strategic decisions. Like, okay, now that they're raising money, they're saying, "Hey, we're gonna do advertising. We really are.

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We're gonna do advertising." It's like, well, that was obvious a long time ago, that that's where this, this needed to go, and they haven't done it. They haven't made the steps.

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I'm totally on your side, but let's say you take a step back, and they gave you a pitch that was really powerful and say, "Hey, if we had $100 million, here are all the things we can do."

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There's, there's definitely a gap in the market where, like, I mean, where are you gonna go? There's Patreon, there's getting...

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You know, YouTube isn't entirely incentivized to optimize around, like, artists getting paid like that.

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And actually, if Substack could deliver a bunch of products that allowed more monies to flow into those creators, they, they could. They would move out of YouTube. They would move out of other platforms.

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It would, could be a central platform for all sorts of creative, especially as, as, you know, the rest of these platforms are gonna get flooded with, with AI.

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So I think somebody gave a really impressive pitch, and if you kind of squint and you believe that overnight they're gonna start becoming good at launching products, it's worth...

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I would give them $100 million right now- You should... 'cause there's nobody, there's nobody else. Yeah. Well, there's only a couple of choices, right?

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You either y- y- you can get good at delivering incremental audience that means that you're more than an email service provider with a shitty app, right? You could do that, and it would attract people, and there would be

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reasons for people to join your network. Or you would take more and more spectrum, i.e. audio and video, and instead of becoming the next Medium, which is a disaster,

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you would become something more like the next YouTube. And I think that's gotta be the pitch, right?

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That you have the network effects of a platform, and that you have a media type that has rich monetization, and that you're not a boring old text platform for creators like Medium is, which is of no value or of limited value.

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I think what they've really... Their sort of secretI don't know if like they actually thought about this, but they've been able to create this like unique level of intimacy between Substack writers and their audience.

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We-- Brian and I talked about this a little bit last night, but the, the comment section even when you compare it to what happens on YouTube or any of these sites, like the comment section and how people engage on Substack I think is pretty unique.

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You can also... You know the Substackers and they'll write you back. And so I think if they can continue to lean into that, sort of like the difference is that why-- how is OnlyFans so valuable?

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Even if it's like forty-year-old like people res- you know, pretending to be the girls to respond to these people paying, there's -- the users are getting this increased level of in- of intimacy that they can't get anywhere else, and then that opens their wallet up to spend more money.

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I can't believe what you just said, actually. Is that what it is? Is that what OnlyFans is, it's an increased level of intimacy? Of course it is, dude. That gets you to open your wallet? [laughs] Are you kidding me?

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Well, it's- It's pornography. I mean, but every... It's access. Well, it's something more. I mean, I don't know. I'm not the OnlyFans expert, but I think, I think they have a twist on that.

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I'll tell my wife that it's not pornography when she sees it on the credit card bill. I assume they disguise it on the credit card. That's gotta be a feature.

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Let me -- [laughs] I think just having seen the OnlyFans comments- What does it come in as? The- Troy? The spend, the spend on OnlyFans happens not on the memberships, but on the messaging, right? So like that's what...

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And I was making like the Andrew Tate joke, 'cause that's what Andrew Tate, that's where he made all his money, is basically writing back these people that were engaging with the different operators of these [laughs] of these bits and pieces.

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But the date, so where the money is made is not on the thirty dollars a month or the fifteen dollars a month. It's the messages and the basically- Oh my God, it's like Bloomberg. Yeah. It's like the terminal.

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The real value is always in the, in the messaging. It is en-entirely that.

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You can find pornography anywhere else, but people pay for that extra access and that extra relationship with an individual that they've, they find appealing.

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The fact that they get to it via porn is neither here nor there.

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There's a huge, uh, the- right now there's a huge audience that wants to support specific creators, and they're spread across podcasts and YouTube channels and s-Substacks and newsletters, and they're all trying to make money, and it's all dispersed, and it's really hard right now to, to, to manage this stuff.

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I was like, uh, the Tim Heidecker Show has a Patreon, and it's also run on YouTube, and none of these systems really work.

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There's a huge place to get something that works, where you have a good product experience, which is not Patreon right now- That's true... or nor Substack.

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And I wanna give five dollars a month to these people that I like, so I can have access to content, maybe a, a, an extra episode a week. I, I pay for a bunch of these right now.

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And, and access to like talking on the, you know, or that my comments are going to be not lost in the flood of, of a hundred thousand people flooding YouTube, and it's all fans of the things I'm watching.

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It's exactly like that.

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That's exactly how OnlyFans- You know, I think, I think of all the things that publishers are gonna look back on and regret doing, and I think giving up on, on-site comments is gonna be one of them.

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I mean, Nick, Nick Denton was onto something with Kinja and keeping the comments. The comments were additive to the Gawker experience, for the most part. And publishers gave up on comments.

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And I think a lot of it was the writers and reporters at publications always treated comments like you treat like a porta potty. Don't look down- I think, I think the trouble-...

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um, because there's nothing good to see...

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I think I have a hypothesis around that, though, Brian, and I don't think it would've, I don't think it would've- I know you think that you need to have everyone involved in the room, and I don't- No, you know, I think there's two, there, there's just two classes, right?

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There's the one which is the, the very broad community where you need that type of scale to have an algorithm lift the most interesting stuff. That is Reddit, right?

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And then on the other side, you need those hyper-focused micro communities that is like the Patreons and potentially Substack, where it's a smaller group of people that have all paid for access or, or done something to gain access, and they all feel like, you know, they belong in that little group.

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Anything in the middle, like a site that you just kind of run through and, and, and visit, it's, it's really hard to make any valuable comment system out of.

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The reason why, and I'm not try-trying to be weird with the OnlyFans example, but it just, it shows the contrast.

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In Playboy, you have a business that's effective, it's public, but it's effectively bankrupt, and you have another company that's been around for just a little while, couple, I think, whatever, five plus years maybe, and it's worth billions of dollars.

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And so it just really shows that when you can unlock that, and intimacy is not a term about weirdness, it's just, it's the connection that you feel with whoever is providing the content. And so that's, that's the point.

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And, and in fact, and in fact, AB, like to your point, like pornography is incredibly easy to find for free on the internet.

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So the fact that people will pay for it means that there's, there's something there that is slightly different and of value to these people, you know?

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And, you know, and that's why maybe they've, they're making more money per employee than, than any- Well, I mean, historically, porn has always been at the forefront of most digital media innovations.

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I'd have to like go back, but like they've basically been the innovators for the rest of the internet. Is this true? Forty-two employees, revenues of one point three billion dollars? It's amazing. It's a good business.

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It is good business. There must be something secret inside of there that makes it work.

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I mean, the one of, one of the things that made it work is that most companies, including OnlyFans at some point, did not wanna touch porn because it's, it's so hard to- Yeah... yeah.

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And- Or, or adding personal connection to pornography equals prostitution. That's... No. So on Patreon, the most valuable category is porn.

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Like that's, no one talks about it, but if you look at where all the money is made on Patreon, it's, it's thatAnd, you know, we might be uncomfortable around it, but, like, sex work is real work, and these people are, are finding- Yeah...

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ways to make money. And, and also, [chuckles] interestingly enough, with AI now, they're able to-- So, so there's some stories where people are able to chat to hundreds of fans at once.

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[chuckles] No, Elon's made a chatbot in another sign of how strange and bizarre the world is, that is some kind of, like, weird, sexy manga character or henrai character, whatever that is called. Alex, you would know.

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Hentai. Hentai. Hentai? I wouldn't know. Yeah. Character that tells you about quantum physics. Well, that's because he's an edge lord and a loser, but yeah, cool. Good for him.

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One other thing off the Substack news is The Free Press has been talked about as an acquisition target already. Bari Weiss is, is a, is a celebrity, particularly among, like, billionaires.

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I think billionaires love Bari Weiss, and I think that gives her a lot of leverage for what to do with this asset.

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Some of the numbers being talked about when it comes to, like, The Free Press strike me as, like, Business Insider 2.0. You get those [chuckles] kind of multiples that's, that's, uh, that's, uh, unusual in media.

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Is this like a... Is this, is this an attractive asset, AB? Yeah.

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I mean, I think you, you see some of these larger media companies, sometimes they'll acquire these brands which allow them to continue to connect or to start to connect with a new segment of the audience while not polluting their core brand.

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And so I think with this, even though the hundred million dollars may seem like a lot, which is... well, is rumored, you kind of always can tell when it's a frocky market, when revenue multiple...

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when the multiples being potentially paid for an asset switch from, like, E-EBITDA to revenue, right? So- Particularly in media. Yeah. I mean, it's just an EBITDA business now- Yeah... I think. So I don't know.

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I think that, you know, CNN is turning on and trying to get better at newsletters. For another media company, this could just be a quicker way to get to that.

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There's probably a ton of revenue synergies by leveraging the ad sales team at a bigger media company to sell ads against this.

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I just, I just don't know how long this content, this lane of content lasts post-Trump, right? And, and maybe they, they don't care. They just want it for the next couple of years. But isn't this a- Yeah. Is this a...

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I, I don't know much about it, but is this a talent acquisition? I think it's more than that. Listen, I think that Bari's done all...

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Bari Weiss has done all the things that you've asked the market and media to do, Brian. I mean, she's done all the things, right? She has, you know, the sort of philosophical lane. She's diversified the talent.

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It's not just about Bari, although she's the impresario. They have extremely popular podcasts. They have live programming. They have events. They... and most importantly, they have a good chunk of subscription revenue.

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And, and so they've, they, they've done kind of like a high growth model of scaling a really talented individual against a segment that, of content that people want. And I don't think it's, it's just Trump.

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Like, it, it... There, there's... It's-- To me, it's longer lasting than that. So I, I, I think that, you know, whether the multiple is, you know, too high or not, I have no idea, but I think she's done a terrific job.

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Yeah. They've had a lot of, they've had a lot of success. I was talking with Daniel Hallock over there. We've been meaning to do something about this. They've had a lot of success also with their live streams. Yeah.

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And actually converting them into... converting live stream viewers into paying subscribers, and I think this gets back to that proximity piece that you're talking about, AB, is that you have to develop...

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You're not gonna develop the mass audiences that you could before, but you have to, you have to narrow that proximity with the audience and develop some kind of leverage, whether that's through some sort of ideological affiliation or whether it's just a personality.

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But you have to, like, sort of narrow that and be connected with the audience.

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I know that sounds cliché, but I think it's really difficult for a lot of these businesses to get their heads around because they just are simply not architected that way. Is this on Substack? What? The Free Press?

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The Free Press, I believe it is. Yeah, it's on Substack. Yeah, okay.

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I, I just wanted to confirm, but, but, but just so you can see here in front of you, if you're watching the YouTube feed, they, the Substack folks have massively customized this template. Oh, yeah.

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They'll do whatever the, the Free Press asks. I mean, they have to. They can't lose it. Yeah. And also look above, The Free Press has an, has an app, an independent app.

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And yet they haven't, they haven't managed to productize any of it for the rest of us. Like, Substack's product execution is, like, one for the books. Can I just make one quick point?

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Because it-- I keep turning this over and over, and I think it's, like, completely wrong. There's this perception that being adjacent to billionaires means that you'll get some of their...

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like, their money just falls out of their pocket. Billionaires are, like, notoriously cheap. Like, the only person that I know that somehow it's, you know, that a lot of money from billionaires is Epstein, right?

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Everybody else, like, you're not gonna just randomly get given money, and so I think Bari has built relationships and is being invited to these things, which is great, right?

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It gives her access to all these things, but I don't think that's gonna just lend itself to a deal. No, but I think, like- I mean, floppy-... access matters. [chuckles] I mean, like, it just- Yeah, yeah.

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But I just keep hearing this over and over, like, "Oh, she's friends with a lot of people, like, a deal is gonna happen."

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I've seen a lot of go-eners look at media companies, and I can tell you, like, it's not just, like...

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Just because they have five or ten billion dollars doesn't mean they're just randomly gonna spend a hundred million dollars- No... on an asset. Yeah. Let's stand up for the billionaires. I think they've gotten...

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They've had a tough time lately. Yeah. So- I mean, I... I mean, we've seen Elon spend a lot of money on stuff just because he thought the competition was, was woke. Yeah, but think about this.

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Jason Calacanis doesn't get any of Yuan's money. Like, it's not like- Well, no, but that's because Jason Calacanis is exceptionally, like, ridiculous, [laughs] I think. You know, he's... I think he have...

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he has reached a level of- Hey, he was, he was early in Uber. I don't know what you're talking about. Yeah, he, he keeps telling us. Look, I mean, I, I think there's probably some sort of mo-motivation there.

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I think you're, you're, you're right, AB, that, like, uh, billionaires are not, like, signing checks left and right, in part because I think they get asked all the time, and they put a shield around that.

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So, so that's absolutely true, but I think there's definitely, like, you know, agenda money in the market. Does it make sense? Yeah.

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One interesting, like, little side conversation, speaking of the billionaire, that, that came up last night that I found amusing was, was, do they really care about media?

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Does Sam Altman really care if this industry goes away? Does Sundar Pichai care? No. And there was this sort of searching [laughs] and, and basically, the answer was...

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Well, actually, AB pointed out, though, that one person objected to this, but that person did run a PR firm. Not that that's not true, but that's their job, is to put a spin on these kind of things.

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Wait, why would they want a middleman between the content creator and the platform? Well, that's what I think a lot of publishers don't recognize.

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They, they rail against middlemen, but if you really squint, they're a middleman a lot of times. And I, it- I don't have to squint all that much. I just, like, eyes wide open. [laughs] I think these are, these are...

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So there's somebody making stuff, and there's somebody reading it, and you're kind of in the middle of it. That's, [laughs] that's, that's it. Well, they don't see it that way.

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Nobody, nobody who is a middleman- I'm sure... identifies as a middleman, I don't think. Oh, I'm sure. Nobody wants to be that. There needs to be... We need to rebrand the middleman term. Yeah.

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It's, it's so bad, in fact, that it's one of those things that we haven't even renamed middle person because everybody's like, "You know, you can keep that." Yeah, [chuckles] you can keep that one.

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Like, we can gender that one. [outro music]