Send me real-time posts from this site at my email
Motley Fool

Twitter Is Taking a Shot at Substack

Paid newsletter start-up Substack has been exploding in popularity over the past couple of years. The company is trying to upend the predominantly ad-supported media ecosystem while proving that quality content and independent journalism are worth paying for. The demonstrable demand for paid newsletters is attracting attention from larger tech companies, particularly within social media.

Twitter (NYSE: TWTR) is now taking a direct shot at Substack by acquiring competing paid newsletter platform Revue.

Image source: Twitter. Image copyright Atsushi Nakamichi for Twitter, Inc.

Twitter wanted Substack but settled for Revue

Acknowledging that Twitter has become an important source of news and public conversation, the company says that the acquisition is designed to make the platform a "better home for writers." That includes developing new ways for prominent personalities to monetize their followings, which can include directly on Twitter or through a paid publication, among other possibilities.

Due to the public nature of Twitter's core platform, the service has become an important avenue for people to grow personal brands or garner followers. Twitter wants to help writers grow paid subscribers while also boosting engagement on the core Twitter platform. The company is exploring ways to develop "audience-based monetization."

The news comes a few months after rumors surfaced that Twitter was interested in acquiring Substack. Co-founder Hamish McKenzie, a personal friend of mine, quickly shot down the speculation.

This is not going to happen.

— Hamish McKenzie (@hamishmckenzie)

Revue already undercuts Substack in terms of its fees. Substack keeps 10% of subscription revenue, while Revue's cut has historically been 6%. Twitter is dropping that further to 5% to make the service even more competitive.

Complementing the advertising business

Twitter confirmed last summer that it is considering a subscription or premium tier of the service, something that investors and analysts have been wanting for years. One of the challenges with that idea has always been the negative implications of essentially putting up a paywall, which undermines the public nature of Twitter.

Buying Revue, a separate platform with less baggage, gives it more flexibility to tinker with while trying to find ways to integrate the services in a cohesive way. Financial terms were not disclosed, but the deal is small enough that Twitter already closed the acquisition.

CEO Jack Dorsey has made it clear that subscriptions would complement, not replace, ad revenue. The broader advertising industry took a hit last year as the COVID-19 outbreak escalated into a full-blown pandemic, and diversifying the business would help reduce some macroeconomic risks. Twitter has been focusing on "increasing revenue durability," according to Dorsey.

"We do think there is a world where subscription is complementary," Dorsey added at the time.

10 stocks we like better than Twitter
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Twitter wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 20, 2020

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue