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Medium is a Marketplace

I have always enjoyed writing. I found it cathartic to release all of these thoughts and ideas trapped inside my head. I first published on Blogger, then on Xanga, then on my own hosted Wordpress site. When I first started writing on Medium, it was simply because it was a more elegant publishing experience. All of the other platforms seemed to get bloated with features and clutter. Medium was clean and simple. It was about the writing and not the bells and whistles. One background color, one font color, one font type. I was drawn by the quality of writing from others publishing on Medium. It was a refreshing community of writers who encouraged and applauded one another (literally with claps).

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What were we thinking?

The difference was that Medium curated the best content for better discovery. Blogger, Xanga and Wordpress felt like archipelagos of fragmented blogs that were isolated. Medium feels like a tightly knit city of neighborhoods and communities where you can explore and hang out. Previous blogs required you to bring or drive your own readership, while Medium allowed you to get exposure via publications of like-minded readership. It felt special to be accepted by a Medium publication, as if being published were some sort of validation or membership into an exclusive club. More importantly, it opened up your writing to a broader audience of readership, which is the only thing any writer really wants.

Since its founding in 2012, Ev Williams had avoided placing ads on Medium. In 2016 it was beta testing ad products under pressure to monetize. One year later, Williams shut down the native ad operations and laid off one-third of the Medium staff. He would instead rely on payments from readers to reward quality content creators and make them partners in the success of the company. The big bet was made in 2018 when Medium started to add paywalls and memberships amidst skepticism. Allowing writers to participate in the upside incentivizes them to create better content and also locks them in to Medium as their publishing platform of choice. It also encourages content creators to drive all of their traffic to Medium so they could personally benefit from it. Once you have the highest quality content, you not only drive content through social media sharing but you also increase organic traffic through SEO. When you have the most traffic, more people will want to publish on your platform. When you have the best content you have a compelling reason for readers to pay for it. This is the flywheel that will continue to drive growth on both sides of the marketplace.

The beauty of Medium is that anyone can write and publish on it. It doesn’t matter what your background, socio-economic status or nationality is, everyone can tell their stories. I’m just another entrepreneur among countless entrepreneurs who write on Medium. And yet, I’ve been able to find readership and even some followers on the site from around the world. My first article to get traction was an essay I wrote about the sad demise of Yahoo! that got 13K views in 2016. It struck a chord with many former Yahoo’s who shared it with their networks, but it was also a nostalgic insider look at the early days of an iconic internet company. My second article was about the importance of being a good salesperson as a founder. This was my first essay that I added to a publication, Hacker Noon, and got 5K views in 2017. It wasn’t until I spent a few months writing my magnum opus of an essay about my experience and insight as a marketplace founder that I broke 20K views. This essay resonated with a lot of marketplace builders and academics who tweeted and shared it widely. The follow-up essay about finding the next billion dollar marketplace also generated 13K views. I had an audience in mind that I was writing each of these essays for. Whether it was for fellow Yahoo! alumni, fellow founders, fellow marketplace creators, I knew that this work would find readers somehow. My most recent essay was about the value of networking and that audience is pretty much anyone and everyone. That essay is up to 50K views and counting. It got 14K views in one day because someone had posted it to Y Combinator’s Hacker News. Needless to say, I had no control over how well each of these posts would do. But what I do know is that I spent time writing and rewriting these essays. I had friends read and edit them before publishing. The more thought you put into your writing, the more it will show and the more readers will appreciate your work.

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Kid, play your cards right, and you still won’t get lifelong royalties from a Christmas song.

The only reason I turned on the Medium Partner Program was because a friend had told me that the Medium algorithm would reward and promote articles that are behind the paywall. It made obvious sense from a business perspective. I turned it on so I could increase the number of eyeballs on my work. Before I knew it, I was generating hundreds of dollars a month passively. I felt like Hugh Grant’s character, Will Freeman, in About a Boy, an adaptation from one of my favorite authors Nick Hornsby. Will lived off the royalties of a cheesy Christmas song his dad wrote and never had to work. Unlike him, you would have to actually take the time and effort to write. A more appropriate analogy would be one of the superstars in the Avengers movies who will be able to live off the residual checks from any one of the many sequels they appeared in every time it shows up on cable or is streamed on Netflix, nay Disney+. Passive income is the dream. The most common form of passive income is real estate which generates rental income in perpetuity. Unfortunately, that option is not available to anyone who can’t afford a large down payment. So if you weren’t the child of a one-hit wonder songwriter, a movie star or a real estate tycoon, you were out of luck…until now. Medium probably won’t allow you to retire, but it can definitely help pay some bills, especially since good content is evergreen. I still get readers visiting content I wrote years ago. Based on this article from The Startup, a single article in the publication can generate over $4,000 and one writer has made over $7,000 in one month! These types of numbers are going to drive more writers and consequently more readers to Medium. Ev Williams and team have essentially built the Spotify of the written word by redistributing subscription revenue to creators.

Marketplace Dynamics of Medium

Cross-Side Network Effects

The two-sided network effects of Medium are clear. By paying writers for their work, Medium attracts talented writers. The more talented writers you have creating content on the platform, the more readers you have coming to read. The growing audience of readers increases the value to the writers and vice versa. Monetary incentives actually make Medium more defensible. The temptation to multi-tenant by simultaneously publishing on different channels such as Wordpress or LinkedIn becomes less of an issue because content creators want to optimize for the paid channel and not divert the traffic and SEO to unpaid channels.

Data Network Effects

The value of Medium is the content itself. People gain utility from reading an article regardless of any other community or networking aspect of the site. The more articles that are written on Medium, the more valuable the site is to any individual reader. Because there are an infinite number of topics and fresh news fodder to write about every day, each additional long-tail piece of content adds value to the network. The breadth of topics that can be written about means that every unique perspective and idea is additive.

Like most user-generated content platforms, it’s probable that only a small percentage of Medium are writing vs. reading. Unlike many two-sided marketplaces which have segregated supply and demand (Uber riders rarely overlap with Uber drivers, Instacart shoppers rarely overlap with Instacart customers) thus driving up CAC acquiring both sides, Medium readers can easily become Medium writers. Acquisition cost for Medium is likely minimal because most traffic comes via organic search, direct links and sharing which are all free. Attracting more of both ultimately leads to more data and value creation for the overall network.

Social Network Effects

The community aspect of Medium should not be underestimated. When you bring together like-minded people, both writers and readers, you are creating a powerful nexus for connection. Knicks fans, Game of Thrones fans, startup founders, astrophysicists…you can find your tribe on Medium. The content created for these communities attracts more like-minded people which helps grow that niche and makes it stronger. Publications and topics allow them to funnel users to the right content and ultimately to the right community. The long-tail of topics that people can connect over is seemingly endless. Medium allows them to find one another and build relationships through comments and messaging. I’ve even met up for coffee with random people who read my marketplace articles who reached out from London to New York. Medium is building real connections offline and that makes the marketplace even more valuable to the network. Community is one of the strongest methods of retention.

Crossover Network Effects

A network effect that is not seen by most two-sided marketplace is something I’m calling the crossover network effect. In most two-sided marketplaces, there is a buyer and a seller, they are the demand and supply. More often than not the seller of the good or service stays supply and the buyer stays the demand. This is the case for traditional e-commerce marketplaces like Amazon or service marketplaces like Thumbtack. A person buying a good off of Amazon is unlikely to become a seller on Amazon. A person needing their television mounted via Thumbtack is unlikely to be offering services on Thumbtack. The same can be said of Uber or Instacart. Most riders are unlikely to become drivers on Uber and most customers are unlikely to become shoppers on Instacart. Occasionally however, in some marketplaces, the supply becomes the demand and vice versa. Crossover network effects can be a powerful driver of the flywheel. As you add more supply that converts to demand and more demand that converts to supply, your growth flywheel spins faster. We’ve seen this on Pared where cooks sign up to work on the platform (supply) and then they open their own restaurants or become executive chefs and use the service as customers (demand). When they quit a job as a manager or their restaurants don’t work out (demand), they find work and earn an income on the marketplace (supply). The same happens on Medium when content creators discover and consume other content on the platform and readers are inspired to try their hand at writing and create new content. Both Pared and Medium benefit greatly from crossover network effects.

Differentiated Supply

Commoditized supply makes a marketplace less defensible. If you can easily steal or replicate the supply somewhere else, then your marketplace is essentially worthless. Medium has a wide breadth of topics and subjects across the spectrum that appeal to different audiences whether it be sports, politics, science, fiction, food, self-help or anything else one could write about. That variety of content and content creators makes it difficult to replicate or steal away. I learned this from my first startup, Fanpop, where we would aggregate communities of like-minded fans of thousands of different topics of interest. The long-tail of content and communities would attract more users with similar interests which encouraged more content creation around those topics. This diversity was a valuable and defensible source of evergreen content.

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The breadth of content on Medium is endless.

The biggest danger of allowing creators to monetize content is that the quality of output will be sacrificed for quantity and erode the Medium brand. There was a high probability that clickbait-y titles and 3–4 minute articles to get cheap applause inundate the site. In a world of clickbait and blackhat SEO, pageviews are not enough. The team at Medium has done a good job with algorithms and editorial to ensure that the cream rises to the top. Data such as time spent on page, scrolling, highlighting, comments, applause, number of social shares are all strong indicators of engagement and quality. It is critical that Medium continues to filter the quality content to paying members otherwise it will churn through them.

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Credit: Christopher Michel / Flickr

Ev Williams is one of a handful of tech entrepreneurs that has had multiple wins. Numerous founders have created one successful brand. Only a few founders have created three brands that are household names like Ev has: Blogger, Twitter and Medium. He is essentially the Godfather of Content and Engagement. With Medium he has brought together the long-form journaling of Blogger with the community and discovery of Twitter. More importantly he has figured out how to monetize Medium without succumbing to using advertising as Blogger and Twitter were forced to turn to. Instead by rewarding the content creators themselves with membership fees from the content consumers, he has created a marketplace and flywheel that will keep both coming back for a long time to come.

Co-founder @ Pared. Lead @ Hyphen Capital. Proud Taiwanese-American dad. Passionate about marketplaces and communities.

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