The Demand-Supply Economics of Your Falling Medium Earnings

Why you should stick around long enough to reap the benefits

There has been a ton of chatter on Medium about the falling earnings of new and old writers alike. Everyone and their mother have been talking about how the Medium algorithm is flawed, or how they are seeing appallingly low read times and drops in earnings, and how they plan to jump ship to other platforms if this continues.

I am frankly quite surprised with the short-term memory that people seem to have and equally the short-sightedness for the forward.

There’s something quite simple at play here — free-market economics — the plain and simple demand and supply equation. However, the funny thing is, this is exactly what was at play when Ev Williams announced an exponential spike on Medium readership and subscription — but at that point, weren’t we all rejoicing?

Here’s what Ev said as part of his update back in August:

We’ve seen record numbers of people turning to Medium to try to make sense of the disorienting changes taking place around us.

Now, let me elaborate on what’s been happening in the last month or so, with a quick Economics 101, coupled with the general awareness of the macro-environment we live in.

Why 2020 was a unique year for Medium

If I have to tell you what one single event dominated every aspect of our lives in 2020, you were probably living under a rock. We had one of the worst pandemics hit the world and it led to short-term and long-term behavioral changes.

One of these changes, that holds relevance to this discussion, is the exponential increase in “time-at-hand” and the fall in “things-to-do” with that time. Most of us were forced to work from home or take unpaid leaves, and some of us unfortunately even got laid off from our day jobs.

Yet, others, who weren’t as badly hit professionally, were definitely restricted in their usual pastimes — traveling, eating out, going to the movies, social gatherings, had all become a thing of the past.

And so, the one thing that saw a boom was everything related to online — the internet sits immune to any physical restrictions, and hence became the place everyone gathered for all their needs. Shopping went online, food ordering went online, entertainment went online, and so each of these saw their own beneficiaries in the Amazons, Deliveroos, and Netflixes of the world.

Medium was one such beneficiary — it sat at the intersection of being an alternate source of income for folks with more free time or lost traditional sources of income i.e. the new writers and the folks who had more time at hand to browse the internet and collect information on various topics of interest i.e. the new readers.

Hence, we saw the exponential spike that Ev talks about in his August update.

The Demand & Supply dynamics on Medium

There are a couple of things you have to keep in mind about the demand and supply on Medium —

• Readers represent demand and writers represent the supply.
• In most markets in general, demand often influences supply, and hence supply tends to lag demand, barring special cases where there are supply-side constraints eg. limited natural resources — which is safe to say, is not the case on Medium.

Barriers to entry lower for readers vs. writers

Now what happened in 2020 was that the behavioral changes influenced demand first — it doesn’t take much time or effort to pay $5 a month to get a Medium subscription. Hence the barriers to entry for “readers” or the demand are low. Hence, we saw a sudden spike in demand i.e. the readers on Medium.

The supply i.e. the writers require more time commitment and effort to increase — the new writers take a while to find the motivation and time to become serious writers contribute to the supply on Medium.

But with the increased size of the pie, there was surely an incentive for writers to overcome the inertia and eventually join the party.

Hence, more and more writers, some rekindling their writing hobbies like myself, and others finding alternate sources of income, either to supplement an existing income or finding new sources owing to loss of jobs, flocked to Medium, albeit, with a lag to the readers.

Below is a pictorial depiction of what I think happened.

Understanding the recent fall in earnings

Firstly, Medium earnings explained

Most people don’t fully understand how Medium earnings work, and I don’t claim to either. But I do believe I have a fair understanding which I will try to elaborate on.

We all know that earnings are proportionate to Member Reading Time. But how does the overall dollar share of earnings available on Medium work? Here’s my understanding.

A certain proportion of a paying member’s subscription money is allocated to be distributed to the writers, for their efforts and contributing to the platform that Medium is. Let us assume $1 of every $5 you pay monthly goes to the writers. Now if the users go up — eg. from 1 mn to 5 mn — the pie of “available dollars” also goes up from $1mn a month to $5mn a month.

This meant that there were more dollars on the table, for the existing and new writers on Medium. However, as I mentioned the rate of increase of readers was likely faster than that of the writers, so this meant an outsized benefit to the existing writers and the “early-bird” new writers in the initial months of this shift in dynamic.

Hence, around the summer, everyone was happy, and more and more people appreciated Medium for the added income source it had turned out to be.

The cold, long winter

However, things have since changed. As with any platform, as more and more people discovered the potential rewards of writing on Medium, more and more writers joined — creating excess supply.

At the same time, countries got used to the pandemic and relaxed restrictions, and people got bored of spending all their time on the internet. There is also the news on the vaccine and general optimism around an end to the pandemic being near (hopefully).

So while the number of serious writers continued to go up i.e. the supply kept going up, the demand i.e. the readers started to taper off. There was also the factor of the holiday season starting to play a part — people are likely spending more time doing other things than just scrolling the internet for articles.

And hence, the dynamics of demand and supply now resulted in frustrated writers who didn’t enjoy the same read times, dollar earnings, and benefits they did initially.

Well, then why should you stick around?

Well, because just like the economics of demand and supply came into play going into the pandemic, they will play their part going out of it as well. This is quite akin to cycles that businesses and economies go through. And this next part of the cycle is likely to benefit writers, yet again.

While readers i.e. demand was the first to spike heading into this unique period, and supply lagged — the opposite is likely to be true going out of the pandemic.

As life normalizes to some extent, the time commitment and effort it takes for a writer to keep up their output will significantly be hit. Work commitments, family commitments, other uses of time that will all come back will mean many of the writers will struggle to keep up.

On the demand side, it takes less effort or time to still continue to read a few good articles here and there, and $5 isn’t high enough a price to force people to immediately shut off their subscriptions.

So as the world normalizes, the supply is likely to fall faster than the demand. And of course, on the supply-side, there is also the distraction of other platforms like News Break, Vocal, which are trying to benefit from this rise of online readership. And so that is another reason that accelerates the exodus of serious writers from Medium.

However, I like to argue, these new platforms might be joining the party too little too late, but that is a whole other discussion.

The Conclusion

This, in my mind, is a golden opportunity that will pay dividends to the writers that stick around, persist through these tough, but temporary times. Because when the dust around these exceptional times has settled probably by mid next year, the ones that keep faith in themselves and the great platform that Medium is, there will be benefits to be had.

This one came from a discussion I was having with Tree Langdon from seeing a lot of similar complaints from writers on Medium. Would love to hear the views of fellow editors and writers — Dr Mehmet Yildiz Dew Langrial Geetika Sethi Britni Pepper Haimish Mead Liam Ireland Agnes Laurens Desiree Driesenaar Dr John Rose EP McKnight, MEd Joe Luca Lanu Pitan Karen Madej René Junge CR Mandler MAT Sumera Rizwan Sabana Grande Maryam Merchant Neeramitra Reddy Dr. Preeti Singh and anyone else that has a view!