Beware whenever any major news escapes from the media industry, because pundits will automatically take that news and use it to develop sweeping conclusions about where the industry is heading. Case in point: Over the last few weeks we’ve witnessed some seismic shakeups at several widely-watched companies, and if squinted at the right way, one could conclude that a news company that doesn’t succumb to clickbait scalability is doomed to failure.
There seems to be four major events that have led pundits to this premise. The first two are massive cash infusions at both BuzzFeed and Vice, both of which have reignited investor interest in media companies and, especially in the case of BuzzFeed, pulled ahead of the competition in terms of reach (BuzzFeed is now serving 150 million monthly users). The third is the firing of Franklin Foer and the mass resignation of much of the staff at The New Republic, as well as the hiring of a CEO who uses Silicon Valley buzzwords to explain how the magazine can become a “vertically integrated media company.” This came as a result of owner Chris Hughes’s reported frustration with losing millions of dollars a year on the publication and a desire to scale the website beyond its 10 million or so monthly users. And finally, we have a 4,000-word memo from Gawker owner Nick Denton, who announced a new board of directors for the media empire and that it would return to its blogging roots. In it, Denton envisions a Gawker with “less pandering to the Facebook masses,” and he acknowledges that in the previous year “we were slaves to the Facebook algorithm.” Instead, Gawker would turn its attention to breaking blockbuster news, not just react to it.
Four news events — that’s one more than what’s needed to declare a trend. And first out of the gate was media critic Michael Wolff, who used his USA Today column to declare that “in the BuzzFeed era … a media company is really a technology company, with its highest resources devoted to automating and increasing the efficiency of audience aggregation.” Using this thesis, he estimates that The New Republic will have to “transform its 50,000 print readers into 50 million monthly digital visitors” in order to become profitable. Meanwhile, Felix Salmon, a senior editor at Fusion, wrote in the Guardian to argue that these recent news events don’t bode well for news websites with “second and third tier” traffic. “The result is real problems for the owners of companies which shouldn’t aspire to massive scale,” he wrote. If you don’t have millions of dollars of investments and a minimum of 50 million or so monthly visitors, he posits, then it’s not even worth playing the game.
Of course it doesn’t take much effort to find media companies that haven’t received millions in venture capital funding and have relatively small audiences, and yet are playing the game quite nicely. Gigaom’s Mathew Ingram names several in response to Wolff and Salmon’s claims:
The cost of starting a digital-media entity, even a potentially successful one, has never been lower. Ask Jessica Lessin, who left the Wall Street Journal to start The Information, or Lara Setrakian of News Deeply, or Andrew Sullivan of The Daily Dish, who is now making close to $1 million a year from his readers — or blogger Ben Thompson, who went from being a relative unknown to running his own self-financed blog company.
In fact, there are thousands upon thousands of content websites that have achieved profitability with relatively low traffic. Choire Sicha launched The Awl from scratch with very little investment (other than his savings) and eventually built it into a profitable enterprise, one now staffed with writers and editors. John Gruber manages to sell one sponsored post a week at $9,250 per post, presumably raking in at least $481,000 annually.
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Even Nick Denton, if you read his memo closely enough, recognizes that massive traffic really doesn’t add much to the bottom line in and of itself. Advertisers don’t advertise on Gawker because it has 100 million monthly uniques, they advertise in it because they want to reach Gawker readers, an affluent millennial set that is highly educated and lives in urban areas. As I’ve argued previously, an over-reliance on aggregation, or, as Denton would put it, “pandering to the Facebook masses,” actually depresses ad rates because it serves up a fly-by audience that advertisers don’t find particularly appealing.
I think Salmon and Wolff are correct in one way: It can be very difficult to scale a general news company, one that focuses on all topics ranging from politics to fashion to finance, without very high web traffic. But if you’re willing to either go niche or appeal to a highly selective, educated audience and don’t generate massive overhead costs, then yes, there’s plenty of profit to be had for “second and third tier” news sites. Just because it’s not the kind of profit that would attract a venture capitalist doesn’t mean that sites like these can’t collectively sustain thousands of journalists and content creators. The mom and pop news site, at least for the immediate future, is here to stay.
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Image via Ten Years of My Life