It’s good that VCs have soured on funding digital media startups
The next generation of media startups will be leaner and more focused.
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It’s good that VCs have soured on funding digital media startups
Axios published Pitchbook data that shows how much money venture capitalists plowed into digital media startups each year going back to 2010.
As you can see from the linked chart, VC investments peaked in 2015 at $1.1 billion and then gradually fell to $298.5 million in 2020. I’m sure it’s not a coincidence that this rise and fall almost perfectly correlates with Facebook’s algorithmic preference for news.
From a period stretching between 2011 and 2015, Facebook opened the floodgates and heavily featured publisher content within its Newsfeed. This allowed startup founders at places like Mic and Mashable to point to hockey stick growth charts as proof that they’d captured the Millennial zeitgeist and would soon translate those young eyeballs into heaps of advertiser-provided cash. It also didn’t hurt that Facebook was feeding them fake statistics that vastly inflated their video views.
We all know what happened next: in 2016, Facebook started to pivot away from news, downgrading it within the Newsfeed. Not only did this cause traffic to crater, but VCs also began to figure out that those hockey stick charts never actually translated into much revenue.
Today, VCs are much more conservative in how they dole out money, though that’s not to say that media startups can’t still raise funds. As Axios put it, “The raises are relatively small — especially compared to the hundreds of millions of dollars that companies like BuzzFeed, Vox Media and Vice Media attracted years ago — and have come early in these startups' trajectories.”
This is actually a good thing. Last year I wrote about theSkimm and how the $28 million it took from VCs caused it to expand in all sorts of irresponsible ways, just so it could justify its lofty valuations. What started as a lean newsletter with a fervent fanbase suddenly found itself pumping out bad YouTube videos and trying to get its users to download a paid calendar app. For more than a year now it’s been reportedly trying to sell itself, but it looks as if most potential suitors have balked at the asking price.
We live in an era when most publishing tools are readily available to even the smallest of publishers. Need a CMS? You can be up and running on Wordpress in hours. Want to run programmatic display advertising? There are plenty of ad networks to plug into. Want to venture into ecommerce? Anyone can set up an Amazon affiliate account. Want to charge for subscriptions? I can think of at least five SaaS products that provide this service right off the top of my head.
That’s not to say that capital isn’t sometimes needed to make initial hires and reach some scale, but it seems absurd to me that any media startup would need tens of millions of dollars of investment just to reach a product-market fit. There are indie YouTubers who have built huge media empires with multiple revenue streams, all without taking a single dollar in investment.
Too much VC cash results in publishers creating content that has no audience. It causes them to expand into mediums in which they have no expertise. It convinces executives that a publication’s niche is too narrow. It’s the reason that half a dozen companies are now trying to go public via SPAC.
The next generation of media startups will be leaner and more focused. They won’t mint many billionaires, but then again, neither did their VC-infused predecessors. The era of the hockey stick traffic charts is over; we’ve entered the era of responsible growth.
My latest: The benefits of joining a podcast collective
What happens if you want the benefits of a podcast network but don't want to sign over ownership of your show? You might want to join a podcast collective.
Will lower web traffic actually hurt publishers?
Parsely released data showing that publishers have experienced a substantial traffic decline in 2021, but will that decline hurt their businesses? I wrote about how the answer to that question depends on a number of variables. You can find my piece over here.
Quick hits
Book authors are being extorted by Goodreads “review bombers.” [Time]
I can't wait to curl up on my couch on a Friday night and watch Salesforce TV. [Axios]
Whenever a legacy newspaper enacts mass layoffs, I think the laid-off journalists should band together and launch their own lean media startup. That's what happened with this shuttered Twin Cities alt-weekly. [Nieman Lab]
Texas Monthly generated an extra $1 million over the last year selling IP rights to Hollywood. [Insider] I still remain skeptical that this can be turned into a reliable, consistent revenue generator. Hollywood is just too inefficient and inconsistent, and film/TV projects are extremely fickle.
The Wall Street Journal has 2.7 million digital only subscriptions, which generate around $1 billion in annual revenue. [Talking Biz News]
Bloomberg Media now has 325,000 digital subscribers. [Axios] 325,000 subs might not sound like a lot, but Bloomberg is charging upwards of $400 a year per subscription, which means this represents $130 million in additional revenue it didn't have just a few years ago.
"Analysts estimate that Dotdash is worth roughly $2 billion, which makes its valuation higher than BuzzFeed's." [Axios]
A music publicist accidentally stumbled into a formula that results in his tweets constantly going viral. [Billboard]
How YouTube created an opening for TikTok to thrive [YouTube]
Several web comics creators have made a good living on Patreon and it looks like Substack wants to make a play for that market. [Substack]
Defector has 39,000 paying subscribers, which means it's generating about $3 million per year. [Digital Content Next]
ICYMI: Why Patreon’s business model is under threat
Every platform, from YouTube to Twitter, is launching features that allow creators to place content behind a paywall.
I have a private Facebook group
It’s impossible to find it in Facebook search. The only place I link to it is within this very newsletter. Why? Because that guarantees that it’s solely populated by people who work in the media industry. We’re closing in on 600 members. You can join here. [Facebook]
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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on Twitter, Facebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.