Why media startups are hard.

Mashable is being sold for $50mn.

That’s 20% of Mashable’s valuation of $250 million following a $15 million round of funding last year led by Time Warner’s Turner. Mashable has been trying to sell itself or raise additional outside capital for months (via).

In total, Mashable raised $46mn (and is being sold for $50mn).
This tweet by Om Malik sums up the current state of media businesses.

Media startups are hard..and getting harder.

Media startups grow only when:

  1. Ad dollar spend is growing.
  2. Audience is growing.

The good news is that the above two are growing, but not for the media companies – only for  Facebook and Google.
The digital ad market is a duopoly between Facebook and Google and this year, the big two in internet advertising are expected to take half of all revenue worldwide, and more than 60% in the United States, according to research firm eMarketer (source).

Ad market share: G and F own the world.
Ad market share: G and F own the world.

Media startups are dependent on Facebook and Google for distribution and discovery.
If you think media companies own the audience, you are far far away from the reality. Facebook and Google pretty much own the audience and media companies now need to find a way to get through them (Facebook now ensures that you pay to access your page audience).
Ditto with ad dollars – marketers find it easy to work with Facebook and Google as they provide a much better targeting vs working with media companies. With content consumption shifting to mobile (which also offers much better targeting on location/time/other parameters), majority of ad dollars are now shifting to the two giants and media startups are left with …well..the leftovers.

New Media Was Largely About Engagement

Engaging discussion from audience is what shaped the new media businesses (a.k.a blogging). This was what defined the web2.0 movement, enabling participation from all. It was a 2-way street (engage/discuss/debate/bitch/chill/have fun).
But with the rise of social platforms like Twitter and Facebook, new media publishers are losing the edge.
Discussions (i.e. commenting) has shifted to Facebook and Twitter, giving the social platforms much more power than the media houses.
How are funded media startups surviving?
Buy cheap traffic. Sell at a higher price.
Keep throwing money on the brand (and not necessarily good content).
Or – pivoting to an agency model.
That is, very short-term strategy.

Destination vs. Discovery: The Battle Continues.

Analyst Ben Thompson puts it beautifully.

new media : smiling, but not so happy curve
new media : smiling, but not so happy curve

The new media publishers are stuck in between.

 “value is moving towards the individual creators of that content – writers, editors, artists, etc. – and towards the platforms that allow for discovery and/or distribution of that content (Facebook, etc.) and away from publishers and media companies of various kinds.”

The new media publishers aren’t a destination site anymore. They are losing have lost conversation to Facebook and Twitter (read: Death of New Media in India). The ‘attention economy’ has two gatekeepers and they won’t let you in.

FYI: Facebook is throttling the traffic to 3% of what publishers had a few years ago.

Back home, take a look at NDTV numbers – even though they have shown profit, the numbers aren’t too lofty.

The gadget site reported PAT of Rs 73 lakh, with 35 million monthly unique visitors. Overall, with 150 million unique visitors, the company recorded revenue of ‘only‘ Rs. 34 crores.
By the way, Zomato made 2.5 crores in 1 day by selling Gold – just to give you a perspective on numbers.

The truth is media isn’t selling anything differentiating to the audience. And if they do, they are not able to break through the Facebook and Google walled-garden. Subscription businesses are a good idea, if you think you can make Rs. 100 crores business.
Time to rethink media?
I couldn’t agree more with Om on this.

What lies ahead? Well, your guess is as good as mine but all I can tell you is that media businesses need to rethink the entire value prop. And truly speaking, the ‘core’ offering – which need not be news/analysis.
Maybe something else.
Media actually could have been much more – but for now they are bound by the very definition of the format.
PS: *All* startups are hard. Media startups have very different challenge thanks to the new world driven by social media (gatekeepers) and the rise of attention deficit consumers.

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