Gigaom: The Life and Death of a Venture-Funded Media Startup

https://medium.com/@michaelwolf/gigaom-the-life-and-death-of-a-venture-funded-media-startup-eb3fbdc4e732

by sayemm • 11 years ago

61 21 11 years ago

I find surprising that sites like Gigaom and Dr. Dobbs which actually try to provide value to their users with original content, die because their ad revenues are not suffice to cover up their costs, while site like Buzzfeed, filled with clickbaity headlines, and dumb articles, pass $100M in revenues[1].

Perhaps, it seems like 'content-is-the-king' is not optimal if you are looking for revenues.

[1] http://www.capitalnewyork.com/article/media/2014/11/8557366/...

caminante• 11 years ago

From the gigaom megathread 6 days ago: https://news.ycombinator.com/item?id=9175824

According to the editor-in-chief of Dr. Dobb's, there's been a recent, structural shift.

Throwaway90283• 11 years ago

Why is it surprising?

It's faster and cheaper to write clickbait articles, and they have a wider appeal. People are much more likely to click and share something with the name, 'What Disney character are you?' or 'Top 10 reasons you should start going out on Tuesday nights', compared to anything on Gigaom. It takes a lot of time to write proper articles, to check the facts, to follow up with sources, and to maintain a respectable reputation.

I'm sure they could trim the fat, and maintain a small group of dedicated writers, pay the bills and make a living. However, they raised quite a bit of money, so they kind of need to go big or die at this point, and going big is not easy for the reasons I mentioned above.

toni2• 11 years ago

The kind of people paying for Janes.com or AviationWeek can also get all their news for free from MilitaryNews.com or such, but still, these sites continue to flourish and they are only growing because having an AviationWeek subscription is a "status". The kind of niche that was reading the old, industry-centric GigaOm would have no problem paying for such a subscription.

mtbcoder• 11 years ago

I'm sure they could trim the fat

Indeed, the article mentions they were paying for office space in both Manhattan and San Francisco.

higherpurpose• 11 years ago

That's not really what I got from the article. What I got is that they spent $8 million on god knows what and within a year they were already in debt and they couldn't pay their creditors anymore = bankruptcy.

I think they tried to expand rapidly into new business models and lost all the money and then some. I don't think it was because they weren't getting enough money from ads to sustain the news business, or at least I haven't seen anyone seriously put forward that theory so far (from the company).

VLM• 11 years ago

"they spent $8 million on god knows what"

Their opex was incredible. Look at salaries alone just what was mentioned in the article, somewhere around 4 dozen people? That's less than $200K/yr salary per person don't forget they had a website and office space and misc expenses and presumably the employees had benefits (per my W-2 form my families health insurance cost my employer $24K last year, and there's only 4 of us).

There is a simple math problem that explains the problem. Eight million per year in opex divided by six million visitors a month means somewhere around ten cents per page view cost. If you get more than a buck or so worth of ad revenue or "whatever" per page view you win. If you get five cents of ad revenue or "whatever" per page view you rapidly run out of money and close. The number of sites that get a buck of revenue per page view is pretty small. The other strategy is yellow journalism "click here for 10 things you never knew about hacker news" and hope for 60 million page views instead of 6.

majani• 11 years ago

Gigaom provided value to you as a reader, but what did they do for their clients, the advertisers?

On a basic level, advertisers are looking for reach and frequency for their ads.

These two requirements are nearly impossible for a high level content publisher to achieve on the internet, where good reach means 10 million readers plus and good frequency means over 50 million page views from that audience. I'm sorry but not that many people are looking for enterprise tech stories, which were Gigaom's forte

Factoring for VC expectations, and you're looking at much larger traffic requirements to satisfy business targets.

High level content has to either: 1. Operate as a small ad business online, no VC 2. Operate in other medium such as magazines, where smaller reach would be appreciated by advertisers

jmngomes• 11 years ago

Surprising...not really. Saddening...very much, as it is a reflection of where press, as an industry, is going.

jobposter1234• 11 years ago

I see this as roughly analogous in any form of media. EG, the commercially successful artists in music are generally pop (Katie Perry, beiber, etc.)

They are the buzzfeed of another market. It seems pretty clear that if you want to go big, you need to compromise on the quality.

"Why" is left as an exercise to the readers.

dragonwriter• 11 years ago

I find surprising that sites like Gigaom and Dr. Dobbs which actually try to provide value to their users with original content, die because their ad revenues are not suffice to cover up their costs, while site like Buzzfeed, filled with clickbaity headlines, and dumb articles, pass $100M in revenues.

Sure it is -- but if you are selling eyeballs, then the content is king is content that is geared to get eyeballs and get the maximum number of ad views out of them.

If you are selling content to those consuming it directly, then the utility of the content to the consumer is the key thing -- but that's different than the advertising-supported model.

thrownnaway• 11 years ago

I found this article frustrating for its avoidance of assigning blame or fault to any of the decisions described.

For example: It seems pretty clear that a bunch of work was done on a research product for GigaOm, but their thinking around it was very off target. $79/year is less than a Netflix account costs. Yet, the author doesn't come out and say "and this proved to be a big mistake."

GigaOm sounds like a scenario where people were "playing startup" for several years and eventually reality set in. They appear to have never been profitable, yet they acquired a company, took out a disastrous loan and raised more and more money. From what I'm reading in articles like this, the people running GigaOm sound like they made a lot of dumb decisions, yes, but it also sounds like GigaOm was never really a real business at any point.

puranjay• 11 years ago

Agreed and agreed. Some of those sound like classic pre dot-com crash moves. Offices in Manhattan and SF? Do you really need that? 22 writers, sales staff, developers...Honestly, you could run an operation similar to GigaOm for 1/3rd of the cost.

guelo• 11 years ago

Gigaom is a really boring news site. I read a lot of tech news and blogs and never come across a link to Gigaom. Has the HN front page ever linked to a Gigaom story?

london888• 11 years ago

I think Gigaom had a harder time competing in an ever-increasing market against sites like HN end even Quora where the comments (especially here in HN) I often find insightful.

I wonder if Om had returned to the helm, cut staff/costs, and made Gigaom much more about his own preoccupations and interests, that would have worked better.

I liked the 'world of Om' a lot and I think this has potential for attracting an audience. Maybe all it needs is 2-3 staff members if that.

Kind of a Gruber/Stratechery/Quora/HN/Reddit hybrid.

ghaff• 11 years ago

Not clear from this or other pieces I've read how much of the downfall had to do with the news part of the business although--as others have said--the cost structure may have been relatively high and the traffic, compared to clickbaity and more consumer-oriented sites, was relatively low. What does seem to have been the case from this piece and one or two others is that there was a lot of pressure to grow the research side of the business and they were "investing" a lot to do this.

In my experience, their research was a bit of a mixed bag. They were trying new business models with primarily a lot of freelancers. Some of it worked. Some of it didn't. They had some smart folks in their stable who did a nice job for a reasonable cost doing things like webinars. Let's just say other dealings weren't as positive.

anuraj• 11 years ago

Who reads these so called technical blogs - I neither find technology nor entertainment in them.

pshin45• 11 years ago

The state of the media industry (i.e. failure of Gigaom and the success of Buzzfeed) seems to be a pretty strong counterexample to the oft-given advice by YC and others that "It’s better to build something a small number of users love than something a lot of users like"[1].

[1] http://blog.samaltman.com/startup-advice-briefly

Gigaom: The Life and Death of a Venture-Funded Media Startup

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