Here at EContent, we recently had the misfortune of reporting on a competitor's demise. In March, Gigaom posted an announcement on its site telling readers that it was closing up shop because it was unable to pay its creditors. This came as a big surprise to those of us in the media and technology space. Gigaom was the cool big sister who just seemed to have her stuff together.
Much of the hype surrounding the site that helped it secure $22 million in venture capital (VC) funding turned out to be the source of its demise. Gigaom eschewed the ad-driven model, instead charging for research and events. When the company didn't reach its goals, this became a problem. As Digiday's Lucia Moses wrote, "Rafat Ali, an outspoken critic of VC funding, warned that backers' expectations are often unmatched by the business realities. ‘Media companies get seduced by that idea that if they operate in a startup environment, that they believe the hypergrowth story.'"
There are many lessons to be learned from the rise and fall of Gigaom. The thing that struck me, though, was that this seemed to be an argument for ad-supported media. You don't hear many of those these days.
We're used to hearing about newspapers and websites shutting down after dwindling ad revenue is not enough to keep them afloat. We see The New York Times and its ilk instating paywalls to help pad the bottom line. Rarely, however, do we hear cautionary tales of companies that dared to experiment with different monetization strategies and lost. That is not to say that we never hear those kinds of stories, though. In fact, those of us in this world hear them more often than we'd like to admit.
Here's what I take away from the Gigaom story: It's not enough to be forward-thinking in your monetization strategy-you have to be flexible. The truth is, according to Pew Research Center, 69% of financial support for news still comes from advertising. Just 1% comes from philanthropy/VC and capital investments.
Gigaom didn't need to completely reject the world of advertising just to avoid becoming a traffic-chasing collection of click-bait. There is a middle ground where you can focus on creating great content that draws in a quality audience to sell ads against, while also experimenting with other revenue streams. And by creating a loyal following, you just might be able to tap into the 24% of financial support that Pew says comes from the audience.
As any financial advisor will tell you, diversification is the key to a healthy portfolio. That's true for media companies as well. In this climate, simply writing off any potential revenue stream is unwise. It's not just the business side of media that needs to be open to new possibilities: The newsrooms need to be willing to change as well.
I'm not only talking about being open to branded content, which is a big enough hurdle to get over. According to Pew Research Center, "One recurring theme in the Pew Research Center's journalism research over the last two years has been that of newsroom collaborations." Rick Edmonds and Amy Mitchell continue, "Legacy media outlets are looking more than ever for ways to augment what they can produce with a depleted staff, and news startups are eager to place their work before a wider audience and figure out roads to sustainability."
In fact, some of the biggest-and most surprising-success stories of the past year or so have been from companies that showed their willingness to change and diversify. As Amy Mitchell writes for Pew in "State of the News Media 2014," "BuzzFeed, once scoffed at for content viewed as ‘click bait,' now has a news staff of 170, including top names like Pulitzer Prize-winner Mark Schoofs, and is the kind of place that ProPublica's Paul Steiger says he would want to work at if he were young again. Mashable now has a news staff of 70 and enticed former New York Times assistant managing editor Jim Roberts to become its chief content officer." With these stories in mind, it's time to take stock of your portfolio and find the perfectly good routes to success you've been avoiding-then, figure out how to make them work in your organization.