Gigaom: The Life and Death of a Venture-Funded Media Startup
medium.comI 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/...
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.
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.
The huge difference is that I imagine that the vast majority of people subscribing to Janes don't do it with their own money, and as such aren't very price sensitive. I imagine that mosy people subscribing to GigaOm are almost certainly doing it with their own money.
Also IHS (the people who publish Janes) have a whole host of other products and well as consulting services, so they can easily afford to run Janes.com at a small loss as part of their marketing budget.
I agree that Janes' subscribers are using their corporate credit cards to pay the subscription costs, but I also think that Gigaom had the potentials to walk into the same path.
Take a look at the first screenshot in the story[1], Om Malik describes the site in 2006 as a "broadband weblog". The kind of quality articles on Gigaom were not comparable with link-baity nature of TechCrunch/Mashable or Engadget/Gizmodo. They could have been the Janes of IT industry if they wanted to. Or at least be as affordable as the AviationWeek.
Notice someone on this thread is describing Gigaom as "boring", I take that as a compliment about the fact that the site was very industry-centric and devoid of click-baity stories.
[1] https://d262ilb51hltx0.cloudfront.net/max/896/1*ajvdVfFtBytF...
could have been the Janes of IT industry
Which part of Janes? If you look at the whole portfolio of service offered by iHS, then they are much closer to something like Gartner Group than a publishing house. I imagine that the real money comes from writing custom reports and consulting work, with the high technical and very expensive years books coming in second. Their books and magazines are probably as much a marketing tool as a revenue stream.
> I'm sure they could trim the fat
Indeed, the article mentions they were paying for office space in both Manhattan and San Francisco.
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
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).
"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.
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.
> 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.
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.
Surprising...not really. Saddening...very much, as it is a reflection of where press, as an industry, is going.
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.
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.
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.
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.
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].
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?
Who reads these so called technical blogs - I neither find technology nor entertainment in them.