Print media has been in decline for more than 15 years, its business model obsolesced by the ubiquity of free online content and the rise of online advertising. But all was not lost: The internet brought with it exciting new opportunities and forms. Eventually, one assumed, it would also bring exciting new revenue structures to replace the ones it had undermined. As newspapers withered, digital media ventures—first Slate and Salon, then the Huffington Post, Gawker, Business Insider, BuzzFeed, Mashable, Vice, Vox, Fusion, and countless others—bloomed.
Venture capitalists and big media investors rained cash on some of the most promising of these, sheltering them from market pressures in hopes that they would someday flourish. The past five years brought some encouraging signs, including a 2012 Pulitzer Prize for the Huffington Post, BuzzFeed’s development of novel distribution strategies, and Business Insider’s 2015 sale to the German media company Axel Springer for some $450 million. Online outlets are producing enough good journalism these days to offset at least some of the social value we’ve lost from newspapers’ retreat.
Suddenly, however, the business picture is looking less rosy. BuzzFeed and Vice, two of digital media’s brightest stars, both missed revenue targets by a wide margin last year, the Wall Street Journal reported last week, and investors are calling for costs to be reined in. The social media–focused tech and culture site Mashable, valued at $250 million last year amid a high-profile “pivot to video,” was sold to trade publisher Ziff Davis last week for just $50 million. Univision is reportedly shopping a stake in the Fusion Media Group, which includes the remnants of both Fusion and the defunct Gawker Media. Last Friday, CNN Money’s Dylan Byers reported that the Daily Beast is on the block, too. And earlier this month, one of the pioneers in online local journalism—the DNAinfo/Gothamist network—stunned the industry and its own employees by shutting down entirely—just after its New York staffers had formed a union. The list goes on.
Turbulence in online media is to be expected, of course. And some analysts think this latest convulsion is merely the latest bump in the flight path—“more of a correction than an upheaval,” as Digiday’s Lucia Moses put it. Big bets were placed on the “pivot to video” over the past couple years; now, Moses writes, we’re seeing a “pivot to reality.” Mashable and Vice in particular had been valued at levels disproportionate to their revenues, partly on the hope that online video ads would prove lucrative for publishers in a way that online display ads have not. That hope appears to have been misplaced.
But ad-supported online media now face a stark question: What hope is left?
Mashable, Mic, Vocativ, MTV News, and so many others didn’t shift their focus to video because they had a plethora of great options. It’s been clear for a while now that this strategy was, like most other pivots in Silicon Valley, a Hail Mary pass. The display-advertising model that powered the first wave of online media startups, including the Huffington Post, had led to a destructive and self-defeating race for clicks. Some higher-end sites found more value in various forms of “native” ads, which were more equivalent to glossy print magazine ads than newspaper classifieds. But that was never going to be a big moneymaker on a mass scale: It works best if you have a well-defined audience that advertisers are willing to put in extra effort to target. For companies with dreams of growing big and rich, video—with its higher production costs and higher ad rates—was one last thing to try. Maybe one of them would get lucky and become the CNN or MTV of the mobile video era.
It’s too soon to say that will never happen. BuzzFeed and Vice, in particular, have enough invested—and enough traction—that they’re not likely to give up anytime soon. There are also some pure online-video ventures, like NowThis, that could fare better than the pivoters thanks to their somewhat leaner and more focused approach. What’s clear by now, however, is that online video isn’t going to save the prevailing digital media ad model from the fundamental forces that are working against it—at least, not fast enough for the investors funding these outlets.
Those forces have been well described over the years by media analyst Ben Thompson in his Stratechery newsletter, among others. In short, giant platforms such as Facebook and Google have usurped individual media outlets as the places where most people find content online. Those platforms are also in the advertising business, and they’re much better at it than the publishers, for various reasons. So advertisers increasingly go straight to those platforms, cutting publishers out of the loop. Publishers are still bearing the costs of producing content, but Facebook and Google are the ones making most of the money from it.
This has been going on for years, of course. So why are we just now coming to grips with the scope of the problem? Talking Points Memo’s Josh Marshall offers a dispiriting answer. It’s because, until now, investors were propping up the industry by subsidizing money-losing operations in hopes that some would hit it big. With even the most promising bets looking less lustrous, those investors are beginning to realize their mistake. What we’re seeing now, Marshall contends, is “a full-blown crash” in digital media. The internet made it possible for pretty much anyone to become a publisher, but that was no guarantee they’d make money doing it. Take out the venture capital, Marshall argues, and there are simply too many online media outlets to survive on the share of the advertising pie that’s left after Google and Facebook devour the lion’s share.
A BuzzFeed spokesperson disputed that characterization to me, pointing to the company’s three-year growth trajectory, the recent success of its food-video division Tasty, and its nascent commerce, TV, and film development business. And perhaps BuzzFeed will be fine in the long run: It has pioneered enough different paths to profitability. Don’t be surprised, however, if we see some shake-ups in management, staff, or strategy along the way.
As Thompson points out, it’s alarming that BuzzFeed is struggling because, as online ad-supported publishers go, the site “was doing everything right.” Facebook has long maintained that if publishers produce content that its users like, and play by Facebook’s rules—such as publishing stories and videos directly to the platform—then they’ll thrive along with it. No company has played that game more eagerly or skillfully than BuzzFeed. So if even it is falling short of expectations, what chance do lesser rivals have?
Online advertising is looking more and more like a contest that publishers can’t win—not on a large scale, at least. Advertising can help to cover some of their costs, but online ads alone won’t pay for big, serious, high-quality journalistic enterprises the way that print ads once did. The idea that the news business needs to find different revenue models—subscriptions, memberships, events, nonprofit status—is hardly new. But it’s time for online media companies to take a harder look at it than they have before.
Leading national newspapers such as the New York Times, the Washington Post, and the Wall Street Journal realized that years ago, and their push for digital subscribers has gradually helped to stabilize their businesses. ProPublica and some others have shown that nonprofit status can work, for a certain kind of journalism. Those models are going to be a lot harder for digital media outlets that lack established subscriber bases, prestige, or a clear investigative focus. In many cases, they’d have to get much smaller and focus much more intensely on serving their readers’ needs—a very different proposition from simply reaching as many readers as possible. No doubt some less journalistically ambitious sites will find it more attractive to consolidate in pursuit of scale than to abandon the click-based model that they were born to monetize.
But giving everything away appears more than ever to be a path to commoditization and low margins, if not outright ruin. The idea that Facebook and Google would share the wealth was a pleasant one, but it now looks naïve. Platforms are in the advertising business, not the charity business. And while they’ve long paid lip service to the notion that it’s in their own long-term interest to make sure publishers survive, they’ve never made it much of a priority.
A major contraction in online media would be very painful for a lot of people, especially journalists like me. But it’s hard to argue that the public would be too much worse off in a world where there are fewer outlets chasing clicks and video views, and more of them trying to prove to readers or donors that they’re worth paying for.