Digital Media’s Crisis Of Confidence As Web 2.0 Generation Adapts To The Mobile Era

The other day I was walking down the street after a week on the road for business travel. From about a block away, I noticed the lights of the local bakery were not on, despite it being regular business hours.
“Why isn’t Rosie’s open?” I asked my friend.
When we got to the bakery, the lights were indeed off. And there was a big sign in the window.
“The wonderful supply kitchen that baked our original recipes for years has gone out of business, putting us in an impossible situation,” the in the window at Rosie’s reads.
Editor’s note: This article originally appeared on ARC as a two-part series. It has been republished to Medium as one long article.

The closure was stunning and sad. Rosie’s had operated in my neighborhood for 38 years. One of its primary suppliers had suddenly closed and without it, Rosie’s could no longer operate cost effectively.
Rosie’s was known for excellent cakes, superb breakfast sandwiches on store-made croissants and a genial staff that was as much as part of the neighborhood as the local pubs.
Then again, another venerable institution that had faithfully served its community for years, suddenly closed its doors.
I was on Twitter, scanning my Tweetdeck for any and all information. Then I gasped as a tweet from Techmeme scrolled across my feed.
Gigaom, unable to pay creditors in full, ceases all operations (Gigaom) http://t.co/MnZ3uJoeY7 http://t.co/mLcYFoRywa
— Techmeme (@Techmeme) March 10, 2015
The note on the front page of Gigaom is exactly the same in tenor and sadness as the one currently hanging at Rosie’s.
Gigaom recently became unable to pay its creditors in full at this time. As a result, the company is working with its creditors that have rights to all of the company’s assets as their collateral. All operations have ceased. We do not know at this time what the lenders intend to do with the assets or if there will be any future operations using those assets. The company does not currently intend to file bankruptcy. We would like to take a moment and thank our readers and our community for supporting us all along.
Gigaom was started in 2006 by former Forbes reporter Om Malik. Along with TechCrunch, VentureBeat, ReadWriteWeb and later The Next Web and AllThingsD (which is, for all intents and purposes, now Recode), Gigaom was one of the first rounds of popular tech blogs that validated the new media approach to tech media and established a voice for a whole generation of new reporters and journalists. Myself included. Gigaom’s sudden departure leaves a great hole in many hearts … and much consternation among its media fellows.
In The World Of New Media, Publications Are Like Restaurants
I give the similitude of the closing of Rosie’s for two reasons: 1) I used to be chef and have helped open (and close) many restaurants and am also a long-tenured tech reporter; B) the similarities between online publications and restaurants are more acute than you might think. I might have a little insight on how these industries operate.
Hot new restaurants pop up all the time. They come with foreshadowing of what the menu and atmosphere will be, the reputation of the owners and predictions on what the restaurant will mean to the local community.
But restaurants are capital-intensive ventures (at least for the rest of the world that are not accustomed to the blatant riches of the tech industry). Instead of venture capital, restaurant owners get loans from banks and suppliers, stretching credit as thin as possible to get through the opening phase. Most restaurants — from the biggest names to the local mom and pop shop — don’t last more than three years. The saying in the restaurant industry is that if you last longer than three years, you can basically make it forever.

Almost everybody of a certain age knows what it is like to go one night to their local pub or restaurant only to see that the doors are locked, the windows are taped up and there is a note on the door announcing its closure. “What happened?” you may ask. “Everything seemed to be going so well for them.”
Restaurants — like online publications — are very good at putting a shining, happy face on front of the business. But you never quite know what is happening behind the scenes. Did the owners stretch their credit to get started? Do they lack capital to grow? Do they lack emergency funds to handle slow times or unforeseen expenditures?
On aggregate, there is plenty of money in both the restaurant industry and online media. Both are multi-billion dollar industries. But that money is so spread out among hundreds of thousands of players that the barrier for success and sustainability — the ability to separate from the pack — is extraordinarily high. Very few restaurants and publications have the escape velocity to become multi-generational institutions.
What is true for restaurants is also true to online media. Despite the big names, popularity and gleaming façade, there is comparatively little money coming in compared to the companies they are covering. TechCrunch, the de facto leader in new media tech for years, only sold for $30 million to AOL (perhaps $50 million or higher with earn outs). ReadWriteWeb* (later ReadWrite), one of the very first popular tech blogs, sold for between $5 million and $10 million to Say Media in 2011. Gigaom was venture funded, raising $8 million last year (presumably, it was this funding that ultimately sunk Gigaom as it was not able to make its payments on the investment).
*Disclosure: I was an employee of ReadWriteWeb — serving as senior writer and mobile editor — before the time of acquisition until mid-2014.
“The high-profile nature of media companies often hides the fact that it’s tough, gritty business,” said ARC’s publisher Matt Johnston, chief marketing and strategy officer for Applause. “In a market that’s highly-fragmented and low-attention span, it’s very difficult for a media firm to get to the top — and exponentially tougher to stay there.”
In a weirdly prescient moment in February, Techcrunch founder Michael Arrington and Malik — both venture capitalists as well as tech blog founders — were on stage TechCrunch’s “Crunchies” awards and joked about how there is much more money investing in startups than there is in publishing.
The fact of the matter is that it does not matter how important or influential a publication or a restaurant is to its community. The industries are fickle with very little margin for error. The capital required to sustain production and growth is extremely hard to come by. Say Media sold ReadWrite last month to Wearable World, taking a huge (it can not be understated quite how huge) loss on its initial investment. AOL has shuttered many of its online properties, including TUAW and Patch. Gigaom has shut down. The Next Web has pivoted its business model a couple of times to sustain itself. Hot properties like Upworthy have seen the rug pulled out from underneath them when reliable sources of traffic evaporated.
The hottest online media properties in 2015 are on notice. The façade of Vox Media (with Vox.com, Verge, Polygon and others) is bright right now, but the inside-baseball rumors in the industry are that things have not always been rosy internally. Fusion has spent a ton of money hiring the best tech media talent in the world. Buzzfeed is killing it today and has a longer runway than most. The Atlantic has resurrected itself with smart maneuvering, technology and offshoots like Quartz. So on and so forth.
It is sad to say, but Gigaom’s closure is almost par for the course. So are the closings of TUAW, Patch, Macworld and the troubles with AOL, IDG and Say Media. Competitive, cash-strapped industries are volatile and one day you just might turn the corner to see your favorite watering hole — physical or digital — has shuttered its doors.
Have A Mission And Serve Your Community
Rafat Ali was one of the inspirations for Om Malik to found Gigaom in 2006. Ali built meta-news publication paidContent and now runs the travel focused Skift. GigaOm bought paidContent from The Guardian a few years back and integrated it into its publication.
Ali is well respected as one of the brightest and most enduring of new media luminaries. He is a voice of the industry and for the industry and constructively critical of it.
Last year, seeing a bubble form in the digital media sphere, Ali asked this question:
Imagine, because of some catastrophe, the media company you know suddenly shuts down, tomorrow. Will anyone miss it, and will the disappearance of the said company harm the ecosystem at large in various ways?
The question is ultimately one of utility: does your publication matter to your audience?
Ali continued:
How much of a personal or professional utility value do your users ascribe to your brand? And how indispensable are you to the ecosystem you exist in?
By Ali’s own account, Gigaom was the type of publication that will be missed and its absence harms the ecosystem it served. Ali, of course, may be biased after paidContent ended up at Gigaom, but I tend to agree with him. The writers for Gigaom were some of the best at their individual beats in the industry. Kevin Tofel — a prime competitor of mine for years but also a congenial colleague — is perhaps the only one of my thousands of Google+ followers to actually read and respond to my posts. My Boston compatriot Barb Darrow covered enterprise with expertise born from years of experience. I met Stacey Higginbotham the first time I ever went to cover a FCC meeting when I was still with Government Computer News in D.C. and she has been indispensable on the carrier/spectrum and Internet of Things beats for years. Mathew Ingram is one of the very few go-to resources for news and opinion on meta-media matters in the industry. I have immense respect for all of these fine reporters.
“What we had at Gigaom was special. It was a rare work environment where I not only liked, but respected all of my colleagues. I hope they all find jobs doing what they love, and if I can help them, I will,” Higginbotham wrote on her personal website.
But, in the end, what did Gigaom really stand for? Smart analysis and no-bullshit coverage of all things technology, yes. But did it ever really have a focus? Did it own any one beat outside of smart reporters covering specific industry segments, like clean technology?
Ali’s latest publication, Skift, has a focus, narrowing in on the important topic of the convergence of technology and the travel industry. Another publication diligently serving its readers is Tech.eu, hitting on the under-covered topic of startups in Europe and founded by Robin Wauters (formerly of The Next Web and TechCrunch).
One of the reasons that companies like Danny’s Sullivan’s Third Door Media (which has never taken VC funding and has operated on a small but diligent budget for years) and includes Search Engine Land and Marketing Land has been able to survive in the trade press is because of its hyper focus. It also helps that Sullivan was one of the first to make covering Google search an essential beat.
In response to Gigaom’s closure, Sullivan wrote about the fallacy of success with venture funding but also the importance of focusing on serving a distinct community extremely well.
In fact, our revenue would be worse if we had a broad audience. We produce content for digital marketers, so your typical BuzzFeed reader interested in that damn dress isn’t going to be much of value to us.
And that’s fine. We know our audience; we know the content we’re producing for it, and by growing our audience, our publications become more valuable to readers, attendees and advertisers.
I always viewed Gigaom as a sort of spiritual cousin to ReadWrite. Both focus on intelligent and thoughtful coverage of the tech industry. But speaking for ReadWrite, we never quite figured out the problem of focus. Breaking news or in-depth analysis? Focus hard on startups or big platform companies like Apple, Microsoft and Google? Internet of Things or mobile or enterprise or … the list goes on. We were really good at several things, but on aggregate, masters of none. Publications the size of Gigaom, ReadWrite and others cannot survive in that realm because companies with more resources (The Verge and CNET, for instance) are so much better at covering the breadth of the technology industry. Say what you want about the niche publications like Android Authority, Android Central, iMore or Android Police … at least they own their beat until the time that beat no longer becomes relevant. See: CrackBerry.
Business Of New Media
The page view is still the king of the digital publishing world. Click, click, ad impression, click, click. The delusion among the advertisers that support digital media revenues are that clicks equate to eyeballs and eyeballs are ad impressions.

The fact of the matter is that most publishers cannot fully survive on this cost-per-impression or cost-per-click advertising model. The margins are extremely low, the revenue is miniscule unless done at massive scale (see: Buzzfeed and Huffington Post). The ad model that most of the tech blogs were built on proved to be insufficient, leading them into new revenue operations, especially native advertising and events.
Sullivan’s Third Door Media has what he calls a “nuclear triad” of revenue so as not to be overly reliant on one: direct ads, lead generation and events.
Sullivan explains in an article on Medium:
Third Door Media generates income in three diverse ways: direct ads on our sites; lead generation and conferences. I often joke that this is like our “nuclear triad” of revenue redundancy, so that we’re not vulnerable to any single thing. But none of this relies on a mass audience.
Even Gigaom had (at least) a threesome of revenue resources: events its “Pro” research department and advertising. The model, more or less, served Gigaom for its nine-year existence until it couldn’t pay its Silicon Valley Bank creditors. Reached for comment, Silicon Valley Bank said it could not discuss private client matters.
The most difficult aspect of sustainability and success for digital media companies in 2015 is this confluence of business model and editorial focus. The result is a continual race against the clock to make sure that both are being served to the best of the ability of the publication before the cash runs out for the business stakeholders (be they venture capitalists, independent or corporate owners) run out of patience and money. All of this happens concurrently with an ever-changing digital media landscape that a publication must evolve with before it becomes irrelevant.
Web 3.0 And The Evolution Of Digital Media

The ever-changing digital media landscape has been a problem for the generation of tech blogs started between 2003 and 2007. These were publications built on the back of the Web 2.0 movement. For instance, the reason founder Richard MacManus titled ReadWriteWeb what he did was because Web 2.0 eclipsed the first era of the Web that was read-only. The read/write Web became a two-way communication platform and it was this foundation that the likes of Mashable, ReadWrite, TechCrunch and VentureBeat (and many non-tech related sites) grew.
Digital media in 2015 is different. Call it what you want, but the Internet is different now than it was when Web 2.0 was in full swing in the mid-2000s. It is mobile-centric, algorithmically driven, social, instantly communicative and personalized. These factors — which I cheekily dub the Mobile Era or Web 3.0 — are what led me to believe that companies like Flipboard are the epitome of this new media generation.

Flipboard’s Mike McCue by Ken Yeung
Tom Foremski of Silicon Valley Watcher notes how disruptive mobile has been for new digital publishers:
The shift to mobile is extremely disruptive to new media titles because it is happening much faster than the transition of business from print to digital (which is still in progress).
The problem with mobile media is that it’s near impossible to monetize via adverts that earn one-tenth that of desktop ads, which earn one-tenth of print ads. From dollars, to dimes, to pennies.
Mobile represents not only a change in business model for digital publishers, but a change in behavior for readers. Many digital media publishers will tell you that page views have been down across the industry for the last couple of years. Traffic acquisition is much more difficult as search and social become less reliable and reader attention is no longer centered on individual publications but rather on algorithmically driven feeds that surface what is popular at the moment from any variety of sources.
In order to effectively capture reader attention on all of the various feeds, publications need to be just about everywhere. A mobile-friendly responsive website, a robust social presence, a dedicated app for iOS, Android and Windows Phone and partnerships (or at least good relationships) with media platforms like Flipboard and LinkedIn. The funds needed to build or take advantage of all that is necessary to thrive in media in 2015 is basically non-existent on digital media budgets. Going back to the restaurant metaphor, an already stretched budget cannot support these costly changes in business environment.
Taken altogether, is the future of digital media doomed? Of course not. People like Danny Sullivan and Rafat Ali will always find a way to adapt and effectively serve their audiences. But do not be surprised if the stunning fall of Gigaom is prelude to a market correction as the digital media industry continues to evolve.
Originally published at arc.applause.com on March 11, 2015.