Mic Drop

Let’s Talk Sustainable Funding

News media — especially digital media — is in the midst of a correction, but perhaps it is more of a crash. This has been recently evidenced in fall of Mic.com. The millennial-focused digital news site raised $60 million in VC since it launched in 2011 and was said to be valued in hundreds of millions in 2017. On Thursday, Bustle Digital Group agreed to buy what’s left of the company for less than $5 million. Mic laid off most of its editorial staff before the sale.

Mic suffered from many of the same problems that have plagued other digital media companies that were too reliant on social media traffic and sought to grow fast with VC-backing. The big picture is that: a) there are too many publications reliant on too few advertising dollars; b) platforms like Google and Facebook have sucked up most of the limited ad slots, attracting 99% of advertising revenue growth last year, which in turn has catalyzed VC to stop investing in companies that can’t convert viewers to revenue. The reality only sinks in after the withdrawal of on-going VC re-investment. In fact, venture-capital funding for digital media has shrunk for a few years.

The Columbia Journalism Review has noted that the shift to video content essentially marks the beginning of the end for digital media companies, since it forces them to distribute content through their advertising rivals Facebook and Google. This came to fruition last year after the high-profile digital-media ventures Vice and BuzzFeed both missed revenue target, partly due to their shift on Facebook-pushed video content strategies. This doesn’t mean Buzzfeed is also going the way of Mic.com, but rather they should not expect the free inflow of capital.

Given the competition for advertising dollars, perhaps it’s time for media companies to start producing content that readers are willing to pay for. An old-staple of the 4th estate — The New York Times — is leading the trend. Subscription and circulation as a percent of revenue rose from 26 percent in 2000 to 64 percent in 2017. Independent media is a critical part of a well-functioning civil society. As it comes under increasing attack from the current administration, we would hate to see it collapse from unsustainable business models.

Rilwan Meeran, Managing Director
Derek Brooks, Private Equity Consultant

Freedom of expression and information has hit the lowest point in a decade worldwide, with Poland, Croatia, Romania, Russia and Hungary among the offenders, according to rights organization Article 19.

The Allsides Bias Ratings page allows you to filter a list of news sources by bias (left, center, right). Components of the rating system include crowd-sourcing, surveys, internal research, and use of third party sources.

Joel Simon’s 2014 book, “New Censorship: Inside the Global Battle for Media Freedom,” gives holistic account of the political, social, and technological developments that have resulted in the loss of press freedom around the world.

This newsletter is intended solely for informational purposes, and should not be construed as investment/trading advice and are not meant to be a solicitation or recommendation to buy, sell, or hold any securities mentioned. Any reproduction or distribution of this document, in whole or in part, or the disclosure of its contents, without the prior written consent of Flat World Partners is prohibited

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Forward Thinking Capital

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