Mediatwits #153: The Case for (And Against) VC Funding for Digital News

    by Jefferson Yen
    March 27, 2015
    Peter Kafka explains how Buzzfeed and Vice are more like ad agencies than we might think.

    What do BuzzFeed, Upworthy and Refinery29 have in common? Well, for one, they’ve raised millions in venture capital money, and they’re all getting deeper into the digital news business. Refinery29 is looking for a news director as they’ll soon be joining in the scrum to cover breaking news. Upworthy made its own news when they announced New York Times deputy international editor Amy O’Leary would join them as their new editorial director. Of course, everyone is chasing BuzzFeed. The company rounded up $96 million in funds and made $100 million in revenue last year. But it’s not all rosy in the land of VC-funded digital publishers. Earlier this month, tech website Gigaom abruptly ceased operations because they ran out of money. There were eulogies for the company in the tech press. According to a report by Peter Kafka, the demise was caused by mismanagement. What’s the future of the digital press? We’ll ask Kim Bui, West Coast editor at Reported.ly; Peter Kafka, senior editor at Recode; and our regulars Alex Leo, head of audience development at Yahoo; and Andrew Lih, associate professor at American University. PBS MediaShift’s Mark Glaser will host and Jefferson Yen will be producing.

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    "Their business model is like that of an ad agency. People who are advertisers pay them a lot of money to create content and they go place it in front of people." - Peter Kafka

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    mark-glaser-ISOJ-headshot-150x150Mark Glaser is executive editor of MediaShift and Idea Lab. He is a longtime freelance writer and editor, who has contributed to magazines such as Entertainment Weekly, Wired and Conde Nast Traveler, and websites such as CNET and the Yale Global Forum. He lives in San Francisco with his wife Renee and son Julian. You can follow him on Twitter @mediatwit.

    AndrewLih_270x210 Andrew Lih is a new media journalist and associate professor of journalism at the American University School of Communication. He is the author of “The Wikipedia Revolution” (Hyperion 2009, Aurum UK 2009) and is a noted expert on online collaboration and journalism. He is a veteran of AT&T Bell Laboratories and in 1994 created the first online city guide for New York City (www.ny.com). Follow him on Twitter @fuzheado. AlexHeadshotSmall

    Alex Leo is the head of audience development for Yahoo! Before that she was the head of product for Newsweek and Reuters.com, a senior editor at The Huffington Post and an associate producer at ABC News. She was named one of Forbes 30 Under 30 in 2012 and chosen by NBC New York as one of the top twenty people to follow on Twitter (@alexmleo). She has written for The Guardian, The Atlantic, Elle, Jezebel, Reuters, and more, as well as the play “Love, Loss and What I Wore.” She is on the advisory board of Internet Week New York and a mentor at Columbia’s Publishing Course.


    P. Kim Bui is the West Coast producer for the social media reporting team at First Look Media. Her career is focused on storytelling on the Web and how journalism can learn from technology outside of the field. She’s also an adjunct instructor at the University of Southern California and co-founder of #wjchat, a weekly Twitter chat for web journalists.

    Peter Kafka has been covering media and technology since 1997, when he joined the staff of Forbes magazine. He made the digital leap to Forbes.com in 2005. He may have been the first national business reporter to interview Steve “Stone Cold Steve Austin” Williams. In 2007, Peter became the first hire at Silicon Alley Insider, the predecessor to Business Insider, where he worked as the site’s managing editor.He began writing for AllThingsD.com in 2008. In 2011, he began producing and hosting the D: Dive into Media conferences; he will continue to work on other live events for Re/code.


    Gigaom’s demise has led some to question the role of venture capital in digital publishing. Danny Sullivan, founding editor of Search Engine Land, called it “a warning to anyone taking VC.” He argues that while sad, Gigaom’s stoppage is not indicative of an overall trend in digital publishing. He points to not only his own website but also The Information as examples of digital publishers who have been able to grow without venture capital funding.

    Pando Daily’s Sarah Lacy argues that is not about whether or not to chase venture capital but rather having a solid business plan. Slate’s Will Oremus suggested Gigaom’s aversion to “clickbait” denied it the wide readership it might have something to do with it’s downfall.

    There’s no denying the market has seen significant investment from venture capital with more than $650 million pouring into digital media. But there’s a problem. Advertising remains the number one source of revenue for publishers which means they have to compete with the likes of Google and Facebook when negotiating ad rates. BuzzFeed’s advantage in this field are its lists which they’ve been able to turn into native advertising for brands. Business Insider has been able to expand its revenue streams by delivering research and hosting live events. Ninety percent of Refinery29’s revenues come from advertising but it’s focusing on developing its video content as another form of revenue. For this new breed of digital publishers, getting venture capital is just the first step in securing their future.

    What can we learn from Gigaom? How difficult is it for independent publishers to survive online? If you’re trying to reach a mass audience do you have to take venture capital to grow? Is a boot-strapped venture the way to go?

    Jefferson Yen is the producer for the Mediatwits Podcast. His work has been on KPCC Southern California Public Radio and KRTS Marfa Public Radio. You can follow him @jeffersontyen.

    Tagged: advertising business models buzzfeed digital media gigaom journalism publishing social media technology Venture Capital vice vox

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