Internal Memos #2 - Silver Lining & Lessons of Mic's Implosion

(note: These are internal memos I send out to my team of ~ 70 FTEs, you may find them interesting).

What happened?

Last week, digital media company Mic shut down abruptly, in essence. Technically it sold for $5M to Bustle, which was founded by former co-founder of Bleacher Report Bryan Goldberg. But after raising $60M in funding and being valued on paper at over $100M, for all intents and purposes, Mic shut down.

I met the founders of PolicyMic way back in 2012, when they presented at the Next Big Thing in the Paley Center when I more or less lived in NYC. 

Why this is pertinent to us: 

I haven't commented much on the news as it was hard to find any silver lining... but I think a week after, the less obvious takeaways and lessons are more evident.

Mic's challenges speak more to a few specific things: 

1) journalism/news, 

2) chasing scale, trying to do too much (too many verticals), 

3) venture/private equity-funded media companies

4) platform reliance.

How are we different: Well, aside from the fact that we didn't rent two floors in World Trade Center & didn't raise $60M (we never raised anything).

1) This article from Washington Post talks a lot about Mic's impact on journalism... but the best observation is (not surprisingly) in the comments:

"If a kid wants to study journalism and cut their teeth in that industry then more power to them. But the economics and supply-demand in this industry, while never fantastic, just isn't there anymore. For every one person who makes a solid living, there are myriads who make little to nothing and end up walking away from the career to make ends meet. Art, drama, acting, singing, dance, all in the same category. Frankly, it's hard to imagine parents paying or kids taking out loans for this sort of degree but some do, which is fine, their money. This said, it's no mystery or secret that like art, acting, etc, journalism is a tough business to get into and make a solid living."

It's true that if the web democratized publishing & production, it blew the lid off of "journalism" where anyone and everyone could be a journalist, in the loosest sense of the world. Ironically, Bustle's CEO Bryan Goldberg's first company Bleacher Report capitalized on that very trend. So the fact that he is now scooping in & buying the remnants of Mic - which wanted to "re-invent" journalism, is ironic, to put it mildly.

2) Like every other venture-backed media company, Mic embraced other verticals, chasing "scale."

"Since late 2013, Mic has launched World, Identities, Music and Sports sections, in addition to their existing Policy, Arts, and Live News sections. Mic will debut a new data visualization department in the coming weeks and they are in the midst of hiring editors and writers for new sections, including Science, Health, Technology, and more."

That's when according to Rafat Ali (founder of PaidContent, the original blog covering digital media news), they signed their contract of irrelevance. Rafat goes on to comment about the general state of media:

"Everyone I am talking to has consensus on this: bottom is falling out of consumer digital media, and it is really really bad out there for venture backed (or even indie) online media cos. It seems to be coming apart faster than I've ever seen in my two decades of covering this."

I don't disagree with what Rafat is saying, but I think the key thing to note is that applies to unprofitable, venture/PE-backed media companies. That doesn't mix, because you can't really scale content easily, nor should you. I've joked about this with Rafat, but it's worth noting that when I started WatchMojo and would ask Rafat to write about us, he'd tell me to follow-up when we'd raise capital. He graciously admitted feeling a bit bad about that, but the point I want to make is: We in the media and industry falsely fetishize companies that raise capital and congratulate them when doing so, even though oftentimes, THAT's when the march to obsolescence begins for a content creator: when you have to prioritize investors over users (readers/viewers/listeners), clients and your employees who are creating the content.

Indeed, today this article by Vanity Fair does a wonderful job recapping all of the malaise

"But everyone else seems to operate on a relentless pivot schedule. “It’s a moment of real pressure,” one digital media executive told me. “My sense is, it’s tougher times for everybody.” Summing up the latest portents, a veteran digital-media strategist warned, “I think this is the tip of the iceberg. I think it’s gonna get worse, not better.” Tony Haile, founding C.E.O. of the Web-analytics provider Chartbeat, echoed that sentiment. “No one’s looking forward to this Q1,” said Haile, whose latest project is a publisher-friendly subscription ad-blocking service called Scroll. “You’ve got that kind of thing going on where everyone’s for sale.” (...) 

And yes, those are the higher-profile ones that industry publications cheerlead, talk up, only to trash and bash down... but the main gem is the following:

"The stakes are arguably the highest, it appears, for the much ballyhooed cabal of independent, venture-funded, super-scale companies, such as Vice, BuzzFeed, and Vox. Reacting to Peretti’s confederacy-merger proposal, one prominent founder and C.E.O. wondered whether there was “a problem for the whole space,” or “a problem for a handful of companies that really over-raised and over-expected and are now trying to re-adjust.” Consumer spending is up, and billions of dollars are being sunk into content, this executive noted, and yet “you have this little pocket of the universe looking desperate. So the reality is: is there a problem in the digital-media space overall, or a strategy problem for a certain set of companies?” In a somber parting memo on the day of Mic’s mass layoffs, outgoing publisher Cory Haik lamented the current state of the media universe: “Our business models are unsettled, and the macro forces at play are all going through their own states of unrest. If anyone tells you they have it figured out, a special plan to save us all, or that it’s all due to a singular fault, know that is categorically false.”

How are we like them/how are we similar: 

4) to quote Animal Farm, not all platforms are created equally. YouTube is part of Google, the most powerful advertising system ever created. Google is a fairly mature ecosystem relative to YouTube, but even YouTube has basically had ten years to develop and master its platform. Facebook is still trying to determine what role - if any - video will play at scale, over time. Yes right now video is central to its PR war drum... but over time, it may not be. Each month it seems to change its execution and tactics in video... but because Facebook provides massive audience reach, companies dive in... and venture/PE-backed firms go all in, head first. It's important to note that Facebook remains a child/teen in video, and one should only dip their toes. When you see Jellysmack and First Media boast of high reach on Facebook, it's wonderful... but it's awfully suspect of what Buzzfeed and Mic were saying not too long ago.

[Added later, but mentioned in previous posts] There's also the more fundamental difference in philosophy: Google's DNA is all about sending out traffic, knowing it will get more over time. Ditto revenue share with publishers via AdWords/AdSense. Facebook's Mark Zuckerberg built a system that sucks in all traffic, watch time, and revenues by conditioning brands, publishers and yes, video producers to pay it for reach. Why on earth would he ever reverse that structure and pay material revenue out? This is why Watch was created, to retain as much Feed revenue.

So yes, we at WatchMojo want to diversify in terms of verticals, genres, formats and platforms... but let's be realistic that there may not be a pot of gold at the end of every rainbow.

Do you need to read these articles? 

The WaPo article is really interesting if you care about journalism... the Vanity Fair article gives a great digest of what's happened to the digital media industry but adds a good amount of cynicism about the recent panic mode journalism (ironically).

Ultimately, the silver lining is "beware the institutional imperative" to blindly follow others to get written up in industry publications... it's almost better to avoid it all!

AK