The news this week that Mashable would lay off 50 employees in the wake of a fire sale to Ziff Davis for $50 million is a sign of the times in digital news.
Just two years ago the company was valued at $250 million and won $15 million in new funding from Time Warner. Now a plunging valuation has become a painfully common affair across the digital space for both small players and industry titans.
Last week, BuzzFeed axed 100 employees and delayed a planned IPO after missing expected 2017 revenues by as much as 20 percent. A traffic drop prompted Mic.com’s much-maligned “pivot to video” — and dozens of layoffs. Vice also missed earnings, but you may have overlooked that story as the company prepared for what is expected to be a brutal piece in the New York Times about the company’s issues with sexual misconduct.
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“Digital media publishers are looking for scale,” said Michael J. Wolf, CEO of Activate, Inc., a management consulting firm for tech and media companies. “We’re at a point now where there aren’t many of these companies. You could look at Mashable and say it’s just too small. The other reason these companies need to get larger is because they need to move their businesses into video.”
Scale, however, is far from the only problem. As a growing number of people consume content from Google and social media, companies like Mashable find themselves in an increasingly untenable situation. As distribution algorithms are constantly tweaked, media shops are left constantly scrambling, playing the role of digital soothsayers to a hostile web.
One former Mashable senior staffer told TheWrap that social media changes took a brutal toll on traffic during his tenure and that the company constantly was left floundering with no real strategy for developing other revenue streams.
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A similar story played out at news website Mic.com.
“It provides an opportunity where people think there is a system to play, a game to play. You start designing stories to play into an algorithm,” said a former senior editorial employee at Mic. “Then you start picking stories based on what will do well on Facebook. People start to focus on that and not the news itself.”
To that end, the company often employed what were known internally as framings, creating formulas like “In One Tweet [Sharable Person] Just [Thing Done].” A small cottage industry of “one tweet” posts were produced to document the pronouncements of author J.K. Rowling.
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Some examples include:
“In One tweet, JK Rowling shaded all the men asking why there’s no ‘Men’s Day'”
“In One Tweet, J.K. Rowling Just Sparked the Most Magical Celebration of Equality Eve”
“One Tweet from J.K. Rowling Perfectly Shuts Down Rupert Murdoch’s Anti-Muslim Rhetoric”
“In One Tweet, JK Rowling Tells Mic We’re Wrong”
The dependence on social media has put many outlets in a bind, David Cohn, Senior Director at Advanced Publications, told TheWrap. Media sites can’t ignore Facebook; they need to leverage the social network’s massive platform to funnel readers towards its content. But the money they’re making, in comparison to the gargantuan ad sales Facebook and Google rake in, is negligible. (The duopoly accounts for 85 percent of all internet ad growth, and combined will make more than $100 billion in ad revenue in 2017, according to Mary Meeker’s annual report.)
“That generation — [sites like] NowThis, Circa — it’s a negotiation, and they’re in a weaker hand. And the reason they’re in this pickle is because they don’t have this strong hand to demand strong tools to monetize. Facebook has that upper hand, so Facebook can monetize,” said Cohn.
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He pointed to NowThis as a textbook representation of new school media’s symbiotic relationship with Facebook.
“NowThis is really just a content creator for Facebook, that’s the relationship. Facebook is the distributor and NowThis is the studio — not unlike the movie studio and the movie theater,” added Cohn. “The situation we find here is that the distributors, the Facebooks and social platforms, are in a much better position to monetize, and in a much better position to dictate, because they own the product.”
As companies scramble for answers, outlets have increasingly turned to video to maintain their weakened grasp of the audience. But the pivot to video isn’t a surefire panacea. Mark Bonner, former managing editor at International Business Times, recently told TheWrap the strategy was anything but a silver bullet for the company. By adding autoplay clips, IBT aimed to keep eyeballs on the screen longer and, in turn, boost its ad revenue. That didn’t happen.
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“[The pivot to video] was forced on us, and I never got an explanation why, but I can only guess they were looking at the balance sheets and saying ‘this is a fast way for us to make up some gains,'” said Bonner. “It didn’t work, as far as I can tell, because we all got laid off.”
Compounding matters, goals put in place by many of the big money venture capital firms backing these companies has undermined the drive of their editorial teams. An obsession with traffic first, quality journalism second, has stymied the industry. And the impact of VC — and its share of the blame in the media-wide downturn — isn’t lost on those that have seen it firsthand.
“So many of these companies got a lot of VC [venture capital] funding and then at companies, like a BuzzFeed and Mashable, there’s an emphasis on growth. The way to grow is to get hits and the way to get hits is to publish stories that gets hits, not necessarily stories about hard news,” said the former senior Mic employee. “That shifts things away from journalism towards traffic and when you do journalism for traffic rather than for journalism, that takes the sail out of journalists, makes it harder to stay focused, and makes it much more of a business and commodity.”
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So what’s the path forward? Cohn sees more companies turning to a “hybrid” business model — somewhere along the spectrum between BuzzFeed’s obsession with scale, and smaller subscription-based outlets like The Information. At the same time, the million dollar question boils down to how tech and media companies find a working relationship moving forward. The hysteria over social media wiping traditional outlets off the map is overstated, but fostering a more sustainable model for quality content will have to emerge.
“In truth, they need each other, and when push comes to shove, these tech giants know that and understand that. You can’t surf Google if no one’s producing content, and it means nothing to share content on Facebook if there isn’t good content being made,” said Cohn. “And there’s only so many cat photos that people can really share. There has to be substantive stuff.”
(Disclaimer: TheWrap media editor Jon Levine was formerly a staff writer at Mic).