Each Saturday, Farhad Manjoo and Mike Isaac, technology reporters at The New York Times, review the week’s news, offering analysis and maybe a joke or two about the most important developments in the tech industry.
Farhad: Howdy, Mike! What’s going on with you? Sorry, I don’t have some kind of funny intro this week. I’m just pretty tired. I need a nap.
Mike: I had a root canal on Friday and my dog won’t stop eating our drywall. Other than that, life is grand.
Farhad: Sounds fantastic. OK, let’s go through some tech news. Apple announced it sold 13 million new iPhones in its opening weekend — which, like everything with Apple, some people thought was really awesome and others thought was meh. Google unveiled some new Nexus phones, tablets and a Chromecast streaming device. Those were fine and also unexciting — smartphones changed everything and yet, man, are they boring.
Mike: I have a seriously difficult time caring about phones now. Every announcement is just “look at this cool new processor we put inside.” Yawn.
Farhad: You know what’s not boring? Cars. Google let some reporters ride in its new driverless vehicles this week, and some went away convinced that cars without drivers are the inevitable future. Also, Tesla began shipping the Model X, its super-expensive new crossover vehicle. I don’t get the business case for selling a $130,000 sport utility vehicle with rap-star doors, but it does make for some good press.
Oh, also, there was some speculation about whether Jack Dorsey will be named the permanent chief executive of Twitter — but given the rate at which the Twitter board is moving, I’m sure we’ll have all year to talk about that.
So let’s talk about our business, the media! This week Business Insider, the scrappy tech- and finance-focused digital publication founded by the former stock analyst Henry Blodget, was sold to the German media company Axel Springer for $343 million. It was just one of many dump trucks full of money pulling up to the digital media business. BuzzFeed and Vox recently each announced that they had raised $200 million from NBC Universal. Vice has also raised a boatload. So is this all great news? Should I start shopping for a McMansion?
Mike: I’m glad this is our topic this week, because like any good member of the media, most of my day is occupied thinking about myself and the indispensable nature of my industry.
Really, though, here’s my thought: There’s tons of money, as you said, pouring into these digital media start-ups. I don’t believe it is possible for all of them to survive.
Rates for display ads — the often terrible, splashy things that crowd your screen — are in the tank, relatively speaking, which means your site has to garner enormous traffic over time to cover costs and, eventually, become profitable.
That’s (arguably!) doable for some legacy media brands, at least in the short term. Our publication, for instance, is not in immediate trouble, since we are well-known and drive lots of traffic, and we have other revenue streams beyond just display advertising.
Farhad: I think some people would argue with you about whether The New York Times is in immediate trouble. Especially after it hired you and me.
Mike: O.K., but think of these smaller businesses: Many are still nascent, trying to make a name for themselves in a crowded world with many competitors offering the same product. They prop themselves up with venture capital so they don’t require immediate profits, but that’s obviously not a sustainable strategy. And in some cases, they are also paying out huge salaries to star writers who help to gain an audience. Again, this is not viable for the long term.
So the options are: Grow until you’re significant enough to become acquired by a larger company, go public or die. And I truly don’t believe that there are enough large media acquirers to go around that all of these small digital media upstarts will eke it out. Others obviously won’t have the numbers to go public. Many will die.
What do you think of all that uplifting, armchair media commentary? The best part about it is I’m sure many of our self-absorbed, outspoken friends will tweet many reasons I’m wrong when this newsletter comes out.
Farhad: Wait a second. I think you need to name names. Sure, not all new media ventures are going to survive, and sure, a bunch of smaller ones will choke. But which big ones are you saying will die?
Business Insider’s success was built according to your template. By quickly covering just about every story in its orbit, and by slapping on tabloidy, eye-catching headlines that get people to click, Mr. Blodget’s company became a traffic behemoth, attracting an audience of 70 million or so people a month. It grew fast enough to become significant — and then irresistible to acquirers.
BuzzFeed and Vox have accomplished the same ends using different editorial approaches; BuzzFeed, in particular, has figured out a way to surface stories and ads on social networks that creates a tsunami of traffic. The business is working: Per a report on BuzzFeed’s internal financials that Gawker acquired this year, BuzzFeed’s revenue tripled in 2013 and was on track to double in 2014. And despite huge investments in talent and production, the company eked out a small profit in the first half of 2014.
I’m not saying all of these businesses will survive. But for the bigger ones, the picture looks pretty good. I think the larger story here is about the benefits that come from a willingness to try new business models. For a long time, our business was trapped in a stultifying state of mourning — things were changing, people hated change and many threw up their hands. The money from venture capitalists has given people not just hope but also the freedom to try out new ways to pay for media.
Some of those models won’t work. That’s the nature of experimentation. But some will, and maybe a few will do so spectacularly. I, for one, welcome our new media overlords.
Mike: But I don’t think these are all spectacularly new business models. The Huffington Post figured out how to aggregate reporting from other outlets and optimize search engine terms for Google, exploding in page views. So did Business Insider. BuzzFeed is just doing with social traffic what Huffington Post did with search traffic. Vice is bringing TV to the web, but it really wants to run its own TV channel. Same with Fusion. Everything new is old again.
Farhad: Slightly new ideas, at the right time, can be huge successes. The iPod was just a digital version of the Walkman. It was also a pretty great business.
Mike: My predictions, with no direct knowledge: Vox will be bought by NBC/Comcast. BuzzFeed, which passed on being acquired by Disney, will go public. Vice will also go public.
What I really think is that the smaller sites that have not been acquired — Refinery29, Mic, The Daily Dot, Mashable, The Next Web — those are the ones to watch and see if they get sold or if they flop. Growth is hard, profitability is hard and venture capital is not going to be so easy to come by forever.
Anyway, what do I know? I’m just another media blowhard.
Until next week?
Farhad: Sure, if there’s still money to pay us. See you!