{"id":10856,"date":"2015-03-21T13:34:40","date_gmt":"2015-03-21T17:34:40","guid":{"rendered":"http:\/\/www.mathewingram.com\/work\/?p=10856"},"modified":"2015-03-21T13:34:40","modified_gmt":"2015-03-21T17:34:40","slug":"some-thoughts-on-media-business-models","status":"publish","type":"post","link":"https:\/\/mathewingram.com\/work\/2015\/03\/21\/some-thoughts-on-media-business-models\/","title":{"rendered":"Thoughts on media business models"},"content":{"rendered":"

As the smoke begins to clear from the shut-down<\/a> of my former employer and the rubble that was left behind starts to take shape, a number of nagging questions remain. That’s an understatement, of course; pretty much all that remains are questions, some financial<\/a> and some emotional. But from my personal perspective, one of the most nagging is: Does Gigaom’s failure mean the model the company was based on — a three-part structure composed of advertising-supported editorial, events and subscription research — is fundamentally flawed, or was it just poorly executed?<\/p>\n

A number of news articles, including one by Peter Kafka<\/a> at Re\/code and another posted on Tuesday<\/a> by Farhad Manjoo at the New York Times, have described the debt and related cash-flow requirements the company faced, which appear to have become too onerous for the board and the company’s creditors to stomach any further (more details have emerged since<\/a>).<\/p>\n

Although revenues at Gigaom’s research arm were growing, what seems to have happened is the gap between those top-line revenues and the bottom-line cash flow or profits of the division grew too wide, and investors stopped believing that the company would ever get there, or weren’t willing to spend any more to fill that chasm. And without a plausible road to profitability, there was no hope of an exit that would justify the $40 million in cash and debt the company had raised.<\/p>\n

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So was the failure of the company a result of a fundamental flaw in the three-legged research\/events\/editorial model? I don’t think so, despite the rather tangible evidence to the contrary — evidence I am forced to confront every time I look at my dwindling bank balance. I didn’t just champion the Gigaom model because I happened to be working there, I actually believed (and continue to believe) that it can work, and that if done properly it can create a much better foundation for a media company than just relying on advertising.<\/p>\n

I mentioned the Economist in my earlier post<\/a>, and it continues to be the ne plus ultra of this approach: it has an editorial product that is supported in part by advertising and in part by subscriptions, but it also has a highly-regarded research arm — the Economist Intelligence unit — that contributes substantially to the bottom line, and it does events and offers its members other benefits as well. Politico is pursuing a similar model, offering a free editorial product combined with a subscription-based premium product<\/a> (Politico Pro) that includes events and other benefits for members.<\/p>\n

The principle behind this model is that you bring readers in through the front door — the free, ad-supported editorial side, which hopefully carries its own weight (as Gigaom’s did) but doesn’t make a lot of extra money — and you hope to create a relationship with them based around your expertise. Then you (theoretically at least) monetize that relationship through other means, including events and subscription research. In some sense, the editorial product becomes a loss-leader for the rest of your offerings, a way of finding new readers or customers.<\/p>\n

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So what failed in Gigaom’s case? Former VP of research Michael Wolf argued in a recent post<\/a> that the research arm lost its way at some point, and decided to focus on high-volume (but relatively commoditized) products like webinars and sponsored white papers rather than developing a deep expertise in subject areas — and it also targeted large corporate clients, many of whom apparently didn’t renew after their initial trials, instead of focusing on individual buyers and growing more slowly.<\/p>\n

This might be naive, but I still believe that the Gigaom research unit and the model it was part of could have worked, and in fact arguably did work for a number of years. From what I have been able to piece together, it sounds like spending — which was undertaken in an attempt to grow that side of the business to a scale that would make it worth all the millions that VCs had invested in it — just out-paced the actual cash coming in. That’s arguably a flaw in execution, not the model itself.<\/p>\n

The bottom line is that I don’t think the death of Gigaom should be taken as evidence that the model itself doesn’t work. Is it difficult to execute? Sure. A guarantee of success? Hardly. But I think there is room for another media entity to make a go of it if they wish to, and hopefully we will see more giving it a shot. Advertising and traditional news paywalls are not the only options.<\/p>\n

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Was the business model behind Gigaom — a combination of editorial, events and subscription research — part of the reason the company failed, or was it the execution of that model?<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_crsspst_to_mathewingramblogwordpresscom":false,"mf2_syndication":[],"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-10856","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/posts\/10856","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/comments?post=10856"}],"version-history":[{"count":0,"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/posts\/10856\/revisions"}],"wp:attachment":[{"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/media?parent=10856"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/categories?post=10856"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mathewingram.com\/work\/wp-json\/wp\/v2\/tags?post=10856"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}