There's an old joke I've heard told about just about every industry in the world, but today I'll tell the version about the internet news business.
"How do you make a small fortune providing news on the internet?"
"Start with a large fortune."
That old joke has maybe never been truer than it is this week, when The Messenger news site went dark after blowing through $50 million in startup funds — and hadn't even been in business for a year. CEO and founder Jimmy Finkelstein promised investors that The Messenger's appeal to "a big, generic news audience," as Axios described it, would generate $100 million in the first year alone.
From when the site went live in May to its demise on Wednesday, it brought in somewhat less than $100 million. The Messenger earned maybe $3 million, according to various sources.
Missed it by that much, as Maxwell Smart used to say.
Axios called it "one of the biggest media failures of the internet era," but it's one of two just in the last couple of weeks. In mid-January, Sports Illustrated announced that its entire staff faced being laid off — many immediately, some over the next couple of months while management figured out if there could still be a Sports Illustrated.
The magazine's publisher, Arena Group, five years ago sold the rights to the SI brand for $110 million to a licensing group called Authentic. In return, Arena would pay Authentic a quarterly fee to keep using the SI brand. They missed their last payment and the agreement was terminated, leaving Arena without a magazine to publish.
In other words, SI blew through $110 million in five years on top of whatever other revenue the magazine generated.
SI started with a large fortune and now doesn't even own its name.
Here's the kicker about Messenger from Axios, and it represents a lesson unlearned time and time again: "While the site garnered a sizable amount of traffic, proving some audience interest, it was unable to support its sizable newsroom on the revenue it generated."
The Messenger was top-heavy. Top heavy is not a sustainable business structure in the internet age, and yet company after company keeps thinking it can do what others couldn't. Finkelstein said in a note to staffers that he was "personally devastated" by the decision to shut down after exhausting "every option available and have endeavored to raise sufficient capital to reach profitability."
Yeah, that was never going to happen.
Being successful on the internet means being nimble and low-cost, like PJ Media. We are the little mammals scurrying under giant dinosaurs while the Chicxulub asteroid hurtles toward the Earth.
With a little help, we will survive the Extinction Level Event now wiping out one media giant after another.
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