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Niche is the Future of Scale

Despite BuzzFeed pumping over 300% last week on the news that it would be creating quizzes using ChatGPT, it would be hard for anyone to look at this company and say it was a resounding success. The same can be said for Vice and many of the other fast-scaling, fast-falling media companies from the last decade.

I was at dinner a few nights ago with a number of media operators and investors, and the topic of BuzzFeed, Vice, Mashable, Mic, and many of these former media darlings came up. And one person at the table asked: "What happened? Why didn't they work?"

It boiled down to who the publication served. As we talked, no one could articulate the audience for any of those sites. Perhaps Vice had a clearly defined audience at one time, but the who became less obvious as it grew bigger. Who did BuzzFeed write for? Who did any of those sites create content for?

The mandate had always been "get bigger" or "we need scale." Those obfuscate who the audience is for any specific publication. If you can't articulate who you serve, how will you ensure you create the right content for them?

But we should remember that when many of these sites launched, it was in an era where most publications were trying to maximize scale. A couple of years ago, I spoke with Jarrod Dicker, who at the time was at The Washington Post, and is now at TCG. This part of the interview stands out for me:

At that time, when the Huffington Post was acquired, the way that we thought about building a media business was very different than we think about it now. I remember being at the Huffington Post and not even acknowledging the Washington Post and not even thinking they were going to be around in the next five years. We drove past The New York Times and CNN in traffic. It was really just a game of how you could distribute content further, how could you be more discoverable, how could you be more socialized. We literally built the CMS to do that.

…

It was less about the reputation of the brand and more about being the first link or URL to reach that user. A decade ago, if you would Google something, I don’t know how much you focused on the URL you were clicking on. You looked for something or your friend shares something and you clicked it. But especially around 2015-2016, that totally reversed. You made sure that anything you clicked on was a source you knew about and trusted. The game completely changed. It only focuses on one component of where venture-backed media went wrong, but it highlights a critical point, which is that reputation is long-term. Building a media company that distributes content and chases clicks and views is a good high short-term, but in order to really grow a business, you have to have brand affinity. The consumers have to wake up every morning and want to engage with your content.

The internet was a world of uncapped growth potential. And so, what mattered was how many people were engaging with the content rather than who those people were. Of course, we now know that this is fundamentally incorrect. But at the time, an ever-growing scale was better.

Why do I harp on this point?

Despite the promise of uncapped growth potential on the internet, it does not actually translate to digital media. You cannot grow an audience bigger while still consistently serving the group with whom you got your start. Even major media companies can't do it, and they have billions of dollars available.

Consider Fox News. I consider the content reprehensible. And yet, night after night, its audience tunes in to watch the latest thing being said. If it tried to expand to liberal TV, its current audience would likely be a little pissed off. Or, ESPN. You could argue that sports are as general as it gets, but ESPN trying to venture too far out of sports would likely hurt it and compress margins. You name the publication or company, and if it's successful, it's precisely because it has zeroed in on its core audience.

But what both Fox and ESPN show is that niches can be unbelievably profitable. I met a magazine executive yesterday who told me about a history publication in the portfolio. In its heyday, it had 300,000 subscribers paying $50 a year. I know of woodworking publications that are printing money with unbelievably strong margins.

The only way to succeed in media in 2023 is to niche down. And if you do it right, it can provide legitimate scale. But you have to change the approach to how you build.

Going back to my dinner... One of the people I was eating with asked about Vox. Why didn't I include it with the other media darlings that had failed over the past decade? I certainly don't think that Vox has been a resounding success—it has its own problems—but the strategy has helped it a lot more than many of the other media companies. For many of its largest publications, it can clearly define who the audience is: Polygon/Gaming; The Verge/Tech; SBNation/Sports.

What about Dotdash Meredith? Yes, it's been in the press recently for stumbling a little as it has integrated the Meredith brands (a piece for another time). But it has clearly defined target audiences for every single site—Investopedia/Personal Finance; Brides/Weddings; AllRecipes; Food. The list goes on. And because it knows exactly why someone would visit the sites, site editors can push the team to create whatever content those specific people need.

What about Endeavor Business Media, an unbelievably fast-growing b2b media company? It has dozens of brands: IndustryWeek/Manufacturing. Microgrid Knowledge/Energy. And this is just a sample. The team has grown through acquisition by picking up unique assets that serve their respective audiences.

It's our strategy on the B2B side at Morning Brew as well. HR Brew for the HR audience. IT Brew for the IT audience. Healthcare Brew for the healthcare audience. Every time we launch a new B2B, we can clearly articulate who the audience is. And if we can't, we don't build it.

In the case of every company I've mentioned here, they have achieved scale not by trying to take a single entity as big as possible but by focusing multiple entities on very clearly defined audiences. Additionally, they all—by and large—share a couple of the following traits.

First, there's a common technology. Vox has Chorus; it's CMS. I've written about how Dotdash acquires and integrates brands. This is, ironically, why Dotdash has been getting bad press about its integration. In a David & Goliath situation, David acquired Goliath, Dotdash's most significant integration ever. Endeavor Business Media has a common CDP and forces all its sites onto that, which gives it a massive database to pull from. And Morning Brew built its own CMS to power its newsletter business.

Second, there is overlap with the advertising products. If everything is fundamentally different, it can be hard to achieve scale. By having similar products across the portfolio of sites, the companies don't need to support as many different offerings. Even one as disparate as Endeavor leads with its 1st-party data, selling products that pull off that central database.

By and large, to achieve scale on the internet, you need to do it with a house of brands strategy. You need to own multiple unrelated publications that serve their core audience. The alternative is trying to build a branded house, which has worked out for very few publications. So anytime I hear someone say, "we're going to grow to $1 billion with our single brand," I immediately add it to a list of probable failures. It's not because I want them to fail but because achieving that kind of scale is unbelievably hard.

If you want to scale in media, go niche. Start with one publication. Perfect the model. And then do it again. And again. And over time, you can move even faster as you get better with each launch. By serving a core audience, you'll build the brand affinity that Dicker references in the quote above. And that is, ultimately, how you win.

Thanks for reading today's AMO. If you have thoughts, hit reply. Or, join the AMO Slack to discuss this and anything else. Have a great weekend!