January 18, 2022

Will Investors Keep Making the Same Mistakes?

“Those who cannot remember the past are condemned to repeat it.” Philosopher George Santayana is credited with this quote. As I have been reading about many of these new news media startups launching, I can’t help but feel that investors—and new operators, honestly—are ignoring the past.

There are two recent examples that have me feeling this way. First, of course, is the new media startup coming from Ben Smith, formerly of NYT, and Justin Smith, former CEO of Bloomberg Media. According to The New York Times:

Ben Smith said in an interview that they planned to build a global newsroom that broke news and experimented with new formats of storytelling. He did not provide details on what beats or regions would be covered, how much money they planned to raise or when the new organization would start.

“There are 200 million people who are college educated, who read in English, but who no one is really treating like an audience, but who talk to each other and talk to us,” said Ben Smith, who is not related to Justin Smith. “That’s who we see as our audience.”

Justin Smith, 52, will lead the business side, and Ben Smith, 45, will be the top editor of the new venture.

Then there’s the recently announced Grid. According to an Axios story:

A group of D.C.-based journalists on Wednesday launched a new media company called “Grid” that focuses on hard news analysis and investigative reporting.

The new company, which was previously unnamed, plans to differentiate itself by providing deep reporting and analysis for a select few topic areas shaping the modern world, like misinformation, climate and Chinese geopolitics.

And then, according to The New York Times:

Mr. Bauman, who started the project in August 2020, said he had raised about $10 million in the first round of funding from Abu Dhabi-based International Media Investments and Brian Edelman, a tech executive. In March, he hired Laura McGann, formerly an editorial director at Vox, to build the newsroom and establish Grid’s editorial identity.

“We’re writing for anyone who wants or needs greater clarity on the most important stories of the day, and we think there are millions of people out there who fit that description,” Mr. Bauman said.

Why do we keep doing this? On one hand, it is unfair to pass criticism on both of these companies because they really don’t even exist yet. Grid has just started publishing and the two Smiths are doing an amazing job getting press and saying nothing about when they’ll launch.

But there is no rationale for creating these products. According to Grid, there are millions of people who want or need clarity on the most important stories of the day. That is a great way of saying, “there is no real way to describe our audience.” And for the Smiths to say, “there are 200 million people,” what they’re really saying is, “we want to serve everyone.”

As the saying goes, “if you try to serve everyone, you’ll serve no one well.”

Yet, here we are, looking at the perfect example of media companies that are smack in the middle of the barbell with no discernable niche and, instead, are running with the theory that there is this big, underserved market of people who need journalism.

What baffles me is why investors are looking at this as if there is an opportunity. Let’s break it down. If you’re someone looking for journalism to explain what’s going on, you could read The Atlantic, NYT, WaPo, Vox (where one of the founders of Grid came from), or a multitude of different publications. I’ve said it many times, but the world does not need more generalist news organizations that cover all the same stories.

But investors love it. It’s a “big idea” and it’s going to serve so many people. What’s unfortunate is that so many of these startups are going to struggle. Differentiating yourself when you’re telling the same story as everyone else is really hard. Spinning it as a “new way” of storytelling doesn’t change the fact that it’s still the same subject matter.

To be clear, it’s not impossible. Look at Axios. The world did not need another generalist publication with a heavy slant on politics. And yet, it found a way to do it by bringing in big-name people full time. Dan Primack is one of the most well-known reporters in the deal-making space; Axios getting him was a big coup and it immediately brought audience to the table. So, it can certainly be done. It’s just really hard.

That’s why niche media is where I like to focus my energy. Most times, one of these niche players is far more likely to serve my needs than a generalist publication. Take, for example, Grid’s argument that it’ll focus on Chinese geopolitics. Why read Grid for that when I could, instead, read The Wire China, which is focused exclusively on China. All of its resources are directed toward serving a very focused market.

Why am I even writing about this?

There’s a real problem in media where the only interesting stories that get any sort of discussion are the big, flashy, generalist publications. And yet, there are hundreds of very profitable media companies serving niche markets that are forgotten about.

But the real issue with publications that serve a wide audience is that it’s really hard to provide any depth without spending a ton of money. And so, in a quest to grow these startups, founders will continue going back to investors, hitting valuations that become impossibly inflated.

A more simplistic answer is that, in a few years, it’s likely some of these startups flame out. They’re entering incredibly competitive markets without a clear go-to-market strategy. And so, when these startups fizzle, investor interest in media will retract, despite the fact there are legitimate opportunities if they’d just change their attention to niche opportunities.

Like I said above, it’s unfair to criticize right at the beginning. But history has shown that new entrants into the general news space will run into stiff competition from the far more successful players like NYT. Rather than competing, investors should be clamoring for more niche opportunities. The path to profitability is clearer and, with the right time horizon, the upside is likely better too.

But people hate history. And so, in a few years, we’ll hear about investors getting cold feet with new media investments. And niche operators will continue doing what they do best. Until the next round of flashy, generalist publications. Because ultimately, this is the cycle of media.

Benioff brings a Salesforce approach to Time

Under most circumstances, a tech founder trying to fix a media company probably wouldn’t work. But what’s become interesting to me is that his approach has been working at Time. According to Axios:

Benioff tells me that Time projects 30% revenue growth this year to over $200 million, with CEO and editor-in-chief Edward Felsenthal saying that around one-quarter of that will come from a studios unit that’s just two years old.

More broadly, the company used to be internally organized by function (editorial, marketing, tech, etc.), whereas now it’s restructured around product (a la Salesforce).

I think it’s certainly impressive that the business is growing its revenue with about $50 million coming from a business unit that didn’t exist two years ago. But I want to focus on that second paragraph talking about the organization of the team.

The standard approach at most media companies is as described: editorial, sales, product, etc. Based on that, what Benioff has described is treating different products as independent that need their own respective teams.

This is very much how Salesforce works. When I was at CoinDesk, we used Salesforce as our CRM. We also used Marketing Cloud. I had two different salespeople I had to work with because they were totally separate teams. Even support was different.

I think there is value in the Benioff approach, but we do need to be careful in what we glean from it. For smaller publications that might have different products, the resources required to staff appropriately become almost cost-prohibitive. This is why centralized teams make sense.

But as you scale, this sort of “decentralized” approach makes sense.

It’s kind of what happened at Morning Brew. I took over a part of the business (b2b) and have been focused on scaling that. I have a separate editorial team from the other part of the business. Although the sales team sells across the business, b2b has a team focused almost exclusively on its products. On the growth side, there is a team that is exclusively focused on growing the b2b franchises.

But we’re only partially decentralized. Growth is still a single team that has different “sub-teams” within it. Revenue is still a single team with different “sub-teams” within it.

Structuring teams can be complicated. And as you grow, the desire to decentralize becomes compelling. But to make it work, there needs to be a unifying force behind it. In the case of Time, there’s Benioff who is the owner. At Morning Brew, we’re still founder-led, which I think helps a lot. In both cases, we know the direction we’re marching even if I am building the b2b business in a different way than the b2c side. In other media companies, siloes start to legitimately form where there is considerable redundancy in people.

Ultimately, our team structures should be set up in a way that makes things move faster. Decentralized, siloed products can do that. But it can result in competition and a lack of collaboration. The inverse, though, is a centralized system that moves a little slower, but perhaps collaborates better. There are certainly trade-offs with everything. I’d love to hear from you about how you’re structuring your teams.

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