“TPM started literally out of nothing,” Josh Marshall, the founder and editor of Talking Points Memo, was telling me by phone this week from the site’s new loft in the Chelsea neighborhood of Manhattan. “There was no money behind it. There wasn’t anything like that. And for a long time, the operation was kind of run on a shoestring. And that applied to everything from salaries to office space to how long we held onto the computers before we upgraded them.”
Shoestring, meet purse string. With an injection of capital in the high six-figures, TPM plans to double its editorial staff and — here’s some news — open a bureau in Washington as the company expands its reign as one of the Internet’s only profitable news sites. But in seeking an outside investment for the first time, Marshall also risks unsettling the delicate and scrappy business model on which he’s built TPM since November 2000.
The new money is courtesy of Netscape founder Marc Andreessen and a handful of other Silicon Valley venture capitalists. In our conversation, Marshall confirmed a TechCrunch report that described the funding as an angel investment between $500,000 and $1 million. Paperwork on the deal is likely to be signed this week.
By my estimation, Andreessen’s check will bankroll TPM’s expansion in New York and DC for roughly two years before having to pay off. (Marshall wouldn’t say.) The site’s revenue is entirely derived from advertising, which I’ve written about previously, so TPM will look for its new reporting staff to provide a significant traffic boost, perhaps doubling or tripling its current average of 1.5 million unique visitors per month — without the benefit of a hotly contested presidential election to cover.
Politico, which has said it expects to achieve consistent profitability for the first time this year, says it draws 6.7 million unique visitors with a staff of roughly 100. TPM currently employs 11 people (one based in Washington), in addition to Marshall and his wife, Millet Israeli.
Last week, TPM posted seven new editorial positions — three in D.C. and four in New York. Marshall, who is known to take his time with hiring decisions, said an eighth new job is planned by the end of the year. When they’re fully staffed in the capital, TPM will open its first bureau there. “Washington is a couple hundred miles away from where we’re located,” Marshall explained. “In terms of having some institutional coherence and esprit de corps for our team in D.C., it’s important to have a home base and not only be working from homes or from coffee shops.”
I mentioned Politico as a point of comparison, but TPM’s closest competition for political news coverage may actually be The Huffington Post, which yesterday announced the hiring of Dan Froomkin as its new Washington bureau chief. (Dan helps run our sister site, Nieman Watchdog, and wrote for us. He was recently let go by The Washington Post.) Though both TPM and The Huffington Post now benefit from outside funding — the latter much more so — they’re seeking to cover the capital on slim budgets.
“We’re not going to have, person for person, as many [reporters] as Politico or The Washington Post,” Marshall said, “but we believe we will be able to reach a critical mass of reporters where we can compete in terms of global coverage of what is happening in Washington.” (Marshall wrote something similar in announcing TPM’s last round of hiring, contrasting TPM’s smallness with “the big dailies” and “the VC-backed internet outlets” like, ahem,
Politico The Huffington Post.)
By all accounts, TPM doesn’t pay as well as those news organizations, either. Like many Washington magazines, the site has succeeded in identifying mostly young talent before they’re hired away by larger, better-paying news organizations. (Greg Sargent, Paul Kiel, and Justin Rood are all TPM alums who were poached, respectively, by The Washington Post, ProPublica, and ABC.)
“It’s always a little painful when someone hires someone away from us at double the salary or something,” Marshall told me. “But it’s also a validation of our model and our ability to recognize talent.”
That strategy may require some tweaking with this expansion. Marshall said, “For our company to be able to grow and be effective, we will need a kind of a core of people who can invest in their jobs as career jobs. And that means more competitive salaries, better benefits, everything that goes along with making it possible for people to invest themselves in the enterprise for the long haul.”
Among the current job openings at TPM are a “senior reporter-blogger” in Washington and a “senior news writer” in New York. Though he hasn’t been writing much, former Time reporter Matthew Cooper remains an editor-at-large at TPM, and Marshall said he’d take on an “expanded role” in D.C. as they begin hiring there.
Web economics sometimes blur the line between scrappy upstart and industry heavyweight, and TPM, which has carefully built a business model based on steady advertising growth, seems to be seeking a little of both here.
The Andreessen investment is part of an angel round of funding, not venture capital, which is a crucial distinction. VC money would likely come with greater expectations for high profit margins down the line and give the investors a significant say in TPM’s strategy. This angel investment undoubtedly comes with fewer strings attached, and Marshall said he will maintain majority ownership of TPM Media. It’s unclear if he’ll open a VC round at any point.
Still, if doubling the editorial staff doesn’t produce enough extra traffic to pay for those reporters after, say, two years, TPM may be forced to retrench. That’s what it makes a bold and exciting venture, and why we’ll try to keep a close eye on it. No one — not Politico, not The Huffington Post, not The Washington Post — has yet hit upon the right equilibrium for profitable political coverage on the Internet. If the market can support a TPM of some 20 employees, that will be great news indeed.
Inside the newsroom
I ran this video in May, but if you missed it, here’s a quick tour of TPM’s newsroom: