Recent bad news for a number of digital-born news outlets (including BuzzFeed, HuffPost, Mashable, and Vice) is a symptom not only of the intense competition for attention and advertising online, but also of a digital content bubble where most news providers continue to operate at a loss — losses that cannot be sustained indefinitely.

So far, the largest digital-born publishers have been sustained by investors, some of whom may be losing their patience. Legacy media outlets have used their offline revenues to bankroll investments in online operations that are still often not profitable on their own. Smaller digital-born operations have started out with money from their founders or philanthropic backers, but many are struggling to break even.

More than 20 years into the rise of digital media, it seems clear that the content bubble will eventually burst unless more robust business models are found. Investors’ high hopes and dwindling legacy revenues won’t sustain digital news forever.

People continue to spend more of their time with digital media. Advertisers continue to spend more of their money on digital advertising. And yet most news sites continue to struggle to find a sustainable digital business model.

In a new Reuters Institute report, Tom Nicholls, Nabeelah Shabbir, and I analysed seven prominent internationally-oriented, digital-born news publishers, including both long-established players like HuffPost, newer entrants like Quartz, and recently launched European enterprises like Brut. We show how many of these, often on the basis of venture capital funding or other deep-pocketed backers (sometimes including investment from established media or telecom conglomerates), have pursued an expansive global strategy oriented towards securing audience growth first, expecting to generate profits later from advertising.

In their near-complete reliance on advertising, the largest and most expansionist digital-born news outlets face specific questions that set them apart from legacy media like newspapers as well as a growing number of domestic digital-born news media, all of whom are increasingly turning to pay models and membership schemes.

By 2017, we have found in other research that 66 percent of a sample of major European newspapers operate pay models, and prominent digital-born news publishers across the continent (including De Correspondent, El Diario, and the pioneering Mediapart) operate paid or membership models. Broadcasters generally don’t (though CNN plans to introducing digital subscriptions), but they benefit from still significant offline revenues and can treat online as a loss-leading brand extension.

Most of the digital-born news publishers who have sought international expansion have neither subscribers, members, nor offline revenues to sustain their operations. They rely on digital advertising. As Jean-Christophe Potocki, general manager at HuffPost France told us: “If we don’t fight this battle, given our model, we’re dead. Diversification is to provide extra, but our model is advertising and we need to fight it directly.”

Not all of these outlets will win this fight and be able to sustain itself on advertising alone (just as not every newspaper or niche news site will make pay models work). The challenges they face are clear, and include:

• low average revenues per user, especially with the move from desktop to mobile accelerating;
• the rise of programmatic advertising, widely seen as depressing CPMs for display advertising;
• the competition from large technology companies, most significantly Google and Facebook, that attract a large share of online advertising;
• the use of ad-blockers as users are frustrated by intrusive ads and long load times.

The most successful internationally oriented digital-born news publishers have used a combination of on-site and off-site distribution, aggressive search engine optimization, and social media promotion — coupled with content that is free at the point of consumption — to build large audiences across multiple countries, generally on the basis of a much leaner organization than most legacy outlets and a much more aggressive willingness to experiment with and use new tools and technologies. Brut, for example, has exploded on to the scene to become one of the highest social reach brands in France in less than a year. HuffPost operates in many countries and has an online audience reach that rivals much larger and more established brands like CNN and BBC — but on a much smaller cost base.

But many expansionist digital-born publishers are struggling to effectively monetize audiences that are sometimes a mile wide and an inch deep. What could be the first step to building a more engaged audience abroad looks to critics like “dumb reach”.

So far, many internationally oriented digital-born publishers remain in investment and growth mode, and have not been consistently profitable. In some cases, investors and owners seem to be losing patience and are pushing for cost cutting as a way of turning a profit. Venture capitalists and other backers are not interested in vanity metrics, but in a return on their investment. Can digital-born news media deliver?

The challenge of building a profitable business around free, advertising-supported digital news has been particularly clearly illustrated by the recent challenges faced by the brands who have most aggressively chased large audiences across many countries and most platforms. But while the challenge is particularly pronounced for those who have neither paying users or offline revenues to rely on, it’s not unique to them. The Guardian, the Mail Online, and other newspaper websites face the same pressures on their advertising revenues. Some legacy publishers acknowledge that their digital operations are still not profitable, and many domestic digital-born news media too continue to struggle with sustainability.

Given that people do not seem willing to spend all that much time (about 8 minute per day in the U.S.) or money (8 percent of online news users in the U.S. say they have an ongoing subscription) on digital news — and given that news media compete head-to-head with large technology companies for both attention and advertising — should we expect to see the digital content bubble burst after 20 years of investment in which only a few have seen a sustainable robust return? Or is this just a shakeout, where the most vulnerable brands implode and others emerge stronger?

Where internationally oriented digital-born news publishers seem most exposed in this crunch is in their reliance on digital advertising and in terms of the platform risk that comes with how they have built their wide reach through search and, especially, social.

Where they seem strongest is when they face those challenges with a leaner organization and a clearer strategic focus and editorial identity than many legacy media, and when they make more effective use of technology, both in terms of platforms like search and social and in terms of in-house tools for automating and enabling work.

Some of them will be lean enough to keep costs low, clearly enough defined to find a niche in a crowded market, and focused enough to make their editorial, distribution, and business strategies work (almost certainly relying on more than just advertising). Some of them won’t. And if they aren’t, then, as Jean-Christophe Potocki pointed out, they’ll be dead.