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Newsonomics: By selling to America’s worst newspaper owners, Michael Ferro ushers the vultures into Tribune
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May 6, 2016, 1:44 p.m.
LINK: medium.com  ➚   |   Posted by: Joseph Lichterman   |   May 6, 2016

Much of the narrative surrounding digital media has been gloomy in recent weeks as many people confront the dominance of Facebook and the softening ad market, but Mic co-founder and CEO Chris Altchek said its too soon to write off news startups.

In an email to Mic’s staff, which he turned into a post on Medium, Altchek wrote that the advertising market will eventually catch up to all the various platforms where outlets, including Mic, are experimenting with content. “Advertising is a $500+ billion global industry. Expect it to take a bit of time to adapt,” he wrote.

Central to Mic’s strategy is aggressively pursuing new platforms and distribution opportunities that create explosive audience growth. That usually means building before the business models have been fully developed — typically 12–18 months before advertisers get on board. This year, our revenue is coming from branded content partnerships and our Hero ad unit — which we built 12 months ago — and we’ve already booked more than the entirety of 2015 four months into 2016.

While Mic’s focus on growing its readerships and experimenting with different platforms and mediums may be the right one, there’s no guarantee of success.

The Financial Times reported that BuzzFeed missed its 2015 revenue targets and cut its expectations for 2016, and Mashable fired 30 staffers last month — and lost some of its top news talent — as it refocuses on video.

Many outlets — including Mic — are doubling down on video due to demand from advertisers and Facebook’s prioritization of video in the Newsfeed algorithm. But video is expensive, and online media is a crowded market. Mashable’s experience shows the risks that publishers take as they focus on video and try to break out from the pack. The Information’s Tom Dotan reported this week on the costs Mashable has incurred to pursue video:

The best example of that may be Mashable, which launched its video division Mashable Studios last summer and bet its future on the medium. The video push, which involved hiring new personnel and buying equipment, sent Mashable’s costs soaring to between $4 million and $5 million a month, according to a person familiar with its figures. Those costs were significantly higher than its annual revenue that last year reached about $40 million. In other words, Mashable was at times burning through more than $1 million a month in cash. In contrast, before it emphasized video, Mashable had made money in some months.

Mashable posted a 46 percent growth in revenue during the first quarter, The Information reported, and after the cost cutting and layoffs it expects to continue that growth — or even become profitable — this year, but another source told The Information that the company still may need to invest more to turn a profit.

Regardless, in an environment where Google and Facebook take 85 cents of every new dollar spent on online advertising, outlets are either going to make it trying to chase scale and advertiser dollars or kill themselves in the process.

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