This week we talk about The Messenger, ads, and generative AI.
We also discuss search engines, algorithms, and Semafor’s new curation tool.
Recommended Book: The Coming Wave by Mustafa Suleyman
Transcript
There was a piece published on McSweeney's, a humorous, often satirical writing site, recently, entitled "Our Digital Media Platform Will Revolutionize News and Is Also Shutting Down," written by Devin Wallace, that includes gems, ostensibly from an announcement by some kind of new media business, like this one:
"Our new digital media platform is changing the way people consume content. We’re a one-stop-shop location for breaking news, long-form journalism, and in-depth art criticism. We’re also currently shutting down without any notice whatsoever."
It goes on to say:
"Mainstream media will try to shut us down, but they’ll never succeed since we already shut down at 3 a.m. with absolutely no warning to our readers or even our employees."
This piece is a completely unveiled criticism of The Messenger, a news-focused digital media company that launched in May of 2023 and was dissolved on January 31, 2024, about 8 months after its founding.
It was started by 70-something Jimmy Finkelstein, the former owner of The Hill, a DC-based politics and policy-oriented publication he bought in 2012, which was then acquired by another media company in 2021, who said he wanted to start The Messenger for legacy purposes, and which he raised $50 million to fund, before scooping up the assets of another new online media company, Grid News, and hiring a bunch of well-known writers and journalists from other publications, promising higher-than-usual for the industry wages for the 150 employees it hired for its launch, and that number was doubled to around 300 within a handful of months.
The Messenger was then unceremoniously shut down, the company's staff learning about its collapse and their layoffs from other publications reporting on the matter, many of them suspecting a closure, though, when their Slack conversations were suddenly shut down and their connections to the company, company emails, insurance, and the like, all stopped functioning or simply shut them out.
Company leadership, including Finkelstein, had bragged that The Messenger would defy the slow-motion collapse the rest of the news media world was experiencing, with few exceptions, because it would expand aggressively and publish constantly, increasing employment to 750 people and earning $100 million in annual revenue on the back of 100 million unique monthly visitors by 2024.
That...did not happen. It did achieve 100,000 unique daily visitors shortly after launching, but it was only able to earn about $3 million in total revenue by the waning days of 2023, and it burned through cash faster than its competitors.
That $50 million in funding had dropped to around $1.8 million in the bank from May to December of 2023, and the sudden closure seemed to be an effort by company leadership to cut their losses, though the explosion of activity and sum of money invested, followed by such a rapid decline and disappearance has earned The Messenger and those involved in its sudden shut-down the reputation for having invested in one of the most spectacular collapses in online news media history.
What I'd like to talk about today is the broader online news media industry, the challenges this industry faces, and how those challenges are shaping what's happening now and what's likely to happen next.
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Explanations for The Messenger's rapid and explosive demise are rampant, but some of the most popular orient around Finkelstein's apparently outdated ideas about how to run a news publication, his reportedly bad attitude and horrible relationships with upper-management and other underlings (alongside his reported homophobia and misogyny, which may have amplified those issues), a lack of effort or capability within the ad sales team, which by some indications barely existed, the wasted money spent on Grid News, which was apparently doing some interesting things, but which was almost immediately shut down, killing its brand equity and losing its talented staff, and the incredible amount of bias Finkelstein injected into the publication, despite his claims that he was aiming for something more in the middle for folks who were sick of ideological bias.
It's also been claimed that talented journalists were forced to work in content-farm conditions, churning out dozens of click-bait calibre stories a day, and that Finkelstein and his cronies were basically accustomed to failing-up their entire lives, and thus were caught off guard when their out of touch, but to them brilliant assessment of what was going wrong in the news media world, today, proved to be not just wrong, but company destroyingly wrong—and that then led to a frantic attempt to merge with the LA Times, which was also spiraling, that was destined to fail, and a series of other smaller decisions that TV editor and culture writer Liam Mathews memorably called "ineptitude bordering on cruelty."
Some post-death assessments, though, have supported—implicitly if not explicitly—some of the excuses provided by Finkelstein himself, pointing at the larger winds of change within the industry and blaming those ebbs, flows, and disruptions for the failure of his legacy-defining project.
Among the cited issues is the shift back and forth between ad-supported news and a reliance on subscriptions and memberships: folks paying for the news with their attention versus folks paying monthly or yearly, basically.
There was a big segue toward an absolutist take on subscription and membership-paid content a few years ago, away from the ad-first revenue model that had dominated until that point for most of modern memory, but even big news entities like The Washington Post, Time, Quartz, The Atlantic, the Chicago Sun-Times, and TechCrunch are revamping their approach on this, following Gannett's lead with its newspapers, beginning in 2022, to reduce the number of stories published behind hard paywalls and to either go fully ad-supported once more, or to use more flexible approaches, optimized for what readers are willing to pay, or allowing for generous, ad-supported access to the majority of what they write, with relatively few pieces retained just for paid supporters.
We're also seeing a big move away from the growth-at-all-costs phase of the economy, which lasted from around 2010 until the pandemic, during which many of these entities shoveled gobs of investor money and cheap debt into expansion efforts and experiments, few of which panned out as they'd hoped, evolving into resilient income streams, and when interest rates were hiked as the pandemic peaked, profitability became the name of the game, and many of these companies were caught flat-footed with a lot of unprofitable assets and no-longer-serviceable expenses—so they started killing off components of their mini-empires and firing swathes of employees.
The threats and opportunities inherent in the emergence of generative artificial intelligence technologies are playing a role here, too, as some news entities will no doubt be able to replace some number of their workers with robo-versions of the same, reducing their headcount and paycheck-related liabilities, while also, in theory at least, bulking up some of their AI-handle-able output.
The degree to which this will be true has yet to be seen, but there have already been some early deals between relevant entities, including one recent deal for which Semafor will be paid by Microsoft and OpenAI to use their generative AI technology to help their journalists curate news via a tool called Signals; which in practice is similar in many ways to the news streams you see all over the web, today, with a big headline, an image, a summary of what happened, and some supplementary links.
The idea is that someday this type of tool might be ubiquitous, each news entity with their own spin on the concept, but these rundowns and curated feeds also serving as a jumping-off point for the rest of a media entity's content: something that could change the way they publish and monetize substantially, if it goes as planned.
All of which is leading to waves of layoffs, the industry experiencing what's been called a bloodbath, and even long-lauded brands like Sports Illustrated and Pitchfork are shutting down or becoming merged or stranded assets, their owners struggling to find a way to keep them solvent until they can figure out a business model that works in whatever this new stage of journalism and online publishing turns out to be.
By one estimate 538 journalists were laid off from US-based news publications in January of 2024, alone, not counting the 300-or-so people laid off from The Messenger, and that's following more than 3,000 in 2023 and more than 16,000 in 2020.
Some entities have announced that further firings are impending this year, and quite of a few of the ones that have remained silent so far are on deathwatch, possibly following in The Messenger's wake, collapsing entirely because they weren't able to figure out a way to keep existing in this new, still-emerging paradigm.
Part of the issue with the membership and ads component of this conversation, which are the two ways most news publications are funded, is that there's an increasing focus on algorithmic search and information-discovery on the internet, which basically means rather than someone going to a news entity they like, perusing their offerings and clicking around to different stories from their main website, they might google it or search on TikTok, bypassing traditional players in this space and going to curators and analysts and influencers, instead, reading the news or hearing a summary of it on these other platforms.
One of the major developing trends here, which could further change everything, possibly forever, is the shift within search engines like google toward becoming AI chatbot hubs instead of portals to other webpages.
Google is seemingly attempting to scrape all the information on the internet so folks can ask their on-search-page chatbots questions, and they can plop the answers and resources right there on the google webpage, rather than redirecting those people elsewhere.
Other search engines like Microsoft's Bing are doing the same, and other options are taking this concept even further, not displaying search results and links at all, but instead making a complete website full of information scraped from other sources every time you search, eliminating the need to go anywhere else, ever.
This dramatically changes the math for everyone who makes a living from ads, because folks no longer have to go to their pages and view their ads, which is what generates revenue for the site, in order to get the information they paid to produce. And it impacts membership and subscription income, as well, because why would folks pay for such things when they can just get it for free via google or some other AI-powered search engine?
What we're seeing now, then, is a partial reflection of what's happening elsewhere throughout the economy, as well, as everything recalibrates toward the interest rate and technological reality in which we find ourselves, today.
But it's also possibly a preview of what comes next, as a variety of additional factors, more focused on media and news media in particular, continue to hamstring the entities running the companies in this space, allowing a few, like the New York Times and The Guardian and quite a lot of right-leaning editorial-focused entities to flourish, but killing off basically everyone else during the transition, leaving us with far fewer, less diverse options, and an industry that doesn't seem to have a reliable business model anymore.
Show Notes
https://www.hollywoodreporter.com/business/business-news/media-in-decline-advertising-layoffs-labor-unrest-1235806888/
https://www.politico.com/news/magazine/2024/01/27/is-the-journalism-death-spasm-finally-here-00138187
https://www.axios.com/2024/01/26/media-layoffs-strikes-journalism-dying
https://airmail.news/issues/2024-1-27/sports-immolated
https://www.wired.com/story/plaintext-hairpin-blog-ai-clickbait-farm/
https://www.bbc.com/future/article/20240126-ai-news-anchors-why-audiences-might-find-digitally-generated-tv-presenters-hard-to-trust
https://www.cnn.com/2024/01/23/media/los-angeles-times-layoffs-strike/index.html
https://www.theringer.com/2024/1/23/24047683/us-media-industry-meltdown-sports-illustrated-layoffs-pitchfork
https://www.vulture.com/article/what-we-owe-pitchfork.html
https://www.adweek.com/media/go-media-portfolio-sale/?utm_source=substack&utm_medium=email
https://archive.ph/SMSDU
https://www.semafor.com/article/02/04/2024/inside-conde-nasts-breakup-with-pitchfork
https://www.adweek.com/media/recurrent-ventures-blackstone/
https://www.therebooting.com/the-media-blame-game/
https://variety.com/2024/tv/news/cnn-philippines-close-down-1235890177/?_hsmi=291911003
https://www.axios.com/2024/01/30/wall-street-journal-washington-layoffs-restructuring
https://www.adweek.com/media/techcrunch-shutters-subscription-layoffs/
https://theatlantic.com/ideas/archive/2024/01/media-layoffs-la-times/677285/
https://www.nytimes.com/2024/01/24/business/media/sports-illustrated-covers.html
https://www.niemanlab.org/2024/01/a-student-newspaper-in-iowa-just-bought-two-local-weeklies/
https://www.forbes.com/sites/bradadgate/2023/12/19/media-companies-have-slashed-over-20000-jobs-in-2023/
https://www.politico.com/news/2024/02/01/journalism-layoffs-00138517
https://pwestpathfinder.com/2022/05/09/the-big-sixs-big-media-game/
https://projects.iq.harvard.edu/futureofmedia/index-us-mainstream-media-ownership
https://www.axios.com/2024/02/03/news-media-business-implosion-philanthropic-wealth
https://www.axios.com/2024/02/06/great-subscription-news-reversal
https://www.nytimes.com/2024/02/06/style/journalism-media-layoffs.html
https://www.mcsweeneys.net/articles/our-digital-media-platform-will-revolutionize-news-and-is-also-shutting-down
https://thehill.com/homenews/media/4440773-news-startup-the-messenger-shutting-down/
https://en.wikipedia.org/wiki/The_Messenger_(website)
https://www.axios.com/2024/01/31/messenger-shut-down-closes-jimmy-finkelstein-fundraising
https://www.nytimes.com/2024/01/31/business/media/messenger-closing-down.html
https://www.theguardian.com/commentisfree/2024/feb/02/the-messenger-startup-collapse-journalism-takeaways
https://www.niemanlab.org/2024/02/ineptitude-bordering-on-cruelty-a-roundup-of-recent-news-on-the-messenger/
News Media Collapse