Today I will tell a joke about internet news. How can you earn a little money by providing online news? Start with a big fortune.
This old joke may have never been more true than this week when The Messenger went dark, after burning through $50 million of startup funds. The site had not even been operating for a full year. Jimmy Finkelstein, the CEO and founder of The Messenger, promised investors that The Messenger would be able to generate $100 million within its first year, as described by Axios.
The site generated less than $100 Million between May when it went live, and Wednesday, when it closed. The Messenger made maybe $3 million according to different sources.
Maxwell Smart would say, “I missed it by that much.”
Axios dubbed it “one the biggest media fails of the internet age,” but this is just one of two in the past couple of weeks. Sports Illustrated announced in mid-January that the entire staff would be laid off – some immediately and others over the following months as management decided if Sports Illustrated could survive.
Arena Group, the magazine’s publisher of five years, sold the SI brand rights for $110,000,000 to Authentic, a licensing company. Arena Group would pay Authentic a fee every quarter to continue using the SI trademark. The agreement was terminated because they missed the last payment. Arena no longer had a magazine.
SI has spent $110 million over the past five years, on top of all other revenues generated by the magazine.
SI began with a huge fortune, but now it doesn’t own its name.
The kicker is that Messenger, from Axios, represents a lesson we haven’t learned yet: “While it garnered a significant amount of traffic and showed some audience interest it was unable to support its large newsroom with the revenue it generated.”
The Messenger had a top-heavy structure. In the age of the internet, top-heavy business structures are not sustainable. Yet company after company continues to think it can achieve what others cannot. Finkelstein wrote in a memo to his staff that he felt “personally destroyed” by the decision. He had exhausted “every option and tried to raise enough capital to achieve profitability.”
That was not going to happen.