GigaOM, one of San Francisco’s earliest technology blogs, closed abruptly last week.
A statement on its closure was just casually released March 9, citing an inability to pay Gigaom’s creditors in full: “All operations have ceased. We do not know at this time what the lenders intend to do with the assets or if there will be any future operations using those assets. The company does not currently intend to file bankruptcy.”
GigaOM was founded in 2006 by Om Malik and besides offering news and analysis on emerging technology, the company also presented in the real world through organizing public events. It had more than 6 million fixed monthy readers and a network of more than 70 senior employees. Being one of the leading online tech news sites in the world, you’d think GigaOm was a success story that would complete the life cycle fashionably, but things change quickly in the world of online publishing.
Gigaom might have been badly mismanaged, but its sudden closure is giving digital publishers a moment of pause. The more pressing question they face now is how could this happen to a site that was reaching millions of people every month? If it could happen to Gigaom, how could my online publication be safe?
With a title that was able to build a very strong affinity, it won’t be a surprise to see GigaOM resurrect sooner or later. But for now, it’s vital to consider what Gigaom’s closure says about the business of digital media and what digital publishers could learn from its demise. Emily Bell gives us her two cents on these lessons through her article from The Guardian.
Stop all the clocks, cut off the telephone … it is the end of Gigaom. With many apologies to WH Auden, when the news broke last week that the well-respected technology site Gigaom was closing, it gave the publishing world sudden and unwanted pause. Dogs were hushed, Apple watches were powered down.
Companies close and change all the time, particularly in the perilous world where journalism is your key product. But no one, not even the relatively well-informed writers at Gigaom itself, expected the afternoon call from the management last Monday to result in immediate closure.
Mathew Ingram, Gigaom’s digital media correspondent, summed up the situation well: “We were not setting the world on fire but we were doing good reporting.” Indeed, Gigaom was doing more than that: it was using the reach of its free journalism to sell specialist research and pack conferences in the “freemium” model. It had $8m of venture capital money last year and a new chief executive in January. The fact that the new CEO, Michael Rolnick, was not announced as such should have perhaps set off more alarm bells.
Why the passing of Gigaom rattled the cages of media owners was that it had not obviously been a struggling or failed venture. What it had done though, was apply the rules of its environment, Silicon Valley, to its own financing. This meant not only venture capital money but also debt, from the Silicon Valley bank that secured the loan against the assets of the company. As Ingram noted: “There is a difference between venture capitalists and creditors. When VCs stop investing it’s one thing, but when creditors get nervous they want their money back.”
There were plenty of theories from the rest of the new journalism ecosystem about why the business had failed. Danny Sullivan from Search Engine Land sensibly wrote that his niche business employs 50 people and has grown away from the heat of the VC market, which demands scale and returns. “Being conservative and prepared” had not made his business fashionable but it had made it sustainable.
Over at Fusion, a start-up living under the protection of media behemoths Univision and Disney, Felix Salmon opined that it “sucks to be private”, and suggested that the smaller public stock exchanges are built to help strapped business like Gigaom out of the woods. Over at Slate, Will Oremus wondered if Gigaom’s refusal to lower its ethical standards had in fact dented its ability to cash in on trends like “native advertising”. Nieman fellow Celeste LeCompte, herself a Gigaom employee, suggested that a fatal error was keeping too many of the editorial staff away from the real news about finances.
For every theory and counter theory, there is one underlying truth about Gigaom that every digital publisher recognises. Your business either needs to produce astonishingly high audience growth, or it needs to be protected from it. Not enough people bought the research, not enough people attended conferences. Scale has been set in the publishing world not by historical parameters, but by digital expectation, and journalism, unlike networks, is heavily reliant on cultural context.
As Ingram notes, the site was eight years old and there was a time when its 6 million uniques a month added up to a healthy audience. But when BuzzFeed is weighing in at more than 150 million, it changes both the advertising market and the expectation of investors, even though BuzzFeed and Gigaom are arguably in different markets.
For its eight years of life Gigaom never turned in an annual profit. Many other VC-funded publishers are in a similar position. And what’s more most journalism might never make a profit.