According to Betteridge’s law, the answer to all headline questions is, of course, no. But the last few weeks have seen some stories about digital media organisations that have shaken the firm belief that digital can stand alone profitably with a bright future as print lies spluttering.

In a single week it emerged that Buzzfeed and Vice are going to miss their revenue targets, Mashable was sold for $50 million, and the resistance to the Duopoly is growing as Broadcasters, the FT’s Lionel Barber and the Guardian’s Kath Viner have all waded in.

These events all set the tone of this episode of the Media Voices podcast, dedicated entirely to this question of whether we’re witnessing the beginning of the end for digital media.

People have long been saying ‘print is dead’ but it is becoming clear that digital was dead from the start – at least as a sole revenue source – despite all the hope and all the resources that companies have been pouring into it.

One of the poster boys for digital pureplays, Buzzfeed is set to miss its revenue targets, dashing hopes of an IPO next year. It was aiming for $350 million, but is looking to be at least 15-20% off that figure. By itself it’s not too big an issue, but Vice, another high-profile pureplay is rumoured to be missing its own targets as well. Vice was valued at $5.7 billion when private-equity firm TPG invested $450 million in June this year. The company’s investors are said to be pushing it to rein in costs and achieve profitability next year.

To top it off, Mashable has agreed to sell to Ziff Davis for $50 million, which is 20% of its 2016 valuation of $250 million following a $15 million round of funding last year led by Time Warner’s Turner.

The ‘digital dream’ of easy money streaming in, matching the revenue of the golden days of print is over, argues Peter, but it’s not the death of digital media at all. As a form of media, it’s not going away any time soon, but it won’t be able to cover the burgeoning costs of legacy print structures.

Esther points out that rather than being the death of digital, it should instead be the death of overvaluations, a point that Neil Thackray had made on Twitter. “Buzzfeed are growing, and they’re not just growing, they’re growing really strongly. The failure here is by investors for buying into these ridiculous growth projections. Without mad projections you don’t get the funding, but with them you get investors who ultimately get burned.”

So certainly some of the blame appears to come down on the side of the VC companies and the way they fund these businesses. Peter has very little sympathy for them, but cares deeply about the people who work for these companies, who will be in the firing line. Drawing on an analogy from an article by Josh Marshall, he said that “It’s almost like digital media musical chairs, with 30 people trying to sit in 15 chairs, but Facebook and Google have already taken 10 of them.”

Chris says that the worrying thing is that Buzzfeed are a company who seemed to have everything going for them in the market. “Buzzfeed, whose page revenue per 1000 impressions is high compared to legacy publishers, the fact that they’re going to miss their revenue targets even with having recently opened up their pages to programmatic and banner advertising…doesn’t that tell you everything you need to know about the state of digital advertising?”

Whether it’s the digital advertising aspect that inflated the expectations and revenue targets or other factors that caused such a gap, we won’t know. But it should be a big red flag to any publishers still wholly reliant on advertising revenue.

Of course, digital advertising spend itself is growing, but the revenue growth is going to two places.

“I never blame the Duopoly for anything,” quips Peter. “It’s like blaming a tyrannosaurus rex for ripping your throat out. The problem is, how does digital media, whether that’s Buzzfeed or the little magazine down the road, how do they survive in this ecosystem which is dominated by these people?…In terms of the rules by which we live which is rapacious capitalism, they’re doing exactly what they’re supposed to do.”

It’s an issue which the Guardian’s editor Kath Viner has taken on in a recent speech, saying that the current business model supporting journalism was “collapsing” as Facebook and Google “swallow digital advertising”.

Esther argues that this has happened because Facebook have made digital advertising so easy for small and medium businesses, essentially productising it to anyone and everyone. A recent article from The Drum revealed that the vast majority of Facebook’s 6 million advertisers are defined as small advertisers, for whom advertising on publisher websites and in magazines would usually be completely inaccessible. “It’s idiot-proof,” she comments. “You can put your money in, define your audiences and see results there and then, and that’s what’s been missing.”

So rather than signalling the death of digital, are the revelations this week another sign that scale simply isn’t sustainable? Chris thinks so, and says that this week was the week that digital publishers admitted that they just couldn’t keep up with Facebook.

“This genie that’s out the bottle…hopefully leads people like Kath Viner or whoever to get back to focusing on the readership instead of trying to be Facebook,” Peter said, emphasising that they need to find scalable models for themselves. It’s a point that Skift’s founder and CEO Rafat Ali has written about in ‘The end of scale’ and how futile it is to try and compete with the media giant.

“[Rafat] has got a successful business…but he’s never set out to challenge Facebook. He’s just set out to do what he does best. If the Guardian, the Times…all these other newspapers and magazines can actually get back to focusing on their audience and monetising that, instead of being big enough to attract venture capital investment, then maybe we’ve got a future.”

Esther believes the Economist is one example of a media organisation doing it right. “Rather than using social to drive web traffic, they’ve got a laser focus on turning each person who reads their articles into a paid subscriber,” she says, referring to talks and articles Denise Law has produced over the years about the success of their mixed social strategy.

Few publishers have an audience of 5 million to play with, but Peter sees a common thread between Denise and Rafat’s strategies. “That focus on the audience; what the audience wants, defining the audience, that’s really important….they’re talking about giving people what they want and focusing on the quality of the information.”

“What the Economist always did, and it’s the same thing that The Week always did, they always focused on their readers. They always focused on their mission. The Economist never gave anything away for free. The Week never gave anything away for free, and now they’re winning.”

Chris agrees, and says that organisations need to have the staff there to back those strategies up. “If you have the people there who truly understand what audiences want and how audiences consume media, and don’t rely on this unspoken pact that ‘we can serve you ads if you go on our stuff’, they’re the people who are going to do really well.”

The pivot to video is an unfortunate symptom of this focus on scale, and one which the Media Voices team believe is going to land lots of publishers in hot water in the coming year. “Pivot to video is just banner advertising 2.0” argues Peter.

So what paths are there out of this?

Chris Evans at the Telegraph has talked about blaming Facebook and Google for the lost revenue, but is optimistic that the industry is recovering its confidence because “we are learning to see technology not as a problem but an opportunity”. Publishers like De Correspondent are using the technology to sell to people, and to create content that people want to buy. “They’re making a different thing,” Peter points out. “They’re not taking a print newspaper and shifting it into a digital product…there’s none of that skewmorphism going on. There’s just honest-to-God innovation.”

It’s not all doom and gloom in the numbers either, says Esther. Jason Kint of Digital Content Next says on Twitter that he has seen growth climbing and the best quarter yet for their members in Q3. He attributes it to revenue diversification and advertising’s ‘flight to quality’.

Chris thinks about all the organisations we admire and that are doing well, and draws out a common theme. “They have fingers in all the pies that they can find. They have a finger in print, a finger in digital, a finger in ecommerce, a finger in events…they have a finger in every revenue stream you can think of.”

“The one thing that comes out of a crash is always opportunity,” says Peter, in a rare state of of cheery optimism. “If this really, truly is a crash, and people are waking up to the fact that Facebook and Google aren’t going to save them, and VCs aren’t going to save them, then they’re going to have to save themselves.”

“How are they going to do that? By being what they truly are….they’re not pivoting to video just because Facebook wants them to.”

Esther Kezia Thorpe

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