Can New Publishing Startups Succeed?

Can New Publishing Startups Succeed?

When choosing new ventures, entrepreneurs have more choices than ever. The software revolution has opened up avenues that we couldn’t fathom twenty years ago. Entrepreneurs can start with something as simple as a smartphone app, the development of which they can outsource to any number of programmers. They can use software to build service businesses as well. The choices are seemingly endless.

wordpress web publishing tool

One industry that software has railroaded is publishing. Traditional publications have scrambled to keep up with the pace of innovation. New publishers have scurried to find ways to monetize their new enterprises. Both have seen high degrees of failure.

If both new school and old school are failing, we can raise the question of whether publishing is a viable avenue for aspiring entrepreneurs.

Saturated markets

Last week the internet publishing sector saw a bit of a hoopla when Bryan Goldberg, founder of Bleacher Report, announced his latest venture, a women-centric publication called Bustle. In his opening remarks, Goldberg talked about the great opportunity in the women’s publication space, which caused quite the stir. What Goldberg failed to mention was the vast number of publications already existing in the space. (He later apologized for snubbing these competitors.)

bustle

The revelation from the reaction to Goldberg was that there are indeed a huge number of lifestyle blog that attraction millions upon millions of readers. How was Goldberg’s new venture going to compete in that space? To take his press statements at face value, the answer seems to be “just because.” He cited traditional publications like Vogue, noting their dismal traffic numbers. What he didn’t mention was that Vogue has such a rabid offline readership that it needn’t spend time and money competing in the saturated online marketplace.

The rich get richer

In order to make money, online publications must not only attract a large quantity of readers, but it also must build loyalty among its highest quality readers. The former is possible, thanks to spreading links via aggregation and social media. The latter is far more difficult, specifically because of the former. News spreads quickly. Even if you have something before everyone else, more popular outlets will pick up the story and likely drive far more traffic.

techcrunch

This is readily apparent in the technology sector. There are hundreds of sites that offer high-quality content, and almost all of them provide cell phone news. Yet even if a smaller site breaks a story, larger outlets such as TechCrunch, Engadget, and The Verge will pick it up and run with it. Since they are more prominent names, links and traffic will funnel in their directions. The original source might get cited here and there, but the lion’s share of the benefit goes to larger, more established names.

More than just publishing

It is not enough to write and publish quality content. In order to realize success on the web you have to spread your message far and wide. As you can see from the points above, that is difficult when the game is rigged towards a small number of established players. It becomes even more difficult, because the channels for spreading your content are more crowded than ever.

hubspot google plus page

Twitter, for instance, provides a great platform for sharing content. Yet you have to do far more than hook up your RSS feed to Twitter. Anyone can do that, so no one pays attention to it. You must be engaging not only in your content, but also in your social media participation. That is, Twitter, Facebook, and Google+ (perhaps especially Google+) becomes publishing platforms of their own. So not only do you have to maintain your content publishing, but you have to take on additional responsibilities to fulfill social media publishing requirements.

Few monetization options

Finally we get to the crux of the issue: money. When markets becomes saturated, supply far outstrips demand. For online publishers, this means a lack of quality ad opportunities. Advertising departments have realized a far cheaper ad environment on the internet than they did in print media, and have taken great advantage. They can pick and choose where to make their big spends, leaving scraps for the rest.

entrepreneur media kit

Further complicating matters is the built-in middleman, the ad servers. When you run ads through Google AdSense, Google takes a huge fraction of each transaction, leaving the publisher with even less. Even if you find a less-saturated niche, you’ll have trouble making money because of this small revenue stream.

In order to succeed, digital publishing companies need dedicated sales teams. Yet if they’re not big enough, not even an experienced sales team can attract the kind of advertisers that will turn the company profitable. Advertisers want their messages concentrated on the largest mainstream properties, not strewn among niches. They’ll use that as part of their strategy, but it won’t be a large portion. That creates enormous problems for digital publications.

Expenses galore

How much do you think it costs to run a digital publication? Well, you first have to pay for server space. If you’re running a high quality publication that gets the kind of traffic necessary to succeed, you’ll pay thousands per month for server space. You’ll probably need to hire an IT staff to handle those servers, even if you outsource them (and even one system administrator is costly).

Then you need a content staff. That means hiring competent writers on a full-time basis. Cheaping out (as Goldberg allegedly has done with Bustle, offering $100 per day in a job listing) will lead to low-quality candidates who will fail to help you distinguish the publication. On top of that you need copy editors, because no one likes a slob. A successful publication will also have assignment and development editors to help craft the kind of content people actually want to read (and not just browse on their lunch breaks and when they’re bored).

operating expenses
photo credit: Mr. T in DC via photopin cc

Oh, and if you’re selling ads you’ll need an ads staff that you can’t just pay commission. At the beginning you’re going to lose money on them, because it takes time to get established and gain the credibility necessary to attract big advertisers. Eventually they’ll pay for themselves, but at first you’ll eat much of their salary as they cultivate leads and connections.

As you can see, it is exceedingly difficult to enter the digital publishing industry and emerge successful and profitable. The game is already rigged towards established players. To create a new player you need oodles of venture backing, difficult to obtain in such a saturated market. The only reason Bustle received its venture funding is because of Goldberg’s experience with Bleacher Report. If Bustle fails, and I’d bet money that it will fall far short of the hype, future digital publications will find it even more difficult to obtain that kind of funding.

There is a future in which digital publications can succeed. As of right now, the environment is not ripe. Perhaps entrepreneurs can succeed creating tools that make digital publishing more efficient and effective. For aspiring founders, this might be the best path to the publication industry. But for now the risks are too great, the bet too long, to justify spending your time, money, and effort.

Joe Pawlikowski

Joe Pawlikowski owns and has worked for a number of startups in the last seven years. He keeps his thoughts on marketing and blogging at JoePawl.com.