January was a brutal month for journalists, globally from death and locally from layoffs. The latter hit home this week when TechCrunch announced the layoffs of several former colleagues I worked with as managing editor. The site also announced the shutdown of its subscription service TechCrunch+, which I as founding editor and others launched as Extra Crunch back around Valentine’s Day 2019 with a massive feature on creator subscription platform Patreon (an intentional irony!)
Journalists and media critics have been shrill about the deleterious state of media economics, and that alarm is deserved: quality journalism is extraordinarily hard to do in the best of circumstances, and the business models that undergird beat, investigative and analytical reporting are no longer viable. Subscription is the only path forward, and no news outlet can survive for long when it fails.
What’s striking about TechCrunch is its longevity: it’s become the rare survivor of the graveyard of digital media, surviving successive waves of rapid change since its founding in 2005, before the launch of the iPhone and just a year after Mark Zuckerberg debuted Facebook. Its business secret was simple, but hard to replicate and equally hard to scale: its ad space was much more valuable than other digital media companies, and it had a terrific and consistent events business.
On ads, TechCrunch became a key battleground between tech companies for the hearts and minds of its audience of early-stage founders, who might accidentally be locking in purchasing decisions worth hundreds of millions of dollars as they built their startups. Profitably for TechCrunch, its ads were bought to lock out competitors in massive, multi-billion dollar markets. TechCrunch’s beat coverage is on new startups disrupting the old incumbents — and those incumbents wanted to be sure that no one forgot they were still in the fight.
That gave TechCrunch key leverage on its ad space that few other digital media companies could match. Against a culture-focused site like HuffPost (a sister brand for awhile via AOL, then Oath and then Verizon Media), TechCrunch’s ad space could be five to ten times more valuable on a CPM basis (the standard ad metric of 1,000 page views).
Matching those revenues was a structural advantage in terms of traffic. As one of the most venerable sites covering tech on the web, major announcements from Elon Musk, Tesla, Apple, Facebook and other big technology companies drove heavy traffic to TechCrunch. Most of this was relayed via Google Search and Google News, and at times, more than 90% of the site’s traffic came from just those two sources. Critically, this coverage was eminently affordable. Writing up an article on the latest ravings of Elon Musk might take about 15 minutes (there usually wasn’t that much to say other than his statement, after all), but that one article could drive 100,000 page views or more. That was the secret treasure that funded the real in-depth reporting: cheap coverage of a big tech company coupled with the lucre of comparatively extraordinary ad revenue.
For the business side, TechCrunch’s focus on startups required second-order thinking. Startup-related articles got a fraction of the readership of an article on Apple, since no one is searching on Google for the name of a startup they have never heard of before. So why bother? Indeed, many of TechCrunch’s now-dead competitors didn’t bother. The key insight though is that these articles attract the startup CEOs and founders, and it is precisely this demographic that is so valuable for advertisers. Startup coverage was a form of service journalism, and one that happened to create a perpetual revenue machine.
The other half of TechCrunch’s business is events, and namely Disrupt. Disrupt attracts around 10,000 attendees per year, and the fruits of that service journalism on startups kept on giving. Disrupt offered Founder Pass packages that were quite affordable even for the youngest companies, while charging eye-watering sums for business executives from legacy technology companies. The economic price discrimination is and was brilliant: make sure the “cool kids” are there, and then charge the so-called “grown-ups” to be around them.
TechCrunch’s events were more profitable compared to the industry norm since most of them were local to San Francisco, none of the speakers were paid, panels could be constructed by accomplished beat writers who already knew who should be there (greatly reducing the number of event planners required), and the site itself became the best advertising medium to sell tickets and sponsorships, vastly reducing marketing costs.
The unique economics for TechCrunch around advertising and events funded the organization well, but they have an obvious flaw: they don’t really scale. There isn’t an infinite universe of big tech companies or venture-backed bubble companies willing to spend lavish sums on ad space. As for events, they rarely get better with ever more attendees, and it’s hard to replicate the scarce thrill of a flagship event multiple times per year. If TechCrunch’s business leverage was graphed as a parabola, it was holding steading at the optimal maximum for years — not growing, not shrinking, but as sustainable as a digital media company can be this century.
Extra Crunch as a subscription offering was meant to be the stabilizing third leg of the revenue tripod. Ads and events are both heavily influenced by global macro factors, but subscription offered a route to more predictable long-term revenues. When we were conceiving the new product in late 2017 and early 2018, the idea was simple: offer compelling analysis of successful startups from both business and product lenses. That’s where the idea of an “EC-1” came from (named for the SEC Form S-1 filings for IPOs). TechCrunch would cover the founding stories of companies, but also the intricacies of their revenue models and unique product eccentricities, such as how Patreon handles creator relations or how StockX built an ecommerce authentication team by hiring sneakerheads who obsessively knew every detail of every product on the marketplace.
These days, newsletter writers like Packy McCormick with Not Boring and Mario Gabriele with The Generalist have charged ahead with that thesis. But they were non-existent at the time, since Substack had just launched in the past year with Bill Bishop of Sinocism and was still finding its footing. We ultimately covered companies as diverse as Expensify, Niantic, Nuro, Tonal, NS1, RapidSOS, Klaviyo and Duolingo.
For digital media writers, these profiles were relatively plum assignments. Roughly 10,000 words, $10,000 or a dollar per word for freelancers, a travel budget or use of the corporate jet (okay, I’m kidding on the jet) plus enough time to do the feature right coupled with a full slate of editors to help bring these stories to life. TechCrunch had all the ingredients: the money, the audience, the editors plus a massively sprawling horde of newly-christened startup unicorns to go profile. My target list had hundreds of potential companies on it.
What was missing, in the end, were the writers themselves, a sociological puzzle that took about two years for me to understand. Thanks to digital media economics the past two decades, business journalism had been wrecked by downsizing, limiting or outright ending the careers of thousands of reporters. A small proportion of them still thrived at major financial publications like Bloomberg or The Wall Street Journal or The Financial Times, but they were obviously unavailable to write for TechCrunch.
What I came to discover is that each freelancer would be a case study of an industry in turmoil. There was the one who used to write magazine cover stories who demanded a payment of $100,000 to write a feature (a sum so wildly out of sync with the present economics of the media industry that I questioned how he could be a business reporter at all). There was the one who was so overwhelmed by the daunting prospect of writing an in-depth feature, he checked himself into a psychiatric hospital for treatment with no notice. Then there were those who struggled to coherently weave a lengthy profile together, since they were so used to churning out clickbait articles, any story above 500 words proved a narrative impossibility.
TechCrunch reporters and editors filled in the talent void as did a small coterie of freelancer gems, but it was impossible to repeatedly take the sole writer of, say, hardware off that beat for several weeks to write about the future of agtech at Bowery Farms. Remember, that Apple traffic is what underwrites the whole site. So Extra Crunch trundled along, growing from zero users to a base of tens of thousands of subscribers with decent growth but relatively high comparative churn.
The most important challenge of modern media is balancing an audience’s desire for certain types of stories with a human reporter’s ability to deliver them. Unlike a tech company building an app or a cloud service, this is not an easy product to iterate. If you want to improve coverage of the automotive industry, an editor must seek out and develop a reporter who loves cars and understands how they get manufactured; what points of competition exist between companies; what auto economics are and how they are changing; and what disruption might look like for the industry in the years ahead. Passion plus perspective plus precision is asking a lot of one person or even a small band of reporters.
Even if you can find that talent, then the challenge becomes one of compensation. If someone understands the venture industry well enough, then they can almost certainly get a job at a VC firm and make a multiple of their media salary. Reporting on cloud infrastructure? They can triple their salary working at Amazon Web Services, without the daily doom of media layoffs looming over their overworked typing hands.
TechCrunch+ eventually succumbed to its middling status: essential for the health of the business but unable to grow enough, just enough writers to keep its editorial calendar sustained with analysis but never enough to allow the editorial to truly flourish. It was a profoundly frustrating place for me, just as it was for Eric Eldon after me and Alex Wilhelm after him.
TechCrunch is refocusing on its core reporting, and that’s profoundly necessary. It will likely relaunch subscription again in the future when the time is right. But a media company that cannot convince enough readers to pay for it has a very limited time horizon in today’s world. Subscription offers a path to true sustainability by cutting every aggregator and middleman out of the equation and connecting an audience straight to a newsroom. Readers become sources, and vice versa. Free, as we have learned the past month, the past year, and the past decades in media, is not free — not for the writers and ultimately, not for the readers either.
“Securities” Podcast: The stove hasn’t changed in decades. It’s time to upgrade.
Some of the most important inventions are the ones we barely think about, having become ambient in our daily lives. My most-read article on TechCrunch was an interview with an author about the history of air conditioning, which happened to be invented just a few blocks from my home in Brooklyn. Home appliances have transformed human life, and yet, their invention often only dates back a few decades.
Sam D’Amico at Lux-backed Impulse Labs wants to push home appliances a full generation forward after decades of stagnant innovation. Imagine boiling water in seconds instead of minutes. Imagine new interfaces that actually help users instead of annoy them like most falsely-named “smart” appliances. Plus, imagine decentralizing power distribution at home and across a local neighborhood to boot. That’s Sam’s vision and it’s coming to a home near you (and hopefully even your own).
Sam and I talk about hardware product design, consumer marketing, what it takes to build the right supply chains as well as standing out during the chaos that is CES in Las Vegas. Take a listen.
🔊 The stove hasn’t changed in decades. It’s time to upgrade.
Lux Recommends
- For a wonderfully romantic view of journalism, Wes Anderson’s The French Dispatch remains an all-time favorite of mine. The movie is structured as a magazine, a series of feature pieces connected together by its own table of contents. Brilliantly conceived, edited and acted, it’s a rare salve for a media economy that’s blistering in its negativity.
- Our scientist-in-residence Sam Arbesman really enjoined Brian Klass’s brand-new book Fluke: Chance, Chaos, and Why Everything We Do Matters. It offers excellent connections between chaos and the order of society, and how outliers transform our patterns of life and alter the future.
- Deena Shakir loved Katherine J. Wu’s essay in The Atlantic on “The Most Mysterious Cells in Our Bodies Don’t Belong to Us” “These cross-generational transfers are bidirectional. As fetal cells cross the placenta into maternal tissues, a small number of maternal cells migrate into fetal tissues, where they can persist into adulthood. Genetic swaps, then, might occur several times throughout a life.”
- Mark Leonard at China Books Review has a great overview of how economists in China have become isolated in policymaking in the pursuit of national security. “One economist explained the national mood to me by means of an allegory. ‘Imagine a tale of two people,’ he said. ‘One is in prison, but he knows that everyone is doing all they can to get him released. The other is free, but convinced he may be arrested at any moment. Which one do you think is happier?’”
- Finally, Sam has a trio of fun oddities from across the web. Neal has put together “Infinite Craft,” which simulates an infinite tech tree from the four basic elements of water, fire, wind and earth. Thomas Steeles writes on the origins and misuses of Comic Sans. And finally, Lauren Ramlan, an MIT grad student (of course), has implemented the classic video game Doom in E. coli bacteria. Now that is synthetic media in action.
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.
