This has been a fact for more than two decades. It is driven by the extremely low costs of entry in digital publishing which makes it very difficult to set up the kinds of de facto monopolies that existed for big city newspapers for most of the second half of the 20th century.
Then came the platform monopolies: Google, Facebook and a few others. Over the last five years or so but accelerating rapidly in the last 24 months, they’ve gobbled up almost all of the growth in advertising revenue and begun to engross a substantial amount of the existing advertising revenue as well.
Let’s try a very simple visualization of what I’m describing. Remember, there are too many publications relative to advertising revenue. So let’s imagine there are 30 publications and 25 revenue seats. The publications fight like hell to secure one of the seats. Then the platform monopolies came along and sat down in maybe 5 or 10 of the 25 seats. You can see the problem. The competition of 30 publications competing for 15 seats gets insane. A bunch of the publications are going to die or be forced to find another way to fund themselves.
Now, here’s the too little discussed part of the equation. A huge, huge, huge amount of digital media is funded by venture capital. That’s not just to say they had investors at the start but in effect a key revenue stream of many digital publications has been on-going infusions of new investment.
Much of that investment has been premised on the assumption that scale – being huge – would allow publications to create stable and defensible business models. There are a lot of moving parts to the strategies. But it essentially comes down to this idea: get big enough and you can solve the chronic problem of over-supply of publications in your favor through sales at volume and being able to command stable, premium advertising rates. But that hasn’t happened. Just as one fact point, The Wall Street Journal reported today that Buzzfeed is going to miss its revenue target this year by as much as 20%. That’s a lot.