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Handful of digital startups find success in a gloomy media landscape

·4 mins

This year is looking grim for the news business. Facing a set of harsh financial realities - resulting from a mix of news fatigue, an unsteady advertising market, and a precipitous fall in traffic from tech giants - many outlets have been forced to fold or make significant cuts in recent months.

But there are some signs of hope. A small cohort of for-profit digital media companies that sprang up during the pandemic have found success - at least for the moment - by taking the opposite approach of many predecessors, which fatefully relied on huge amounts of investor money to prioritize growth.

The new class of news startups have kept spending down and hired carefully. They are all centered on newsletters covering specific niches with broad appeal. They have attracted top journalists by putting them at the heart of the enterprise, sometimes as part owners in the companies.

These startups exemplify a shift in the conventional wisdom about how to make money in digital publishing. A decade or so ago, many venture capitalists and top media executives thought the then-rising class of digital startups might eventually dominate the industry. The big influx of investor money was put toward chasing the biggest audience possible.

But traffic from social media giants such as Facebook and Twitter dropped, and the economics of digital ads didn’t add up. Predictions of supplanting traditional TV networks or sprawling print empires never came to pass.

The most recent outlet to try this playbook, The Messenger, folded in January, fewer than nine months after it launched. The formula embraced by the new startups is instead sustainable growth built on a mix of revenue sources, including ads, paid subscriptions, and sponsored events. Instead of trying to reach everybody on the internet, they have kept more narrow lanes of coverage and targeted high-income readers.

Some of the other new companies finding early traction include publications on the newsletter platform Substack, such as The Free Press and The Bulwark, which have attracted tens of thousands of paid subscribers. Several worker-owned publications are showing promise. And some older digital outlets have survived by expanding into businesses such as podcasting and cutting costs.

One of the startups, Punchbowl News, started in 2021 by three former Politico reporters, aggressively covers Congress and has become “the hometown newspaper of Capitol Hill in a lot of ways,” said Anna Palmer, a founder and the CEO. Now with 30 employees, Punchbowl publishes three newsletters a day and has added coverage of the financial services industry. It is looking to expand into other policy areas.

Palmer said Punchbowl had been profitable since its first year and generated $20 million in revenue in 2023, though she declined to discuss subscription figures. A person with knowledge of Punchbowl’s finances said that in the first two months of this year, the company had already booked 90% of its annual newsletter sponsorship goal.

Another successful startup is The Ankler, a paid newsletter focused on Hollywood. It has been profitable for more than a year, said the company’s CEO and founder, who previously helmed The Hollywood Reporter and Us Weekly. The Ankler now has seven employees and publishes several newsletters, including Wake Up, a Hollywood news digest.

Semafor is the largest of the group, with about 75 employees and ambitions to provide global news. The company launched in late 2022, with a smaller number of employees than originally planned. The outlet is hiring for an editor in the Middle East and plans to add a newsletter focused on the region. The company generates revenue from advertising and events and has a sponsorship deal with Microsoft.

Of course, nothing in media lasts forever – particularly in the fast-changing digital world. So there’s no guarantee that the early success of these companies will translate into sustained growth.

Many of these startups are also taking a somewhat risky bet on talent. At Puck, the startup that covers topics including entertainment and finance, early hires are “founding partners.” In addition to a salary, they receive bonuses based on the number of people who subscribe to their email newsletters and how many of them stick around. New employees also get a small ownership stake in the company. Puck, which has about 40 employees, now has roughly 40,000 paid subscribers.