Micro Media to Media Empire: The Roadmap

Recently, two journalist-entrepreneurs have raised venture funding to take their companies to the next level. One is my dear friend, Om Malik, the other is young Rafat Ali, both excellent reporters who have had good careers as journalists, authors (Om wrote Broadbandits), and now as entrepreneurs.

For years and years, I have listened to journalist friends lament their lack of upside. Brilliant journalists write, and their magazines or newspapers get rich. No stock options. No bonus. Nothing. These guys have had to sit out the entire Internet bubble of the nineties, listening to stock-pop stories of the entrepreneurs and CEOs that they profiled. Even middle managers at large companies who take no risk at all, are compensated at 4-5 times what top journalists make.

Given that backdrop, I am thrilled that Om and Rafat have broken free in this era of eyeballs, and are getting to try their hand at entrepreneurship. Other journalists should follow their example.

[There are, of course, notable exceptions: Mike Moritz was a journalist, and so was Stewart Alsop. Both got out of journalism, to find nirvana in the Venture Capital business. Moritz ranks Number 1 in the Midas list right now, having funded Google,Yahoo, and Paypal, and has sought alternate wealth creation strategies.]

This is not to say that Om or Rafat have a Google in their hands. They have nichy media properties that can get to a few million in revenue at best. Beyond that, either they have to open up entirely new segments, or merge with each other. In fact, a merged media group that includes sites like GigaOm, PaidContent, TechCrunch, BoingBoing, EnGadget, Gizmodo, Battellemedia … could be a very nice portfolio targeting the high income geek segment. The more likely outcome, however, would be that they would each get acquired by a larger media company.

At the moment, all of these sites have independent monetization strategies. In fact, speaking of John Battelle, his Federated Media is in the business of supporting Ad Sales for several independent journalists and writers who have broken the 10,000 Unique Visitors a Month rank. Om Malik used FM previously, but has left, as he has achieved a substantially higher level of traffic, and does not want to pay the 40% commission to Battelle anymore. (I spoke with both John Batelle and Om Malik – they are still working together.) You can read an analysis of what’s going on in the third-party ad-network business in this article written by Jason Calcanis. (My take is that FM will eventually have to build its own portfolio of media properties as well, rather than ONLY supporting others, however, a hybrid business model would work just fine, since the 10-250k unique visitor segment will have a lot of inventory to sell.)

So far, the big VCs are sitting this “funding journalists” business out. However, I would not be surprised if one of them comes forward with a roll-up strategy at some point, and pulls together 10-20 of these micro-capitalized ventures to achieve scale. That would be the way to get to a hundred million with decent profitability, by leveraging Ad Sales force and technology infrastructure (content, community, commerce, social media, …).

Can this business model get to a billion in revenue? Yes, it can. It would, however, require moving out of the Tech Geek niche, and adding inventory in orthogonal segments (Businesses other than Tech, Women, Teens, Hobbies, …), similar to how Time Warner has built its magazine portfolio.

The real question is whether guys like Om and Rafat would have the patience, and when a credible CEO who can manage 20-50 strong egos like their’s emerges from the woodwork, and wants to take the empire-building on.