Re/code's Kara Swisher: I give up.

Photographer: Marla Aufmuth/Getty Images

Re/code's Sale and Life After Advertising

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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After the tech news site Re/code sold itself to Vox Media, reports in Fortune and the New York Post noted that the deal was necessary because it’s just too darned hard to build a media company these days. Months before the Re/code sale, the long-running tech site Gigaom had shuttered, too.

Re/code was founded by Kara Swisher and Walt Mossberg, former Wall Street Journal writers who are revered in tech circles. The website launched amid the current tech boom, which has created a huge appetite for the breaking stories, scoops and product reviews that Re/code provides. But after about a year and a half, it only averaged 1.5 million unique visitors a month, according to Comscore. That’s not a big enough audience to satisfy advertisers.

The media business is tough. It’s hard to build the audience needed to produce lots of revenue. To get page views, a startup needs a steady stream of content. And that usually means writers must be hired and overhead bills paid well before a media company knows if the advertisers will come. Venture money has lately financed the growth phase, but success is still far off, even for large websites with broad audiences like Vox and Mashable.

Yet amid the worry about the media landscape, there are bright spots -- websites and small publishing companies that make money and produce content that readers love. I’m talking about the often overlooked subscription news business, which includes newer entrants like the Information and Stratechery, as well as older, revered publications like Grant’s Interest Rate Observer and the High-Tech Strategist.

You should know that I’m more than a little biased: I worked at the Information, which  I joined in 2013, before it even launched, largely because I thought the business model was smart. I’d previously worked at Time Inc. during a few of its digital transformations and at CNN/Money, so I knew firsthand that the free-content business was tough. I knew that magazines and newspapers weren’t truly subscription businesses because advertising revenue was paramount. So I saw no harm in trying out a company whose model relied on subscriptions to truly support the business.

What I learned at the Information is that people are willing to pay good money -- in that case, $399 a year -- for news they need and like. None of them took venture capital to get off the ground. Stratechery -- a one-man show by former Microsoft employee, Ben Thompson -- hit 3,000 subscribers in only 13 months. At $100 a year, the digital newsletter provides Thompson a higher salary than that of most editors or reporters I know; and he works for himself, putting out high-quality essays and analyses on the business of technology. (Another bias alert, I’m a Stratechery subscriber, too.)

When I was at the Information, we were known as a website for elites, and lots of Silicon Valley boldface names subscribed. Founder Jessica Lessin doesn’t think of the readership as elite, but as “defined.” The readers want the vast tech world explained. They want to know what's important and what’s noise.

Knowing the audience and what it wants helps keep the model going. “Subscription businesses live or die based on delivering content so valuable to customers that they are willing to pay something for it,” Lessin wrote in an email. “Subscription businesses also know and serve a core group of customers.”

Thompson wanted to avoid the scale and high overhead necessary to run an ad-based business. “At $100, my revenue per user is really high,” he says. By comparison, the research firm eMarketer says that the average CPM -- or the cost-per-thousand viewers that advertisers pay -- was about $11 in the first quarter of 2014, and this masks the much lower rates that display ads command. Thompson says: “Instead of getting lots of customers, I maximize the revenue from the customers who really like what I do.”

Jim Grant, the founder of Wall Street newsletter Grant’s Interest Rate Observer, and Fred Hickey, the founder of tech investing newsletter High-Tech Strategist, say subscription was really the only business model when they started their publications decades ago. There was no Internet advertising, or even an Internet as we know it today.

Both men tell me that not having advertisers gives them the freedom to publish independent viewpoints on stocks, the markets and corporations. They’re both contrarian thinkers who are quick to cry bubble. Calling a market top is not the kind of thinking that endears one to big financial advertisers like Schwab and Fidelity.

Grant’s subscriber base is relatively small, though his readers have outsized importance in their industry. A subscription starts at $1,175 a year for 24 issues and his subscribers include hedge-fund managers, Wall Street executives and other finance mavens. His twice-annual conferences are graced by the likes of Vanguard founder John Bogle, Blackstone’s Stephen Schwarzman and the well-regarded short seller David Einhorn.

Grant, a former Barron’s writer, says he once dreamed of reaching a broader audience, but couldn’t make it work. “We strove for the mass market but settled for an elite one,” he says. “It’s a great way to get to practice the craft, or the racket, of journalism.”

Grant is a good example of why people wonder if businesses that run on subscriptions alone can really scale. Stratechery's Thompson says he’d love to reach a mass market,  as many non-paywall publications do, even though that’s not realistic right now.

It might be hard for any one site to get huge, but Thompson believes there are lots of niche interests that are underserved by mass media publications and that people would subscribe to. “People won’t subscribe to 10 sites," Thompson says, "but the number of people with access to the Internet is huge and lots of niches are underserved right now because they’re not broad enough for advertisers to care about.”

I don’t mean to imply that the media business is easy. It’s obviously tough for publications to make money. But it’s good to remember that advertising isn't the only model. And in some cases, it's not even the best one.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Paula Dwyer at