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Mashable’s $13.3M funding adds fuel to the tech-media fire

Above: Handsome devil Pete Cashmore is the founder of Mashable.

Image Credit: Mashable

Suddenly, tech media is hot again.

Tech and social media blog Mashable picked up a $13.3 million round of funding this week, the first outside funding the company has taken in its 10-year career. The funding was led by Updata Partners. That comes on the heels of the relaunch of Walt Mossberg and Kara Swisher’s website, formerly known as All Things D, and now dubbed Re/code.

Re/code, now independent from the Wall Street Journal, has taken a significant investment from two outside investors: NBC Universal and Terry Semel’s Windsor Media. Fortune’s Dan Primack reported that each company took “somewhere south of 25 percent” of the new company, Revere Media, for an undisclosed amount.

Meanwhile, the Wall Street Journal is aggressively hiring (and pouring money into) its own replacement for All Things D, a new site called WSJD. Vox Media, the parent company of tech site The Verge, raised $40 million last fall. Some tech media startups, like The Information, are even launching without any apparent funding and are instead relying on readers to pay for their quality content.

And in the background, billionaires are pumping money into general-interest news: EBay founder Pierre Omidyar has promised up to $250 million to build First Look Media (with star reporter Glenn Greenwald at the helm), and Amazon founder Jeff Bezos plunked down $250 million of his own to buy the Washington Post last year.

As a longtime tech journalist, all this is a bit surprising. I haven’t seen tech media this flush since the brief moment of insanity when Conde Nast was funding Portfolio magazine richly enough that the magazine felt comfortable spending $30,000 to hire an elephant for a photo shoot. Before that, you have to go back to the dot-com boom and the Industry Standard’s over-the-top rooftop parties to see irrational exuberance comparable to this.

In the interest of full disclosure, yes, VentureBeat competes with many of these sites. We also see many of the same things happening in the media landscape that they and their investors do: rising ad revenues, growing traffic, an increasing savvy among readers who are seeking more than mere clickbait headlines and who want real, reliable information and context. These trends are benefiting VentureBeat as well.

So it’s encouraging that investors are as optimistic about this business as we are. What I wonder is how many of these tech media companies the market can support, particularly when the advertising market contracts again — as it inevitably will.

Mashable, for instance, has shown a masterful ability to capitalize on social media and to expand beyond tech to become a much broader-interest site. It has embraced “native advertising,” a form of embedded, sponsored posts that look like regular editorial, with great success.

But at the end of the day, its business model is almost exactly the same as that of any other media business: Assemble an audience and then sell those eyeballs to advertisers.

Giving the constant downward pressure on the cost of advertising — thanks to the increasing volume of content online and the sophistication of advertising marketplaces — it seems publishers will, eventually, need to find a new business model. So far, none of us have come up with anything radically different from what has gone before.

That’s no obstacle to building a solid, sustainable, and even growing business. But I’d think it would give investors who are looking for “10x returns” some pause.

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More information:

Mashable (Mashable Inc.) is an American news website and Internet news blog founded by Pete Cashmore. The website's primary focus is social media news, but also covers news and developments in mobile, entertainment, online video, busin... read more »

Vox (formerly known as SB Nation) is one of the country's largest and fastest growing online publishers. Based in Washington DC, Vox owns and operates sites in distinct vertical categories, consumer technology and sports. The Verge is ... read more »

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