The importance of the GigaOm crash

Den Howlett Profile picture for user gonzodaddy March 10, 2015
The sudden collapse of GigaOm is a shock to the media system. There are lessons for everyone both inside and outside media.

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At the risk of navel gazing...when news of GigaOm's sudden collapse broke, I mouthed a very loud: HOLY CRAP. I'd met founder Om Malik on several occasions in the late 2000s, recognized and admired his talent and that of some of the retained employees, analysts and researchers.

For me there was a profound sense of sadness in seeing a pioneering media organization suddenly find itself on the wrong end of creditors who had run out of patience. I know that feeling both directly as someone inside a failing business and as a consultant who made his bones sorting out the mess others had created.

I couldn't help but be moved by the expressions of sadness on Facebook and Twitter. It had the same feel as the passing of a loved one. But once the news had sunk in, I quickly realized that this was always on the cards because of two fatal flaws: bad management and a bad business model.

Running out of cash is the only reason businesses fold but the reasons why are often mired in a complex admix of poor management. That can mean anything from failing to respond to changes in market conditions to bad hires to intractable internal dispute to fundamentally flawed business models, being slow to respond to the obvious and a whole host of other gotchas. What happened? We don't know and likely never will for certain but it is reasonable to speculate on what we see in front of us.

In opining about this event, Tom Foremski, who has long been a reliable commenter and friend in the media space pointed out that:

One of the biggest disappointments of the Internet Age is that we still do not have a  value-recovery mechanism  for good quality media content. A click is a click is a click - but it's not — some media content is much better than others. But we have no rewards mechanism to support the creation of more great media content.

We still have no satisfactory business model that can save the media industry from the disruptive economic forces of the web, that continue to hound its shrinking news rooms and dwindling pools of exhausted professionals.

And in this second media apocalypse new media companies are squarely in the path of this disruption.

Foremski makes those remarks in the context of an industry model that has changed very little, despite moving to paperless forms of production and distribution. The model is primarily dependent upon advertising revenue although increasing numbers of media are adding in lucrative event models to bring home the profit. Except that wasn't happening at GigaOm and, from what I hear, isn't happening at re/code, the phoenix that rose out of AllThingsD.

Dinosuar - gapingvoid
It seems that even with a healthy 6.5 million unique visitors per month, a claimed roster of 200 'analysts' and a subscription model that is reported to have been working, the cost of running what was primarily a news organization was crippling GigaOm in the context of available advertising revenue.

If I had to lay any bets it would be that management didn't get the need to close down a newsroom that wasn't adequately contributing to a model we already know does work.

Looking from afar but having sampled some of the subscription services, I'd go further. While the content was generally good enough for average consumption, it often wasn't great enough or carried sufficient gravitas to attract the right kind of readership. That readership is part of the decision making chain and if you're not on it then you're just another piece of digital flotsam producing content with a half life of 24 hours.

Chasing eyeballs is the common mantra and especially among consumer led media. That doesn't work in enterprise - the place where GigaOm really wanted to play. There you have to be on top of your game or you're just another great writer.

Astute business observers have already noticed the decline in reporting quality among the technical titles. Often little more than rehashed press releases or at best skin deep analysis is the order of the day. Those who have jumped ship to the vendor community have often found themselves quickly swallowed up by PR dogma. That leaves the field open to the vendor community with its deep and controlling pockets to seek and create the agendas they want as part of marketing. In that sense, what we see is a logical extension of the status quo and a natural evolution.

But it is an evolution towards extinction. Regardless of the content producer, if all you are really doing is moving along with the tide then of course you're going to be disrupted if that's the new definition of going belly up. But the fundamentals are not changing and in that there lies genuine opportunity to rethink the models that can keep independent media alive and out of the clutches of advertisers yet still provide value back to those who pay for technology through their subscriptions, licensing and maintenance fees.

That's our view at diginomica and has always been the way. But even here I can't begin to count the number of times I've been asked for our advertising rate card or flooded with blatant PR pitches that almost certainly will add nothing to what our readership wants to hear. It is a daily occurrence. It is sometimes depressing.

What does this mean? New media has to build from the ground up and not be beholden to the whims of investors or advertisers. It has to be laser focused. It has to be rigorously disciplined. In short, media has to be a real business and not something that is done to it by managers. It means that while we absolutely partner with vendors, we are 100% clear that this is not a model where influence or pressure can be exerted through the size of the deal on the table.

If all that sounds rigid then it is. And it is a constant battle against a never ending stream of objection and roadblock. But then I've seen enough of success and failure in business to know that genuine passion for a model and vision for an outcome trump pretty much everything, provided the cashflow is carefully managed. In that context, I am very much aligned to the views expressed by John Furrier at SiliconANGLE on Facebook when he says with thinly disguised pride that:

...we created a new model for publishing, live event coverage, and research all using data to create a growing media business without ads or big tent events...We have a great team of people who with no outside funding have accomplished so much when it's not supposed to be like this -esp when everyone else is super funded with VC capital.


What does this mean for the reader who wants useful information? In one sense the collapse of GigaOm provides a clearing of the decks. Not necessarily in a good way. It means there is now a newly available talent pool and it will be interesting to see who gets picked up, where and on what terms. For vendors, it means some can double down on their efforts to create their own agendas although I believe that to be largely delusional since astute buyers see right through that. For folk like us, it is a reinforcement that we chose a model that works albeit always in some state of flux.

In the meantime, I find it ironic that some parts of media find 'value' in dancing on GigaOm's grave. Experience suggests: you're next.

Image credits: all cartoons via Gapingvoid, a continuing inspiration.

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