Here’s What I’ve Learnt from GigaOm Sudden Death

Om Malik (Middle) and Michael Arrington (Right) are founding father of tech blogs.

I founded a pretty famous media startup in Indonesia with bunch of friends. We started to get traction, millions of pageviews, revenue starting to come. Simply said, things are getting rosy. Everything’s fine and we are on the way to become media millionaire…

Until that bomb drops.

GigaOm, one of earliest tech blogs in the world, declared their bankruptcy. Although their world-class reports, superior editorial team, and love from super fans (including me), their 4 to 8 million unique visitors per month simply can’t pay the bills. Creditor decided to take over the brand and Om Malik wrote this heart-dropping post.

Data from SimilarWeb.com

I read so many posts and analyses from industry leader and their former employees about why GigaOm failed the expectation. Most of them blame high burn rate in research department. Others said that it because GigaOm take more money than it should be. Some said GigaOm growth is not good enough for 10x return VC-type investment.

But it leads to one conclusion: GigaOm is totally screwed.

After few hours analyzing the death and liters of tears, I come up with conclusion. There are several things that media entrepreneur should learn from GigaOm saga. So if you are budding media entrepreneur or just love to learn startup thingy, you should take a note on these few things.

Be super niche or super mass online media

In media business, you should think about what you want to be. While headline-wizard media such as Vox, BuzzFeed, Gawker, and Vice attract hundreds millions eyeballs around the world, there are smaller site but sustainable niche media such as Search Engine Land, Skift, and The Information try to take different approach. However, if you can’t decide which one you want to be, Matthew Ingram, GigaOm former editorial team, put it best:

There’s a sort of barbell effect: If you are super small and super focused and super niche you can succeed, arguably. And if you’re super huge and mass and gigantic and growing quickly, you can succeed. But in the middle, is death. The valley of death. So arguably we got caught in that valley of death.

In short, if you can’t compete with gigantic venture-funded media such as Vox, Gawker, and Vice, nor create better headline than BuzzFeed, you should think about creating niche media. Anything between mass media and super good niche media are destined to dead.

In GigaOm case, they simply fall in Ingram’s “Valley of Death”. Their less than 10 million visitors can’t compete with BuzzFeed 150 million monthly unique visitors. They are definitely can’t compete in mass media sphere. However, their GigaOm pro, to serve the niche market, are too costly and can’t compete in the niche too.

Taking too much VC money

VC funding is cool, awesome, and you will look like internet superstar if you secure funding from famous Venture Capital firm. Tech media write VC-backed companies as they are the real winner…

They are not.

VC funding is just a tool to help you reach your objective faster, likely, 10 times faster. However, if you can’t cope with typical 10 times result your VC asks, you better not to take VC money. What if you don’t even have product-market fit? Definitely, taking VC money is the quickest way to kill you and your employees.

According to Peter Kafka from ReCode, GigaOm had raised around $40 million in equity and debt. Then, from that number, Michael Wolf said that GigaOm had raised around $8 million from VC. If we put 10 times return most VC expected, now they are suddenly looking at a $80 million plus exit. Pretty much impossible due to TechCrunch acquisition by AOL between $25 and $40 million, with at least 10 times traffic than GigaOm.

Moral lesson: just take “enough” VC money to support your “achievable growth”

Scale too fast without dependable revenue

In its heyday, GigaOm employed 85 staffs. Before the D-Day, they still had around 70 people. There were no significant layoffs. However, if you compare it with Third Door Media, the owner of niche site Search Engine Land, they only employ 50 people to date. Due to nature of niche market, Third Door Media generated more revenue and pretty much the same traffic with much less people.

GigaOm main website and event are profitable. However, it’s not enough to support their 10 times growth target. Thus, they created the third leg, research. Although GigaOm research department booked $8 million in business last year, company said it wasn’t profitable.

Simply said, GigaOm scales too fast, without having enough revenue to support the growth naturally.

Be a niche or powerful mass media, don’t take too much VC money, and don’t scale too fast are main things we learn from GigaOm. But there is one final lesson for us:

Everyone could die… like anytime

nobody thought Om Malik can’t save GigaOm

Well, to be frank, no one could predict GigaOm meet their ends this year. They have super fans, super editorial team, yet can’t pay the bills.

This should be warning for all of us. Please share this lesson to your entrepreneur friends. Good luck budding entrepreneur!