The flight to niche

Niche has long had a whiff of the pejorative as a nice way of saying “unambitious, not unlike when someone compliments a “lifestyle business.” Yet in different ways, successful companies like Dotdash Meredith, Future, even Barstool are built on niches. Yes, there’s The New York Times, but following the flows of talent and money is a good way of determining where things are heading. Consider:

• Industry Dive had a remarkable exit with a $525 million valuation by aggregating publications in niche B2B areas.
• Substack led the creation of the most vibrant independent publishing ecosystem since the blog days. While much focus gets paid to the most controversial and political of these publishers, the most vibrant parts of Substack are in niches.
• Penn Entertainment bought Barstool for $548 million after seeing how well it can convert its loyal community to the gambling service.
• Recurrent closed a massive $300 million equity round from Blackstone to continue buying up niche lifestyle properties.
• TCG has emerged as the most canny media investors by focusing on niche publishing businesses, most recently bankrolling Mr Beast’s manager with a $100 million fund to scout out individuals with loyal audiences to pair with DTC companies. Many of these will undoubtedly be in niches, along the lines of TCG portfolio company Epic Gardening.

This vibrancy stands in contrast to the crop of digital upstarts from the 2000s that are now appearing a bit dated. It happens to everyone. You seemingly go from feeling like one of the youngest in the room to being one of the oldest. The digital economy moves so quickly that companies that were seen as highly innovative can quickly become passé. In an interview with Puck’s Dylan Byers, Axios CEO Jim VandeHei noted a formula emerging of many successful new publishers by using Punchbowl as an example:

“By the way, the most impressive new startup of the past few years, Punchbowl, offers some valuable lessons. They are proudly narrow in their focus—Congress—and married a smart business thinker (Anna Palmer) with two very wired, workaholic, Capitol Hill experts (Jake Sherman and John Bresnahan) and proudly speak with authenticity and enthusiasm to a laser-focused audience of Hill staff and lobbyists.”

Of course, it helps when your niche audience is rich and powerful. Providing high-quality information to underserved and less affluent people is a far harder challenge.

A niche focus takes a certain humility. It means accepting you cannot be all things to all people, and that most people will never know or care about what you’re doing. I had a throwback moment this week when The Verge’s redesign was discussed. The homepage long ago faded into the background for publishers as they saw the overwhelming amount of their traffic coming from search and social. The Verge is hoping to reclaim the homepage with a Twitter-like feed of nuggets and embeds. It reminded me of Quartz’s various homepage experiments. As The Verge editor-in-chief Nilay Patel put it:

“Publishing across other people’s platforms can only take you so far. And the more we lived with that decision, the more we felt strongly that our own platform should be an antidote to algorithmic news feeds, an editorial product made by actual people with intent and expertise.”

I appreciate the sentiment, but color me skeptical. Gimmicky homepages aren’t going to build loyalty. The behavior of typing in a URL for a site is foreign to many people. I’m not sure if copying social media feeds in 2022 is that innovative. After all, Daily Mail might have the most successful homepage of any publisher. It is, to use a technical term, a total shitshow, but it delivers what Daily Mail fans want. And it likely will remain an exception to the rule.

If anything, the use of the homepage – the starting point for your most loyal readers – has been overtaken by newsletters, which do a better job of establishing habit and loyalty as a push technology. This is akin to how companies with giant investments in real estate are hellbent on making the return to the office happen. It’s about sunk costs. If you invested heavily in your website platform – the CMS was a serious competitive advantage in a previous era – you’re going to cling to it.

The lean media approach fits better in the current climate, as noted by Nic Newman of the Reuters Institute:

"What's different is the way in which disruptors, in particular, have seized upon email because it doesn't require you to have all that expensive keeping your website up to date. It's a much lower cost model to produce two or three emails and I think that really opens up lots of new opportunities, not for mainstream brands, but for alternative brands or even individuals as we've seen with the Substack and Revue phenomenon."

Even big companies will strive to be a collection of niches more than big, bland institutional brands. I’m excited to actually see Semafor’s product after the long windup. I’m fairly certain it will be a collection of niches rather than an all-encompassing publication. After all, you can’t be comprehensive with a fairly small team. But stack enough niches and you can get big, just as Axios and Industry Dive.

Recommendations

I’ve never understood top editors who retire from actually making content. I understand how difficult it is to carve out the time and mind space, but it’s hard to have credibility with your team if you’re not hands on. Nilay Patel made this point in an interview with Ben Thompson: “I very strongly believe that whatever credibility I have as a leader of the organization is that I still make the product with the team, and I’m still in it and I use the software and I get frustrated when the microphones are crackly. I have the experiences my team has and I feel like if you’re going to be a creative leader, you have to create.”

Newsletters have no natural discovery mechanism. From a writer’s perspective, that means asking readers to recommend the newsletter to others. From a reader’s perspective, discovery is random. Kabir Chibber is looking to solve for the discoverability issue with Indie World, a new discovery engine for “micro creators.”

Beehiiv is emerging as a credible alternative to Substack. The email platform raised another $1.6 million to bring its total funding to $4.2 million (I invested a small amount in Beehiiv’s angel round), as it looks to build out an alternative to Substack that supports advertising. A big test for Beehiiv is whether it can develop network effects through its new recommendations feature. Substack’s recommendations feature has been very successful for newsletters.

Digital advertising is in the midst of big change. People in the tech industry tend to believe disruption only comes from tech, but it also comes from other forces, including regulatory bodies. The Federal Trade Commission’s suit against Kochava is an aggressive move that’s clearly intended to rein in the use of location data. The question is whether the FTC can pretty much regulate this category out of existence.

Bootstrapping a business is hard work. Alexis Grant, who started They Got Acquired, a publication focused on small-scale M&A, shares her progress and spending getting They Got Acquired off the ground.

Boxed lunches aren’t going to move many recalcitrant employees back to the office. The New York Times is finding that out, as its efforts to get its staff back into its pricey headquarters – not that RTO is about sunk cost in real estate; it’s clearly only about collaboration – run into widespread opposition. Over 1,300 Times employees signed a pledge not to return.

The RTO skirmishes are part of a broader pushback against the obvious iniquities of work. The NBA is in a pickle over the kid gloves treatment meted out to Phoenix Suns owner Robert Sarver, who has a documented history of racism and mysoginy that would result in dismissal for any employee. But he’s an owner. So accountability is not the same for those at the top. That is a feature, not a bug, of a system that worships takers over makers.

Lots of people like to talk, but the real ones walk the talk. Patagonia founder Yvon Chouinard’s move to transfer his entire ownership of the brand into a trust so profits go to helping arrest climate change likely will set off plenty of debate. Already, I see Twitter threads on “tax efficiency.” I think people like Chouinard and Brunello Cucinelli are challenging because they are truly heterodox in their humanistic approach to capitalism, which flummoxes those with more rigid ideologies that gravitate to the terrible choice of state control or a soulless rentier capitalism that pits takers vs makers. Side note: It’s hilarious that he was “pissed off” to be on the Forbes billionaires list – and that he didn’t want people thinking he was driving around a Lexus. This guy is built different.

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