Note: This post is a followup to 'The success paradox'. Read the first chapter here.
The success paradox: The bigger the success, the harder it is to parse which inputs were most vital. Attempts to repeat success often lead to emphasizing the wrong factors.
I know the success paradox well. I’ve fallen prey to its intoxicating effects. After building Bleacher Report to a massively positive outcome, I set out to repeat the cycle. I possessed a playbook to building a dynamic and profitable digital media company, and guiding it to an exit. With the added wisdom provided by age and experience, I believed I could avoid the wrong turns of the B/R experience. I could eliminate waste and achieve a more efficient outcome. How wrong I was.
In 2015, I launched Inverse with a full head of confidence. My founding team included a few brilliant engineers from my Bleacher Report days along with a creative group of young editors. I raised a seed round from some of the best investors in digital media. They all bought into my vision. Inverse would follow the same game plan that led to Bleacher Report’s success. Our victory would surely follow.
Five years later, Inverse has matched and even surpassed Bleacher Report on many levels. Creatively and journalistically, Inverse excels. We built a CMS and editorial tools on par or better than B/R, with a far smaller engineering team. And Inverse's audience has followed a similar trajectory to B/R, in a more challenging growth environment.
But Inverse never matched the commercial success of Bleacher Report. To be blunt, it never came close. The question is: why? If we followed the Bleacher playbook and focused on the most crucial elements, how did we miss the mark? The answer is we focused on the wrong things, while overlooking some understated factors. The answer is the success paradox.
Take programmatic advertising, for example.
No please, take it. Publishers, engineers, and users nearly universally hate programmatic ads. The ads are low quality, they slow down site load times and detract from user experience. All for the promise of cost-per-mille ad rates far below direct sold ads.
It’s no wonder I felt fully justified in eschewing programmatic when I launched Inverse. After all, this category of ads was responsible for only a small fraction of Bleacher Report’s revenue. The real driver of revenue growth was our amazing direct sales effort. By keeping programmatic ads off the site, I put users first and focused my team’s efforts on building an ideal environment for direct sold ads.
But in deciding that, I had missed the forest for the trees.
In the early years before B/R had a direct sales team, programmatic ads provided a crucial floor of revenue that extended our runway. As B/R scaled direct revenue to eight figures per year, programmatic grew as well but made up a smaller share of the pie. But the few million dollars generated from programmatic in the year of our acquisition equaled our profit margin. Without programmatic, B/R would have continued to lose money. The acquisition may never have happened.
There was a kicker, too. In the years between when B/R sold and Inverse launched, programmatic had become even more critical to new publishers. Most of the brand advertisers we targeted at Inverse had shifted more of their ad budgets to programmatic. The smaller $50-75k direct ad deals that had sustained Bleacher Report in the early days had evaporated. Instead, those dollars were being spent programmatically.
While I willingly gave up the potential revenue from programmatic ads, I instead built a direct sales team offering branded content. These investments ate away at our runway. Sales people command high salaries. They take six months or more to ramp up to a full pipeline. Once branded content deals start closing, the margins get crunched by production and distribution costs. As a small startup publisher, Inverse struggled to compete against larger, well funded digital media companies offering the same products with more scale.
Eventually, I relented and allowed programmatic on Inverse. But by then I had handicapped our early revenue and shortened our runway. This put more pressure on our direct sales business. This decision didn’t kill our chances, but it set us off on a challenging path that made it harder to recover. Especially as chaos and uncertainty circled all around us.
Another early decision I made still haunts me to this day. I’ve been outspoken in my belief that media companies need to think direct-to-consumer first. I learned that lesson at Bleacher Report when our newsletters and mobile app provided the keys to audience retention and sustainable growth.
By the time I founded Inverse in 2015, the era of social publishing was at a feverish peak. Even Bleacher Report had shifted to a social-first strategy. Many people mistakenly think B/R always dominated social media. The reality is even up until we sold to Turner in 2012, social was still an unproven leg of our strategy. Only after B/R had built a massive owned audience did it extend its dominance to social.
In the years after the acquisition, social traffic to publishers exploded. First Buzzfeed blew up big on Facebook. Then Upworthy came out of nowhere and perfected the clickbait headline. I witnessed firsthand as a company I advised, Elite Daily, grew their audience from a few million a month to over forty million unique visitors nearly overnight.
The growth intoxicated the industry. Even at the time, me and my friends in publishing held a prevailing belief that at some point the music would stop and the free-flowing Facebook traffic would come to an end. But we all seemed to agree that it was better – in the immortal words of Too $hort – to get it while the getting was good. Turns out we were just rearranging deck chairs on the Titanic.
In hindsight, I made the wrong call on social with Inverse. I knew deep down that much of the social traffic was a mirage. Yet I still convinced myself we needed to play in that sandbox. We spent too much time and resources in the early days focused on building a social following.
Instead, I should have focused more on building a direct relationship with our audience via newsletters. We did launch a newsletter, which has developed into an award winning product. But the effort took time to gain footing as it competed for resources with our social strategy.
Again, I had allowed the fog of success to cloud my judgement. By the time the Facebook traffic era ended – as we all knew it would – Inverse was further behind on email than it should have been. Another critical mistake.
These examples illustrate a few key decisions impacted by the success paradox. That said, they only scratch the surface of full post-mortem on the Inverse experience. I plan to write a more detailed analysis on lessons learned at some point in the future. I will document the strategies, assumptions, and decisions we got right and the ones that led us astray.
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Acknowledging that the success paradox exists is the first step. The next and most important step is developing strategies to overcome it.
In the final post in this series, I'll explore the mindset required to avoid falling prey to the success paradox. I'll share the mental models I use to avoid the false lessons of the past and approach each new project from a fresh perspective.