It always used to amaze me when purportedly intelligent people completely miss obvious signs that their new business ventures are doomed.  RCA, dominant in electronic communications and one of the highest profile corporations for half of the last century, bet heavily on an analog video disc system that relied on a stylus and grooves at a time when lasers and digital media were advancing at a furious pace. I spoke with someone closely familiar with the videodisc project at the time and warned him that technology would blow past the needles in grooves. His response was that the RCA system would be cheaper, and consumers wanted cheap.  

The obsolete technology venture, and eventually the corporation, were predictable disasters, both vanishing from history’s stage.  

Now, only the RCA logo barely lives on, licensed out to consumer goods producers looking for a familiar brand name to slap on their products.

At the time I learned about RCA’s video disc fiasco in waiting, around 1980, I was still credulous about the quality of those who rise to the top of various organizations and fields. Some people present very well yet wear mental blinders that can lead them to disaster. I didn’t yet realize that fools are rarely recognized as such by other fools. 

So, when I heard about The Messenger last year, I was immediately skeptical, about big money going after the internet publishing industry. Benjamin Mullen of the NYT reported:

The Messenger, a news website that pledged to shake up the media industry with a playbook borrowed from the doomed publishing start-ups of yesteryear, will be closing down.

In an email to staff, the site’s founder, Jimmy Finkelstein, said that The Messenger’s shutdown was “effective immediately.”

“This is truly the last thing I wanted, and I am deeply sorry,” Mr. Finkelstein wrote.

By closing less than a year after it launched, The Messenger will now be one of the biggest busts in the annals of online news. And its collapse is the most substantial blow in recent months to the news industry, which is reeling from an unrelenting series of cutbacks.

I know all too well how brutal the industry is that they were entering. Facebook and Google hoover up most of the money to be had from advertising, and they are powerful gatekeepers who control exposure for digital publications. Even worse, from a business strategy perspective, the barriers to entry for online publishing are negligible, so new competitors will be showing up and competing for your readers and advertisers.  

This is what inhabits themessenger.com space as I write:

Nevertheless, investors reportedly ponied up $50 million to launch the site, and management started spending away.   

The organization hired about 300 people, including journalists with experience at such publications as Politico, Reuters, NBC News and The Associated Press, who joined the company in the hopes that it would deliver on its promise to introduce an important new nonpartisan voice to the American news landscape.

I remember hearing that Joe Concha, a contributor at Fox News that I enjoy, was writing for The Messenger, so they were doing some signaling that they were fair, not left-wing. Even if the staff were mostly progressive, a natural consequence of the corporate media talent pool they were hiring from.

Alexandra Steigard reports for the New York Post on the chaos as management kept the staff in the dark about the looming financial collapse:

Tempers remained high, with the fired journalists pointing to a lack of leadership and communication as The Messenger’s tragic flaw.

Many of them pointed the finger at [CEO Dan] Wakeford, who was paid around $900,000, for being allegedly “MIA” from the company’s expansive, and expensive headquarters in the Financial District, especially when it came to big editorial decisions.

“People did not know he was British,” said one surprised staffer, who said the first time they heard Wakeford speak was during an emergency meeting held two-and-a-half weeks ago — as reports surfaced about The Messenger’s imminent demise.

By then, Wakeford had a fraught relationship with [founder Jimmy] Finkelstein, who “restricted” him from holding meetings and sending out staff emails to boost company culture and morale, a source close to the situation said.

They seem to have planned on rapid revenue growth and fell catastrophically short of their goals. From the NYT:

Mr. Finkelstein and The Messenger’s president, Richard Beckman, a magazine veteran, planned to hire 550 journalists within a year, which would have put the website in a weight class with publications like The Los Angeles Times. Mr. Beckman predicted that The Messenger would generate $50 million this year. During a demo last year for The New York Times, Mr. Beckman said he wanted The Messenger to make readers “fall in love” with media again, illustrating the point with a sizzle reel scored by the Dire Straits hit “Money for Nothing.”

Mr. Finkelstein, an entrepreneur with decades of experience running publications like The Hollywood Reporter and The Hill, attracted $50 million in investments for the untested start-up. The Messenger’s backers include Josh Harris, a co-founder of the private-equity giant Apollo, and Thomas Peterffy, the former chief executive of Interactive Brokers. Mr. Harris was a backer of The Hill, which Mr. Finkelstein sold to Nexstar in 2020 for $130 million.

But their money was quickly spent. Near the end of last year, the company had generated only $3 million and had just $1.8 million in cash on hand. The Messenger lost about $38 million — the majority of its initial $50 million funding round — and was spending more than $8 million on offices in Florida, Washington, D.C., and New York.

Radically underestimating revenue while locking in high overhead and staffing costs is a way to go insolvent quickly. The Messenger lasted about 9 months.

Where did the founders get the basis for the revenue and readership projections they used (and provided to investors)?

American Thinker has survived by doing the opposite of The Messenger. We have kept overhead minuscule, don’t pay writers, and underpay the editors, most of whom have never had a raise. Even so, revenue, including reader donations and subscriptions, usually doesn’t cover outgo by the end of the month, which is why we really need more subscriptions and donations. 

I wonder if there is a preview of litigation to come in the third NYT paragraph below?

A confluence of problems is behind the carnage, including slumping advertising revenue, disappointing digital subscribership, corporate infighting and deep budget cuts.

The Messenger’s fatal flaw was over-relying on tech companies like Google and Meta for its readership instead of engaging directly with its audience through newsletters and in-person events, said S. Mitra Kalita, founder of Epicenter-NYC and URL Media.

“The Messenger was built off expertise of an internet that no longer exists,” Ms. Kalita said. “Facebook was not going to surface its links no matter how clickable those headlines were.”