Note: This article is based on the blogger "Dave Nemetz", in which he updates us on his experience in trying to create Inverse after the success of his first magazine, "Bleacher Report."
I know the paradox of success well after falling prey to its effects. I repeated the attempt after creating Bleacher Report magazine and achieving positive results. I had a guide to creating an interactive and profitable digital media company. With the additional wisdom I enjoyed, thanks to age and experience, I decided to avoid the mistakes I made with Bleacher Report magazine. I could avoid wasting and achieve a better result. But I was very wrong.
In 2015, Inverse launched with full confidence. My founding team included a few brilliant engineers from the days of Bleacher Report, along with a group of young creative editors and some of the best digital media investors who enthusiastically agreed to my vision. I decided to follow the same plan with Inverse that led to the success of Bleacher Report, and I thought it would be a success like this.
Five years later, Inverse was similar to Bleacher Report and outperformed it on many creative and journalistic levels. We created better content management systems and editing tools than Bleacher Report with a much smaller engineering team. The Inverse audience followed a similar path to the Bleacher Report audience in a more competitive growth environment.
But the success of Inverse did not match the commercial success of Bleacher Report, nor did it even approach it, and the question is: Why? We followed the same steps with Bleacher Report and focused on the essential elements, so what did we do wrong? We focused on the wrong things, overlooking some ambiguous factors; the answer is simply the paradox of success.
Take software ads, for example, which are hated by publishers, engineers, and all users because they are low quality, slow down site loading times, and harm the user experience, all for a much lower profit than direct ads.
So, it's no wonder I avoided it altogether when Inverse launched; this category of ads was responsible for only a fraction of Bleacher Report's revenue, while the real reason for revenue growth was our direct sales effort. Moving away from programmatic ads, I prioritized users and focused my team's efforts on creating the perfect environment for direct sales ads.
But I missed the bigger picture when I decided to do so. In the early years before Bleacher Report had a direct sales team, software advertising was an important revenue base, and Bleacher Report's direct revenue grew to hundreds of millions of dollars a year. Software advertising also increased, but it became a minor part of overall revenue. Still, the revenue generated by software advertising in our acquisition year equaled our profit margin. Without it, Bleacher Report would have continued to lose money, and the acquisition might not have happened.
In addition, in the years between the sale of Bleacher Report and the launch of Inverse, automated programming became more critical to new publishers. Most of the brands we targeted at Inverse were allocating more of their advertising budgets to programmatic advertising. So, there were no opportunities for smaller direct advertising deals ranging from $50,000 to $75,000, which led to Bleacher Report continuing in the early days; instead, advertisers spent those dollars on programmatic advertising.
So, when I ditched the potential profits from software advertising and instead created a live sales team offering brand content, I lost those investments. The sales staff were highly paid during a sale that would take six months or more, and once we got to the last step of making deals, the profit margins faded due to production and distribution costs as a small startup publisher.
Inverse found it difficult to compete with larger, well-funded digital media companies that offer the same products on a larger scale.
I finally relented and allowed software advertising on Inverse. Still, by then, I had lost our early revenue, and the amount of time available before we ran out of cash had dropped, putting more pressure on direct sales. While this decision didn't kill our chances, it did get us into a difficult situation to recover from, especially with the chaos and uncertainty around us.
The importance of undoing wrong decisions:
Another early decision I regret today is that media companies should think directly about the consumer. I learned this lesson in Bleacher Report when our newsletters were linked to the mobile app, audience retention, and sustainable growth.
By the time Inverse was founded in 2015, the era of social media publishing was at its peak, and even Bleacher Report had moved on to a social media-focused strategy.
Many people mistakenly believe that Bleacher Report existed on social media. However, the reality is that until we sold Turner in 2012, social media was still an uncertain part of our strategy, and only after we had a huge engaged audience did the magazine expand its operations to social media.
In the years following the acquisition, the popularity of magazines on social networks increased dramatically, starting with the incredible popularity of "Buzzfeed" magazine on Facebook and then "Upworthy" magazine, which mastered writing very attractive article titles even if the content was not commensurate with it. I saw how the audience of a company I advised, "Elite Daily," increased from a few million per month to more than forty million visitors almost overnight.
We grew unbelievably in the industry, but even then, my publishing friends and I thought it would be a phase that would end and stop the traffic that was attracted by social networks. Still, we all agreed it was better to make the most of it as long as it was available.
I now realize I made the wrong decision regarding social networking in Inverse magazine because I knew that most of its generated traffic was unsustainable. Yet, I convinced myself to invest in this department, so we spent much time and resources focusing on building a social media following in the early days.
Instead, I should have focused more on building a direct relationship with our audience via newsletters. While we did launch a newsletter that evolved into an award-winning product, these efforts took a long time to bear fruit because they competed for resources with our social strategy.
I let my past success blind me again, and when the wave of social media traffic ended as we all knew it would, Inverse's email strategy wasn't as advanced as it should have been, which was another huge mistake.
In conclusion:
These examples illustrate some of the key decisions affected by the success paradox, yet are only the beginning of the analysis of Inverse's experience. The first step to avoiding the success paradox is to recognize its existence, and the next and most crucial step is to develop strategies to overcome it.
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