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Mar 11 2015

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3 takeaways from the closing of Gigaom

Prior to this week, Gigaom would have been a tech publication that we, at ICT Pulse, had hoped to emulate. With its closure earlier this week, here are three of our most immediate takeaways.

Gigaom_Logo (WIkipedia)This past Monday, widely respected tech blog/media company, Gigaom, abruptly closed its doors, after nearly 10 years of operation. In statements issued on the publication’s website and by its founder, Om Malik, the firm had been  unable to pay its creditors in full, and as a result, its assets were now being controlled by its lenders (Source: Mashable).

Though Gigaom was known for its insightful articles, its main sources of revenue were advertising, a premium research and papers publication service, and the tech events it organised. However, it still needed external funding to survive.

As a popular and much respected online tech publication, Gigaom would be one of platforms we, at ICT Pulse, might have hoped our modest publication could become. However, this latest news has given us cause to pause. Below are some of our early thoughts/takeaways.

1. Popularity does not translate to viability

At the time of its closing, Gigaom had almost 6.5 million month readers, many of whom would be regular daily, or even weekly, visitors to the site. That readership would have placed it in an enviable position with advertisers, which was a source of revenue for the firm. Further, it was a strong tech brand, with loyal followers. However, the publication still struggled to make ends meet. Hence though it might have been a popular, and was widely read and cited, this did not automatically translate into a profitable business.

2. At some point, a business must become viable

As stated above, Gigaom had at least three revenue streams, and it was still being bolstered external funding, the most recent of which was secured in 2014. However, perhaps the question must be asked, “when should a tech business be able to stand on its own two feet?” This year June, Gigaom would have been10 years old. However, should it still be at a point where it needed external funding to help it meet its routine operational expenses/obligations?

3. Many of the popular business models used by tech firms might be shaky at best

Across tech, many businesses, including those in software applications development, and those offering a broad range of online products and services, tend to rely on advertising as their main source of revenue. Depending on the size of the business; the size of its customer base or audience; and the amount of traffic an app or website generates, for example, advertising can be (relatively) lucrative – provided optimal levels are achieved. However and until such time, the revenues generated can be inadequate to support the business, and may need to be supplemented.

Having said this, developing the products and services that could become additional sources of income require resources – particularly funds and manpower – which again require money to be available in order to successfully implement and maintain those initiatives. A catch-22 can ensue. Although it might be possible to get external funding to launch those new ventures, again, they ought to, at the very least, become self-sustaining, but ideally profitable for the business.

In summary, the loss of Gigaom has been a sobering realisation of how difficult it can be to survive in the tech space. Although it would not necessarily be considered a start-up, and it would have had access to expert advice and guidance that most businesses would not have experienced, it has met the same fate as so many that have gone before.

 

Image credit:  Wikipedia

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About the author

Michele Marius

Michele Marius has a wealth of experience in the telecoms and ICT space, which has been gained in the Caribbean, Southeast Asia and the South Pacific, and in the public and private sectors. She is the Editor and Publisher of ICT Pulse.

Permanent link to this article: http://www.ict-pulse.com/2015/03/3-takeaways-closing-gigaom/

4 comments

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  1. Adrian Gordon

    This just goes to show that this “freemium” business model that seems to be so popular among Silicon Valley Startups is less than ideal for the majority of businesses actually looking to earn a profit from their product/service offerings. One would think that a publication the size of Gigaom would at least be able to earn enough revenue to fund their day to day operations – and still make a health profit at the end of the day to boot.

    It seems to be getting more an more clear however, that this model is is only successful for companies with truly massive audiences (facebook/google/trwitter etc).

    What is even worse is that this very same business model has trained many consumers to expect everything online to be free; making it far more difficult for newer businesses/publications to monetize their products/services in any way that even slightly suggests to the consumer that he/she must to spend (even a minute sum of money) to gain access to it.

    1. Michele Marius

      So true, Adrian.

      I was quite floored by the news of Gigaom’s closure. Like you, I thought it had figured how to make money and had been enjoying some profitability.

      Quite sobering for me has been the fact that very few forms have figured out how to be make money in the tech space. And the freeness approach does not help….

  2. Sachin Ganpat

    What has happened to Gigaom is happening to all newspapers and news sites all over.

    Gigaom was is tech news site. And as most new sites, people expect to read them for free. People don’t realise that it costs money to report the news, but even more to host a site catering to thousands of readers a day.

    1. Michele Marius

      Agreed Sachin, and the space is quite competitive, so there is a sense of having to continually up the ante to remain popular and relevant with inadequate money coming in…

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