walkitout (walkitout) wrote,
walkitout
walkitout

Re/code coverage of GigaOm, a bit more about GigaOm

It's not too hard to find an old-skool journo who will write at length about all these blogger online media types who, because they didn't have mentorship, or someone shitting all over their work, they aren't actually any good. I tend to discount that sort of complaining.

http://recode.net/2015/03/14/the-long-story-behind-gigaoms-sudden-demise/

I'm gonna assume that Peter Kafka's sources are legit and he did great work tracking down all this lovely info. What he didn't do is assemble a timeline and tell the story against that timeline. And the result is distracting, and hard to make sense of.

From the second paragraph (and all these paragraphs are short):

"But, behind the scenes, Gigaom’s managers and investors had known the company was in serious peril for more than two months. And while they hadn’t discussed it publicly, its backers had been trying to fix the company for at least a year by pouring millions more into the publisher and swapping out executives."

In this paragraph, in two sentences, we learn that (a) managers and investors knew "serious peril ... more than two months" AND (b) "trying to fix the company for at least a year".

and here is the last sentence from the fourth paragraph:

"But the state of the company’s finances over the last couple years is clear: They were a mess."

I don't actually need to know _which_ it was. But I do wonder why it is "more than two months", then "at least a year" and finally "the last couple years". And this is before any specifics are supplied.

Paragraph seven:

"Last fall, after pushing out longtime CEO Paul Walborsky, Gigaom’s investors, which included True Ventures, Reed Elsevier and Alloy Ventures, made two different bridge loans of $500,000 to keep the company running. They brought on former Dow Jones executive Michael Rolnick to head the company in the beginning of the year and lent the company another $1.5 million."

It is March. "Last fall" couple be anything between 3 and 6 months ago, depending on how you figure the thing. But it isn't two months, 1 year, or a couple years. We now have _four_ time frames, two with specifics: 1 year, a couple years, 3-6 months/last fall, 2 months (beginning of the year -- mentioned in the last sentence of paragraph seven, explaining the 2 months from the beginning of the article).

In paragraph 9, we learn that a GigaOm conference scheduled for next week (I think this means Structure at Chelsea Piers, and I think it may have sold out) was not going to be able to pay vendors, and _that_ triggered a last minute attempt to sell the company. No time frame is given for when the attempt to sell the company is given. We gotta whole grab bag of possibilities: 1 year and a couple years are both available and neither one is remotely plausible.

Two paragraphs later (intevening paragraph background on Om Malik) we get a possibility: "Malik, who remained on Gigaom’s board, did work to find a replacement for Walborsky, and was helping to shop the company in recent weeks".

Here's my theory of the timeline embedded in this piece:

Western Technology put in $5 million in 2011. The 2014 funding round was, in part, to pay that debt off. I think that the inexplicable "couple years" finances were a mess was discovered by Western Technology. They decided they wanted their money back and had some capacity to force GigaOm to pony up. So that's the couple years ago.

The "at least a year" is the investors who came on board during the 2014 funding round. They were told one thing when they were being courted, and then once they had signed, they started doing some real digging into the finances and they freaked out. I wonder if they didn't know their money was going to pay Western Technology; would they have declined to participate if they had known?

Last fall, their digging was complete, and they realized that the business model they thought would save the company would not. And they also weren't happy with the executive who didn't seem to know what the hell he was doing and/or was not being very cooperative. So they start working with _all_ equity and creditors of GigaOm and start building consensus to boot the CEO. They are successful by January, but that inevitably increases the number of people who know there is serious trouble. So that's our two months/beginning of the year time frame.

They get their guy in, their guy is unhappy to be there, and even more unhappy once he finishes taking a look around and wishes he hadn't agreed to help. His bright idea is to sell the company. January and February are devoted to this process, but if anyone knows how bad a shape GigaOm is in, they won't bite (after all, the last group wouldn't have bit into that apple if they'd known how rotten it was). So they keep letting people travel and they continue collecting ticket money for the conference, etc.

Whoever they thought they might or might not convince to buy the company, in the end, declined, and at that point, the creditors are stuck with having to meet legal ownership obligations (pay severance) and close up shop. They can continue to get a trickle of ad revenue off the older articles, and maybe someone will buy the name/etc.

Kafka is a good writer, and I am not. But I think Kafka's article would have made more sense if it had had a timeline structure. And I don't understand why it didn't, and it annoys me because the only way I could make any sense out of what happened at the company was to create the timeline, and then write it out.

Honestly, it was like when I went to Spry and they didn't even have an org chart. Don't people understand that you need stuff like that to understand the world they are interacting with?

ETA: GigaOm bought ContentNext from Guardian Media, including paidContent (I really liked paidContent). I can't find out how much they paid for it. The wikipedia page for GigaOm says that the original founder of ContentNext, Rafat Ali, sold it for $30 million to Guardian but if you drill down, the article cited as a source conspicuously DOES NOT say $30 million, and a Dealbook about the Guardian -> GigaOm sale says that the Rafat Ali -> Guardian was 4 million pounds.

http://dealbook.nytimes.com/2012/02/08/gigaom-acquires-paidcontent/

So, there's an error on the paidContent wikipedia page. Here's the source for the $30 million, which if you dig down included an "earn out". I assume the Dealbook gave the price as paid, vs the hypothetical if ContentNext made Tons 'O Money.

There's a whole bunch worth thinking about here in terms of exit strategy for people who start online media businesses. If the exit strategy is to hump like mad and sell out to an existing larger business, will those businesses keep paying when you get this kind of result?
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