Bootstrapped Thought Catalog Thinks Big, Stays Lean

Alex-Magnin-Thought-CatalogIn the land of VC-backed media brands, Thought Catalog wants to be the indie media brand that could.

Founded in 2010, The Thought & Expression Co., which includes sites Thought Catalog and Quote Catalog, hasn’t taken on any investment. Just 35 people work out of its Williamsburg, Brooklyn, office, including Alex Magnin, the chief revenue officer and a founding member of the team.

Thought Catalog is part platform, part publisher. It receives 6,000 submissions a month from young millennials who want a place to get published. Its team filters the submissions, accepting about 10%.

From there, it nurtures its best-performing writers, who get paid or receive book deals through Thought Catalog’s publishing arm, which started in e-books and now publishes 100 books a year, a mixture of hard copies and e-books.

As the head of revenue at a bootstrapped but profitable company, Magnin is skeptical that media companies accepting huge influxes of cash can deliver the returns their investors want. He thinks the media bubble is poised to pop.

Magnin spoke to AdExchanger about how Thought Catalog has built its business and his views on what’s ahead for the industry.

AdExchanger: What’s the origin story of Thought Catalog?

ALEX MAGNIN: In 2010, when Thought Catalog was founded, it wasn’t quite yet cool to do digital media startups. This was before people realized what a massively big deal the Facebook news feed would be, and the VC dollars started flowing into the space. This was a passion project that ended up taking off largely because of social sharing and the type of content we produced.

How has the digital media landscape evolved since then?

In 2013 and 2014, we saw new entrants. 2016 is the year reality is setting in and the market is shaking up. Companies need to make good on profitability and valuations. As an independent media company, we’ve had to do this all along. We have a deep understanding of, when money is not unlimited, where you invest and where you hold back. We have been profitable since day one.

You think it will be hard for VC-funded media companies to have hockey-stick growth. Why?

We’ve seen a massive boom in supply while ad spend is growing modestly. For the past 70 years, advertising has been between 1% and 1.4% of GDP. That makes the marketplace incredibly crowded and competitive, especially when you are trying to increase valuations by five times, which is what VCs generally want.

So what can media companies do to get around that?

Some are trying to be technology companies. They are merging tech with media so each piece of content is going far beyond where it used to. Others are trying to build out platforms. For us, the equation is plain. If we can do the same thing and reach more people by being leaner, we think that’s a model that looks like the future. We are proving that you can reach just as many people and make just as much revenue with 30 employees as you can with 200 employees and $20 million in VC rounds.

Are you similar to Medium?

I don’t consider them a direct competitor because we run in different worlds, in terms of the type of people we want to publish on our site and for ad dollars. The people we compete with for ad dollars are Mic, Refinery and Bustle. Everyone has to compete with BuzzFeed. That’s what we think of as our competitive set.

What’s your take on Facebook Instant Articles?

The open web ad tech community is not as scared as they should be about Facebook Instant. We as publishers ultimately choose where the media is, and it’s a compelling proposition. Facebook has better data, a better user experience and all the advertisers in the world plugged in. That’s a triple whammy that’s tough to beat. What defeats Instant Articles is not going to be ad tech.

How are you trying to build Thought Catalog’s audience?

While reach is important, we care most about making them a superfan of the site. Eight million out of our 30 million uniques visit over 10 times a month. Of those, 900,000 have 200 page views a month. Those people are buying our books, they are submitting to the site.

What’s the appeal of Thought Catalog to advertisers? Are they turned off by the contributor model? Many advertisers shy away from user-generated content.

We have no user-generated content in the traditional sense, because it’s all edited. We think of it as grassroots advertising. Instead of having a New York-based editor write content for the brand, we ask readers to tell stories on a brand theme, and you get something that looks a lot more authentic and organic.

What’s an example of branded content you create?

We did a program for Mike’s Hard Lemonade, which has a bottled margarita beverage called Cayman Jack. We brought in five adventure travelers and had them tell our audience their best adventure travel story, and asked readers to submit their best travel story. The winners were published in a free print and e-book sponsored by Cayman Jack.

With your books business, are you merging content and commerce?

Part of our strategy is monetizing our audience as directly as we can. On the marketing side, it makes us eat our own dog food. We only use our own platforms for marketing. We need to make sure our ad products are so good we can trust they move units. And when you look at programmatic and the option value, if I show 2,000 people an ad and one of them buys a $10 book, that’s a $5 CPM. It helps you set a floor price.

Thought Catalog expanded further with Shop Catalog, an ecommerce arm that had clothing and jewelry. What happened there?

It’s on hold. We continue to launch experiments. We see if they have a spark and if they work, continue to invest in them.

How has programmatic affected your business?

Our revenue is split perfectly equally between programmatic and direct. I spend at least half my time on programmatic, if not more. Programmatic is awesome. There is no cost of sale. Putting content out in the world that gets monetized without us doing much is our bread and butter. And to mix metaphors, direct sales is the icing on top and evens out the revenue. It’s the tip of spear. We do lower-margin services work and branded content to bring them on for a banner ad deal.

We are seeing digital video explode, and the worlds of digital and TV cross over through investments and new TV channels like Vice. Are you exploring video or is it not a fit?

It’s not a fit for what we are doing. There will be a tragedy of the commons-type problem with digital video. If everyone expects video CPMs and content, such that there is a massive supply of video content, they are not all going to get TV-like CPMs.

What’s your take on branded content?

The dirty secret is that publications were making massive CPMs. Branded content posts would have $100 CPMs, which is equivalent to a Super Bowl ad. We were early and had a couple great years with branded content. We are starting to see pricing come back to earth – more in the cable television-esque cost per view – as brands and agencies move it out of experimental budgets and into regular budgets where it has to compare on a cost-per basis.

Thought Catalog has a millennial audience. How big of an issue is ad blocking?

We see 4% to 8% ad-blocking users, but that the number is so low only because we are so heavily mobile – about 70%. That ad blocking percentage doesn’t keep me up at night.

How do you sum up the Thought Catalog approach?

We focus on a few core things we know we can do better than anyone else, and avoid distraction. Hopefully one day in the future, we can take up the mantle of being the preeminent indie digital media company.

So does that mean you are not for sale?

What's important is that we think and behave like we're not for sale.

This interview has been condensed and edited.

This is part of an interview series with media leaders about the future of digital advertising. Check out previous interviews with The Atlantic, Bloomberg Media, Evolve Media, Forbes,Mic, The New York Times, Purch, Refinery29, Time Inc., The Washington Post and Ziff Davis – and more to come.

 

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