by Christopher Zinsli, blogs.wsj.com
November 11th 2014
Public-radio producer Alex Blumberg made a living explaining how business works, for shows such as This American Life and Planet Money. He still does, only now he’s doing it from the inside.
Blumberg and co-founder Matt Lieber have raised $1.5 million for their podcasting startup, Gimlet Media. Betaworks, Knight Enterprise Fund and Lowercase Capital have invested, as have former Tumblr developer Marco Arment, Groupon Inc. founder Andrew Mason and New York Times reporter Charles Duhigg.
The New York company raised $200,000 of the round through an equity crowdfunding campaign that reached its goal in a matter of hours, Blumberg said.
The startup’s launch is being chronicled, naturally, on a podcast called StartUp. The initial episodes have covered common concerns facing many startups, such as coming up with a name, finding partners and raising funding. StartUp is the first show from Gimlet, which plans to launch a network of podcasts.
Blumberg sat down with Venture Capital Dispatch to discuss the economics and artistry of successful podcasts.
The interview has been edited for clarity and length.
New York has gotten a lot of attention for its startup scene. How do you see things, as a newcomer to the scene?
It’s been very friendly and generally just very supportive. I had this image, working in public media this whole time–it’s hard to describe just how accurate the term “not for profit” is. It’s very, very accurate. There is a tendency to see the profit motive as turning people bloodthirsty and cutthroat, and certainly that happens, but my experience so far has not been that. They’re just trying to create cool new things.
For a long time venture capitalists weren’t terribly interested in investing in media companies or content production companies. How are investors looking at content and media companies these days?
I think for everybody it’s where they feel comfortable. There are some investors who are just more comfortable with content, and have seen content become successful and have been an investor in Upworthy and BuzzFeed and understand how those content companies work and have seen it grow and happen, and they have faith that somebody else can make it grow and happen as well. There are people who get it and there are people who feel comfortable with it and people who don’t feel comfortable with it.
It seems you’ve gotten investors from both the tech and the content side.
We have, and the other thing that I’ve realized is that people invest for so many different reasons. One investor told me that it’s always a heart/head decision. One of the toughest things from an investor point of view is to see something where you like the idea of it, and you might like the product of it, but you don’t think it can generate enough returns for you. And so if you need to be assured of those returns then maybe you’re not going to invest, but if you can give in to yourself that those returns could be possible then you will invest. I had one investor tell me that content makes a lot of investors nervous because it gets to the artistry question a little bit. How do you know who the Steven Spielbergs are going to be? That’s the tricky thing about a content play.
Does it become a question of identifying someone with an approach to content? BuzzFeed is huge, they’ve got a very set formula that they execute over and over again, and they’ve done very well.
We had this whole line of pitching where we have an approach to content that’s very similar to [BuzzFeed founder] Jonah Peretti. He caught on to how the Internet works in a very, very specific, deep way from the beginning. So yeah, you could say he had an understanding of content. But then the retort was, yeah, but he also understood about user acquisition, he understood all these business metrics better than we do. So this is an investor conversation that we had, where we were saying we have an approach to content, we understand audio, we understand how audio works, we understand how to engage with audio, we have a theory of engagement about what works and what doesn’t work, and we have a theory of making hits in the audio space. And that was compelling to some people and not compelling to other people.
What’s your theory of engagement?
I think audio demands certain things. It demands plot in a pretty straightforward way, or it demands authentic emotion in a pretty serious way, or it demands companionship. So those are the three reasons that I think people listen to audio. They want to be told a story, they want to feel a very personal connection, or they want to hang out with friends that they feel like they have. And the best shows do all three. And that’s what we’re going to be going for.
Is podcasting going to be a hits-driven business, or can you make a business out of having moderate successes?
I think the layer at which you can be successful will continue to expand as more and more people adopt this behavior and on-demand listening grows. But yeah, ultimately I think it’s a hits-driven business. I think you’re going need a level of audience to support the endeavor financially, and if you can’t get that level of audience, there’s some level of audience under which it’s not sustainable. I think there’s opportunities to understand what your audience wants, to understand what more they would want from you, to be able to provide some sort of digital experiences or services or products to them that they would want to consume, and I think that’s very, very underdeveloped right now. I feel that’s one of the big things that we want to be figuring out: How do we engage the audience and give them opportunities to financially contribute to the success of the business.
Financially contribute, does that mean advertising, products, live events…?
The model that I have is the T-shirt that we did for Planet Money. We had essentially a product tie-in, but it was very, very organic to the thing that we were doing, and what people were buying wasn’t necessarily the T-shirt, it was access to that experience. And I feel like that is something that is absolutely replicable. I think we’re at the very beginning of that, and I think that there’s a lot of things that you can be providing to people that they might enjoy and they would be willing to purchase. And what I like about it is it’s the opposite of the way that you typically consider monetizing, which is just selling more ads. There’s ways of monetizing that annoys your audience and then there’s ways of monetizing that actually delights your audience and provides stuff that they want. If you can create some sort of special thing that they’ll like and sell it to them, that’s a great business model.
Can that approach be scaled across an entire network of podcasts?
Absolutely. Each show will build its audience and interact with that audience in its own way. There’s a whole bunch of different things that can be done. In a certain sense, what we’re doing is we’re just expanding the definition of what it means to be a media company. We have to find the stories and we also have to come up with a couple of creative ideas every year for engaging our audience. It’s exciting to think what these opportunities are.