October 23, 2017 Last Updated 12:55 pm

The Athletic’s big write-up in the NYT reminiscent of other big digital start-ups, now long gone

Like other competitors to newspapers, both in print and digital, The Athletic is finding it fairly easy to pick off talent and launch new products, but can it become profitable before the money runs out or the market for capital dries up?

The Athletic had its coming out party today with a somewhat snarky feature in The New York Times. Co-founders Alex Mather and Adam Hansmann come across as a bit arrogant and more than a little naive, but then again who exactly remembers how Steve Jobs or Mark Zuckerberg sounded like this early on in their careers?

But many of those who lived through the glory days of B2B publishing will remember how Mark Walsh, then the CEO of start-up VerticalNet sounded, as well. Walsh talked a good game, and in 2000 he managed to convince Joe Galli, then working for Amazon, to come over and be president of VerticalNet. The NYT at the time called it a loss for Amazon, though that has proved to be pretty bad judgement on their part.

VerticalNet was supposed to upset the entire B2B publishing business at a time when it was apparent to many on the west coast that the future would be digital, but few B2B print publishing owners even knew how to check their email. The company’s model was to create numerous industry websites, help customers launch their own mini-sites, and recruit editors from the magazine covering those industries.

In the end, the model was faulty in that VerticalNet was trying to lure advertisers to a platform that could not yet produce results, and eventually all those customers would want their own websites, not ones controlled by a media company.

Some got in early, recruited from trade magazine titles, and received stock in the company. Then the company went public in 1999 and its valuation rose to $1.6 billion, then up to over $10 billion, despite pretty modest revenue. These lucky ones could sell in time to avoid the bursting of the tech bubble. Eventually, in 2008, the company was sold off for a fraction of its peak valuation.

But while there looks to be comparisons in attitudes between The Athletic and VerticalNet, the models are very different. In fact, in its battle with newspapers, The Athletic looks down right traditional.

I’ve written many times that newspapers were in the habit of losing business to competitors long before the web became the dominate platform. Back in the ’80’s and early ’90s, good days for newspapers, they were losing business to real estate tabloids and auto trader publications. Newspaper executives were slow to see the threat to their highly profitable classified sections. So, when help-wanted advertising migrated online it was just another of competitor taking another bite out of the the giant pie newspapers represented.

In this case, The Athletic wants to steal talent from newspaper sports sections, create new local sports websites, and then sell digital subscriptions.

“We will wait every local paper out and let them continuously bleed until we are the last ones standing,” Alex Mather, a co-founder of The Athletic, said in an interview in San Francisco. “We will suck them dry of their best talent at every moment. We will make business extremely difficult for them.”

Looking at it from another perspective, one could argue that the new venture really isn’t competing against newspapers but against Vox Media which runs local team sports blogs under the SB Nation banner, as well as the national sports news start-ups.

The point of differentiate, the co-founders of The Athletic believe, is that they are selling subscriptions, more than 15K in Toronto they claim. Still, the company is not adverse to advertising, just not yet dependent on it (which is good since its reach and total audience would appear rather small to many digital media ad buyers).

In fact, the company still looks very much like a start-up, with modest revenue, and a need for additional funding to keep it growing. There is plenty of investor money would there, so they should be able to find it, but so did VerticalNet, even getting a $100M investment from Microsoft in 2000 before the cash inflow fizzled out.

The question is what happens next for The Athletic, which is publishing in an environment not that dissimilar to what VerticalNet thrived in back in 1999 — lots of investor cash available, a booming stock market, and a feeling that the good times in Silicon Valley will never end. They did.

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