Why Do So Many New-Media Startups Ultimately Commit Suicide?

Life in the Fast Lane With VC-Enabled 'Geniuses' Who Do Themselves in With Not-So-Genius Moves

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Simon Dumenco
Simon Dumenco
It's become accepted wisdom that many old-media companies are doomed; they're led by, the thinking goes, out-of-touch numbskulls. They exhibit incompetence and/or lethargy of such Darwinian proportions that they simply deserve to die.

It's a useful conceit that makes for a compelling narrative, because everybody loves it when Goliaths get felled (well, except for Goliath Co. shareholders), especially by scrappy young Davids. But wait a second! A lot of old-media companies may be wounded, but they're far from down for the count (and, in fact, a good number of them are rapidly becoming hybrid old-new media companies -- and have been resurgent in 2010 as the advertising economy rebounds). Whereas new-media companies? Over the years, a lot of their briefly triumphant Davids are now effectively dead and buried.

Consider the social-media sphere, so gloriously mythologized (once again) in Aaron Sorkin's "The Social Network" (even if it does make Mark Zuckerberg seem like a dick). The movie passingly name-checks two forebears -- Friendster and MySpace -- but fails to note that they, too (especially MySpace), once seemed like The Inevitable Future. In fact, there's a sad string of previous social/community sites, from TheGlobe.com to Geocities to Tripod, that each got to sort of rule the world for a minute. And yet -- speaking of clueless, out-of-touch numbskulls -- they all cratered thanks, in large part, to the self-destructive, user-alienating impulses of their leadership.

So let's compare the number of old-media corpses to the number of new-media corpses that litter the landscape. Now tell me: Who, collectively, has more of a death wish?

I've been thinking about the typical new-media life cycle a lot lately because of the travails of Digg, the social news site that famously inspired an absurdly breathless BusinessWeek cover story back in 2006. Over a portrait of Digg founder Kevin Rose (both thumbs up, headphones on, baseball cap on backwards, grinning like a doofus), a headline blared "HOW THIS KID MADE $60 MILLION IN 18 MONTHS" (an insane guesstimate of his net worth based on guesstimates of Digg's then-supposed value).

Digg is now an also-ran -- done in, in part, by the ever-shifting currents of the social web as well as its own stupidity. The site, as you've surely heard, recently engaged in a disastrous attempt to reposition itself. How disastrous? Some of the most "dugg" stories on Digg lately have been about how Digg users are abandoning the site in droves because the new Digg sucks. Google the words "Digg redesign" and the first result (at least at the time of this writing) is a Digg page linking to a heavily "dugg" ReadWriteWeb.com story titled "Digg Redesign Tanks: Traffic Down 26%."

To his credit, Digg's new CEO, Matt Williams, wrote an open letter last week that said "we're deeply sorry that we disappointed our Digg community." He then offered a rather breathtaking laundry list of stuff that, to placate users, they've already changed back, plan on changing back (like restoring Digg's "bury" button) or otherwise plan on tweaking.

Williams' most astonishing sentence: "Our top priority is to make Digg as good as it used to be." OMG, Digg, WTF?

The truth is, boneheaded moves of this sort are incredibly common in the digital space. The history of new media is littered with former "genius" types suddenly doing themselves in with not-so-genius moves. Some startups are born with a death wish (see: Napster), but most rather quickly acquire it.

Why does this sort of thing keep happening? Simple: Great Recession aside, the startup world continues to exist in a bubble economy propped up by venture-capital dollars. Being clever enough to score backing continues to be seen as proof of brilliance -- and market-dominating chops. But satisfying VCs and satisfying users are often two very different things.

The irony of the moment: Old-media types, having been labeled numbskulls for so long, are increasingly taking a humbled, sober view of both the media marketplace and their own balance sheets. Whereas the bubble boys of Silicon Valley -- at least those still flush with cash -- can persist in their own sort of state of denial.

But hey, guess what? Turns out that having a lot of VC funny money in the bank doesn't make you any less susceptible to Darwin's laws.

Simon Dumenco is the "Media Guy" media columnist for Advertising Age. You can follow him on Twitter @simondumenco.
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