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Medium says it can’t make money selling ads so it’s laying off a third of its staff

Medium is laying off 50 people and changing its business model.

Evan Williams
Mike Windle | Getty Images
Evan Williams

Medium CEO Ev Williams says his company's ad-based business model isn't working, and the startup is laying off 50 employees and closing its offices in New York and Washington, D.C., as a result.

That's about one third of the company's employees.

In a blog post shared on Wednesday, Williams said he wants to move away from ad-supported content, which is how most stuff on the internet generates revenue. Williams described that business model, which is almost entirely dependent on clicks and views, as a "broken system."

"The vast majority of articles, videos, and other 'content' we all consume on a daily basis is paid for  —  directly or indirectly —  by corporations who are funding it in order to advance their goals," Williams wrote. "And it is measured, amplified, and rewarded based on its ability to do that. Period. As a result, we get … well, what we get. And it's getting worse."

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So if ad-supported content is no good, what will Medium do instead? Williams hasn't decided.

"We are shifting our resources and attention to defining a new model for writers and creators to be rewarded, based on the value they're creating for people," he wrote. "It is too soon to say exactly what this will look like."

Medium simply grew too quickly, according to a person close to the company, and laying off 50 people is part of Medium's plan to cut costs while it figures out what comes next.

Medium has raised more than $130 million from a number of well-known investors, including Andreessen Horowitz, Google Ventures, Greylock and Spark Capital. Its most recent funding round, back in April, valued the company at more than $600 million.

By Kurt Wagner, Recode.net.

CNBC's parent NBCUniversal is an investor in Recode's parent Vox, and the companies have a content-sharing arrangement.