Comcast Ventures had seen enough. Years of researching business models, seeing their portfolio's performance and watching digital media startups struggle had made an impression. The venture capital firm made a decision: unless it found an extraordinary idea or entrepreneur, it would no longer put seed money behind advertising-driven media companies.
"Starting an ad-supported business is really, really tough," said Daniel Gulati, a Comcast Ventures partner, in an interview. "As a general thesis, we are not actively looking to invest in seed companies that have an advertising-based business model."
It's a shift in thinking for Comcast Ventures, which has put money behind advertising-based models before, including 2009 and 2010 investments in Vox Media and a 2016 funding of finance news network Cheddar. (Comcast Ventures is owned by Comcast, which also owns CNBC parent company NBCUniversal.)
Their targeting capabilities, given all of their data, is "second to none," Gulati said. "As their growth accelerates, the opportunity for new companies diminish."
As a result, subscription fees are hot -- a return to how most media (newspapers, magazines, cable TV) prospered for decades.
This week alone, New York Media, the owner of New York Magazine, announced its sites would be paywalled. That was soon followed by paywall announcements by Verizon's Yahoo Finance and Uzabase's Quartz. Bloomberg, Axel Springer's Business Insider, Conde Nast's Vanity Fair and Wired, and a bunch of other online magazines introduced or hardened their paywalls this year. The New York Times, Wall Street Journal (owned by News Corp), The Financial Times (owned by Nikkei) and The Washington Post (owned by Amazon CEO Jeff Bezos) made that decision even earlier.
"For many years, the popular narrative has been that readers simply weren't willing to pay for content online," said Eric Stromberg, a venture capitalist at Bedrock Capital.
"The only way to win was to build an engine of free articles that were monetized through ads and shared on social networks. Paywalls wouldn't scale. You were destined to have a niche audience if you had a paywall. We're starting to see a shift. I expect we'll see it more powerfully over the next few years."