After failed acquisition attempts, deep layoffs and executive pay cuts, newsletter company TheSkimm hangs in the balance
- Once-buzzy newsletter startup TheSkimm just laid off 20% of its workforce as it faces a downturn in advertising that's pummeling media companies.
- It had been banking on a subscription-based app to boost and diversify revenue, but decided to make it free for the rest of the year.
- The 7-year-old company, which has raised nearly $30 million over the years, also faces questions about how future-proof its mission is.
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The pair, who are co-CEOs and cofounders of the media company, cut to the chase: Ad proposals were down about 75% due to the sudden economic downturn, according to two people in attendance. Top executives would take pay cuts, effective immediately.
Four days later, roughly 20% of the 130-person team was laid off. A tearful Zakin delivered the news over Zoom. The team waited as long as several painful hours to find out if they were among those cut, one person who was impacted said.
Many felt blindsided.
"I don't think anyone had a strong assessment that they were making such big decisions so quickly," said one former employee. "There weren't rumors of layoffs coming."
Like all media companies, the pandemic is testing whether or not TheSkimm is essential to advertisers. Brands are spending less, with many allergic to running placements next to negative news. That's not great for TheSkimm, which is largely a news-driven product and needs to cover the virus closely. Its trademark light-hearted style of packaging the news, which advertisers glommed on to, no longer seems to fit the times.
"Our content all starts with COVID, and it becomes hard for our core advertisers who are trying to get people to put on makeup or take vacations," a second former staffer lamented.
TheSkimm declined to comment for this story.
For the first few years, TheSkimm was riding high. Founded in 2012 by Zakin and Weisberg, pals who met at NBC, TheSkimm delivers a speed-read newsletter for millennial women on the news of the day in a cheery tone. (Hillary Clinton was dubbed "Hillz.") It cultivated "Skimmbassadors," or power users who recommend the newsletter to their friends.
TheSkimm quickly gained traction and went on to raise $28 million from a star-studded group of investors including Sara Blakely, the billionaire founder of Spanx; Shonda Rhimes; and Tyra Banks. It was endorsed by celebrities like Oprah and Reese Witherspoon. At its high point, it was looking for a $100 million valuation.
TheSkimm was said to be profitable and generated upwards of $20 million in revenue in 2019, people with direct knowledge have said.
But it hasn't raised funds since 2018, when it took $12 million from Google Ventures and other investors. Its subscriber growth has plateaued at 7 million. Last year it was looking for an investor or an acquirer and met with investment bank LionTree and women-aimed publishing giant Meredith, among others, people close to the company have said. None seem to have bit. To onlookers, the company felt small and too reliant on advertising.
Plans to diversify revenue fall short and get scrapped
TheSkimm's mission for 2020 was to become significantly less dependent on advertising, which makes up the vast majority of its revenue now. TheSkimm makes most of its advertising through direct sales, or sales directly from advertising agencies to publishers and their sales representatives, rather than programmatic-buying technology that many advertisers are increasingly reliant on. Direct deals, while lucrative, can be inefficient and have long cycles from pitch to closed business, to payment."We have an interest in working with partners [like TheSkimm] because they do tend to go deep with a certain audience. At the same time, we try to find opportunities to aggregate and scale for efficiencies so that we can apply audiences at scale versus going deep with just one partner," said Jessica Brown, director of digital investment at media-buying agency GroupM.
In 2019, TheSkimm took small steps to diversify its revenue streams, branching out to a daily news podcast and financial advice book. This year its big bet to diversify was its forthcoming app, SkimmMoney. SkimmMoney was designed to teach millennials how to manage, save and invest their money. TheSkimm planned to make money from it two ways: It would charge users a subscription fee ($5 a month, according to two former employees), and it would also sell the app to companies, which could offer SkimmMoney a benefit to employees.
But charging for a money-saving tool during a financial crisis felt tone deaf. In April, theSkimm decided to make the app free for the rest of the year, former employees said.
Pandemic aside, not everyone was convinced SkimmMoney would work. While insiders said the app was well researched, some questioned whether people would pay for it. TheSkimm readers were not used to paying for its content, and there are many competitive financial education apps like Qapital and Digit.
The app went through numerous iterations, which unsettled some employees, and two top people steering the strategy left earlier this year.
Another stab at diversifying revenue was a holiday pop up store in New York's Flatiron district. The "Celebrate Smarter Shop" sold fashion, fitness and accessory items. But it missed its financial goals, leaders said at an all-hands meeting, according to multiple people in attendance.
TheSkimm is having an identity crisis
Weisberg and Zakin cultivated an image of the woman they were targeting and packaging for advertisers, which has grown up over the years. When the brand launched, "the Skimm Girl," represented as a cartoonish cutout of a thin, pearl-clad woman, loved SoulCycle and J.Crew and was drinking jalapeño margaritas, The Cut reported.Today, "Sara" lives in the city, makes $100,000, reads, and drinks tea, one former staffer said. TheSkimm Girl, which started to be seen as too exclusive and white, is being phased out. The logo recently came down from the office door and was replaced with a crisper image; new branding materials were being circulated earlier in the spring. Some former employees said the company has hired more people of color.
Now, the challenge for the company is to grow its audience and revenue sources with even more limited resources. People familiar with its finances say its situation isn't as dire as other digital media outlets. But its ability to justify the big multiples its investors expected or get future investment looks dimmer. It's hard to name a consumer media company that started as a newsletter and got big.
The pandemic raises new questions of whether the company can move beyond its roots and stay relevant. While promoting the pop up, the founders talked about helping millennials and Gen Z spend their time well.
That mission made sense for a busier world that needed to cut through the noise. Now, not so much.
As one ex-staffer put it: "The premise was about saving time. Everyone has five minutes now."
SEE ALSO: BuzzFeed CEO Jonah Peretti faces his toughest leadership test ever as the media company could lose millions this year
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