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July 24, 2024
PI Global Investments

The Messenger, Which Aimed to Transform Media, Faces Dire Financial Straits

Shortly before the media start-up The Messenger launched last year, its president said the company planned to generate more than $100 million of revenue in 2024. It will need a major turn in fortune to get there.

The site generated about $3 million in revenue last year, according to two people with knowledge of the company’s financial results. And it has told potential investors that it had only $1.8 million in cash on hand at the end of December, after losing about $38 million last year, putting it under severe financial strain.

The operating results of The Messenger — which until now had not been fully disclosed — underscore the difficulties facing the company. The founders, who raised $50 million to start the website, initially said their aim was to transform coverage of U.S. politics, culture and sports. But it has run into editorial and financial troubles.

This week the company is laying off roughly two dozen employees, including those who covered national politics, science and technology. It is raising money from investors to maintain its operations through this year. On Tuesday, Richard Beckman, a founder who was a long-serving executive at the magazine company Condé Nast, announced he was leaving the company.

Kimberly Bernhardt, a spokeswoman for The Messenger, pushed back on the idea that the company was under “dire” financial strain, adding that The Messenger booked as much revenue in January as it did all of last year.

Ms. Bernhardt said the company had already raised more than $10 million in its latest funding round. She added that the company was also “planning to introduce events and The Messenger TV” and that its finances would reach break-even later this year.

“The Messenger’s revenue will continue to increase and its expenses will continue to shrink over the course of the year,” she said.

The Messenger’s troubles highlight the difficulty of starting a media company reliant on digital advertising, which has been the main source of revenue for the company.

The site has struggled despite having longtime media executives as founders, including Jimmy Finkelstein, whose career has included stints running The Hollywood Reporter; deep-pocketed backers, including Josh Harris, a co-founder of the private equity firm Apollo Global Management; and journalists with experience at premier publications.

The company has also run into some editorial problems. Gregg Birnbaum, a widely respected politics editor, quit in May after a clash with an audience editor at the site. Some staff members have chafed at demands to churn out stories based on articles published by their rivals.

But it has begun to gain traction with readers, according to figures from the measurement firm Comscore. The Messenger told potential investors that it attracted 24 million visitors in December, a 24 percent increase over the previous month.

As of last year, The Messenger was projecting just $75 million in revenue in 2024, according to the two people with knowledge of the company’s finances. About $10 million of that projection is to come from the not-yet-started TV division.

The company’s costs exceeded $40 million last year, the two people said. Much of those costs — more than $8 million — came from lease obligations for its office buildings. The Messenger has offices in New York, Washington and West Palm Beach, Fla.

The valuation of the company for the funding round underway is unclear, according to the two people. Axios reported earlier Thursday that the company was seeking to raise $20 million.

Upon hearing the news of the newsroom layoffs, many of the company’s employees called for more transparency from Mr. Finkelstein on the internal messaging system Slack, demanding an employee meeting to discuss the company’s financial state.

In an internal memo on Wednesday, Mr. Finkelstein described the decision to lay off employees as “tough.”

“I understand this is hard, and I am genuinely sorry for those impacted,” he wrote.

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