Medium, the once-promising platform led by Twitter cofounder Ev Williams, is losing 50 staffers -- about a third of its workforce -- and will undergo a radical overhaul to fix what the CEO has deemed a "broken" business model -- advertising-supported online publishing.
Williams touted the company's successes in a post announcing the layoffs, but said that change was needed to address several major business shortfalls that otherwise would continue to plague it.
"We reached this decision when Medium's management team came together to review the last year and take a hard look at our business -- where we are and where we're headed," Williams wrote. "While we could continue on our current path -- and there is a business case for doing so -- we decided that we risk failing on our larger, original mission if we don't make some proactive changes while we have the momentum and resources to do so."
The company will shut down its New York and Washington D.C. offices, cutting some employees from those locations while allowing others to work remotely. The vast majority of product development and engineering teams will remain intact, according to Williams.
Promoted Stories, which the company launched in beta last year, will be impacted, while Memberships, which allows publishers to post under a subscription model, will not, a source familiar with the firm told the E-Commerce Times. Therefore, micropayments and membership could be a future business model.
Key metrics in 2016, including readership and published posts, were up 300 percent compared with the prior year, Williams noted.
However, the platform's 2012 launch grew from concerns that the incentives driving the creation of content failed to serve both the people creating it and those consuming it. Those incentives served only to drive the creation of content at a lower cost, despite the resulting lower quality and lack of original thought. That system was unsustainable in the long term, Williams said.
The vast majority of ad-supported content today, including articles, video and other content, is paid directly or indirectly by corporations that fund it to advance their own goals, he noted.
Content is measured, amplified and rewarded based on its ability to accomplish those goals, Williams maintained, rather than on the value it provides.
Online news publishing is "undergoing a reflection period" following the uproar over fake news that dominated the debate after the U.S. presidential election, said Zack Fuller, paid content analyst at Midia Research.
"What has become apparent is that the economics of ad-supported news and content presently favors reacting both as fast and sensationally as possible," he told the E-Commerce Times, "neither of which are intuitive to the quality content platform that Medium positioned itself as."
Platforms like Medium will continue to struggle until the monetization dynamics are amended through developments such as micropayments, Fuller said.
Medium is operating in an environment where social media platforms like Facebook and Google are dominating 99 percent of the growth in digital ad revenue, and the rest of the industry is fighting for that remaining 1 percent, said Jason Kint, CEO for Digital Content Next, the trade organization formerly known as the Online Publishers Association.
"That's entirely unhealthy," he told the E-Commerce Times. "We've never seen anything like that in the industry."
Facebook and Google capture about 75 percent of overall digital ad revenue, he noted, citing data from Brian Weiser, an analyst specializing in AdTech for Pivotal Research.
Medium is at the same time a special case and a barometer for shifting digital business models, suggested Rick Edmonds, a media business analyst at Poynter.
"The unique selling proposition for Medium seemed to be that it was a writer-friendly platform with a strong distribution component," he told the E-Commerce Times. "That part is unusual, and they delivered -- great display, a classy venue for a variety of written work."
Medium has pursued a common but not widely recognized strategy for digital startups, Edmonds added, in that it built awareness first, while it learned along the way in order to fill in the details of its business model.