Bryan Goldberg: I remember on New Year’s Eve 2019, I was thinking to myself: “Maybe this will be the year where there are changes, and it becomes clear that the bottom’s behind us.” And really, the first quarter of 2019 was probably the most dramatic, in terms of all those flashing signs that tell you that we are at or near bottom. We had a bunch of layoffs — Huffington Post, BuzzFeed — and some decent deals to get done and at really distressed prices.

It’s a broken market. Not just in terms of prices we’re getting on assets — it’s a broken market in terms of just sort of a liquidity crisis. That’s how I describe it now: There’s just sort of a media liquidity crisis that’s driving prices to be even more nonsensically low. But there’s just going to be beneficiaries of that. I mean, that’s the nature of the market, right? I kind of view it like the real estate market in Florida was in 2010.

Goldberg: My thinking is by 2020. I think this window is maybe another 12 months, and then people are going to start to enter. You’re going to see private equity enter. I don’t think you’re going to see traditional media getting involved in that position, but I think you’ll start to see private equity get involved, if prices get low enough, and see what they can do.

Goldberg: I think I would say it’s panic of non-participation.

I mean, you just can’t get many venture capital or private equity guys to move, because unlike real estate you can just buy and sit on, you’ve got to operate these assets. And people just have no idea how to do that. Advertising by its nature is an incredibly intimidating business for most people with a finance background. I mean, when I talk with VCs and private equity guys about advertising, they just clam up. They’re scared because it’s not a terribly rational, straightforward business, and you got a lot of VCs applying these ridiculously simple frameworks trying to figure it out. Saying things like: “Wait a minute, inventory impressions times CPM equals your revenue potential.” It’s like, no, that’s not really how it works. They’ll say sometimes: “You know, we can’t get our heads around this business.” And it’s like, yeah, you can’t. You’re finance guys.

So you’ve got that double problem. You’ve got the liquidity crisis that mirrors the real estate debacle of 2010. But unlike the real estate debacle of 2010, you actually need people who can operate. It would almost be as if the only people who could buy real estate in 2010 were contractors or developers.

Goldberg: The prices have gone low and we’ve basically come in here and said, look, we have two major advantages over pretty much everyone. One, we have a platform, so we have infrastructure. And infrastructure for digital media’s gonna cost you — if executed more or less perfectly, you’re still going to have to spend about $150 million of cash just to get to that infrastructure. You need to get a scale to get a CMS built to scale.

And then the second thing we have is just operational expertise. I mean, I’ve been doing this about as long as anyone I ever talk to. I started Bleacher Report in 2005. We’ve built a great team around it, so we know how to operate. We’ve got the platform to operate, and so we can buy things like Gawker.

Goldberg: Well, technically it’s $80 million. We raised another $30 million of cash, and typically when we do deals, it’s a mix of cash and equity. Usually more equity than cash. And if we keep top executives like Josh Topolsky [founder of The Outline], we’re going to grant them some shares too. So for every dollar cash, maybe we’re doing two dollars of equity. And we’ll probably raise more at the end of the year — or if we find a big target that requires cash, we would raise around that.

Goldberg: It varies, but there’s a couple things we try to do. We try to keep the revenue per employee north of $400,000. North of $300,000 revenue per employee, you’re typically not earning a lot of cash. $400,000 per employee puts you in sort of a nicely profitable position.

When all was said and done at the point of close, Mic was kind of in that $300,000 range. When we look at The Outline, we basically said we could be in The Outline and the stuff that we expect Josh to launch — how fast can we get it? If he’s successful in the launch of the tech platform [which Bustle Digital Group will launch later in the year], he could do even more than that for us, simply because we don’t really play in that category. We have all those advertiser relationships with the Samsungs and Microsofts.

Goldberg: We’ve done deals with them. Every time we do a deal with them, it’s for a female-specific campaign. Overall, we’re going to be leveraging our sales force of 28 ad sellers. Then, behind them, you’ve got about a dozen planners, a dozen account managers, maybe eight or nine marketers, and that doesn’t even count the brand and content folks, which is probably another 50 people. You’ve got behind them about a 100-person revenue organization.

So we’ve got really an army behind what it is that Josh Topolsky’s going to do in the next year, and he didn’t have that before. And frankly, I think we can all agree his ambition [with The Outline] was kind of shooting for the moon. But now we’ve got a real rocketship behind him.

Goldberg: It’s going to vary by property. The freelancers are a big percentage of the content, but we do have editorial staff, which I want to say is around 100 people. Then probably about 200 freelancers on top of that. And we actually pay pretty competitively. People always presume, “You must be getting sort of favorable pricing on writers and editors,” which really isn’t true. That’s sort of a presumption. We do have a lot of writers outside of New York, so it’s typically on a geographic basis. We’ve built a pretty big bunch of freelancers who are paid competitively — they just have to be in places where those rates are more than livable. I think when things get thorny is when people are expecting to make a certain wage and live in prime Manhattan. That’s when things can get tough.

Goldberg: Yeah, and a little social media editing as well.

The money in the social media stuff hasn’t really panned out the way we wanted it to, or at least hoped it would. And you’re right. You know that both Bleacher Report and now Bustle and Rachel Zoe aren’t New York-centric the way some of the news looks. Even the way Condé Nast is —Meredith is probably the best analogy. I tell people we’re the “Condé Nast of the digital age.” It’s a little sexier than saying “the Meredith of the digital age.” Meredith has been good. They said: “Look, if a lot of our coverage is going to be service and lifestyle journalism, we can have writers across the country and places like Iowa or the Midwest.” I think New York tends to get a little bit in New York’s own head.

Goldberg: Meredith has turned over a lot of folks.

Goldberg: It’s two things. One is you’re right that cost-cutting is sort of the only game in town. And for Meredith, it’s cost-effective, but it’s kind of not the game we’re playing. If they wanted to buy us, they’d have to pay a growth multiple, because we’re growing really fast. I just don’t think they’re in a growth mind. I think they’re sort of in an annuity mind.

In terms of Condé Nast, why couldn’t they go do what we just did? The answer is they could have. The Newhouses certainly have the capital to do it. But the switch from traditional was so slow — it was just so slow-moving and so gradual that they never had sort of an “aha!” moment where they said: “Oh shit. We’ve got to flip the switch here and become a digital-first company.” That moment never came.

Goldberg: I mean, I think he’s done a solid job, and I think he’s well regarded for that. I think he’s pushed to move print to digital, but he’s still facing reality. And the reality is that the bread basket for Town & Country — or you look at Elle or Harper’s Bazaar — that’s definitely never going to be digital first, and they’re still making a lot of revenue at least in print. And so how did he transform something like Town & Country to digital? You can’t. He’s sort of been forced to take a small subset of publications like Cosmo and really focus on the flagship ones for digital. Some of these smaller, more niche lifestyle publications, they’re just never going to move to digital. There’s not a lot that he can do to solve that problem. You know, Cosmo made a decent-enough move to digital. But it just can’t be a digital-first company. It just can’t. You look at Esquire as well — they’ve moved to digital. They’ve done some good stuff in digital. No one’s saying that Esquire digital is a failure. But you can’t replace what Esquire was in a print magazine two decades ago.

Goldberg: I think the hard part for something like Esquire or Harper’s Bazaar in digital — even to some extent Vogue — is that you get into the scale game. Digital demands greater scale. I just don’t know how many men are trying to figure out if corduroy is back in fashion.

I always say digital demands a scale of, like, 5 to 10×. So I don’t know what the circulation of Town & Country is — maybe it’s half a million readers. But you’d need to get that to maybe 5 million readers, and the nature of Town & Country… [Update: Hearst noted after this interview was published that Town & Country currently gets 6.7 million monthly uniques per comScore, as compared to a 475,000 rate base in print.]

Goldberg: Yeah. And you know, you wonder how much of that revenue at first is legacy subscribers. How many people are 79 years old and they just don’t even remember that they keep paying the Town & Country subscription fee?

Goldberg: It’s a large number, and that’s their business, like it or not.

Goldberg: No, with the exception being about 10 percent of our revenue is from commerce — from affiliate commerce, people buying.

Goldberg: That’s growing fast for us. The tickets from events will now be a big slice of revenue. You’re probably talking, you know, hundreds of thousands of dollars this year, which is not super needle-moving for us, but when you package it with advertising, it’s sort of part of the program. And those events, when packaged with a large-scale program, are really compelling to advertisers.

And I’d like to see that grow on. It’s not going to be 50 percent, but I’d love it to be 20 percent in the next year or two. And I love that because we have enough clients who are doing multimillion-dollar relationships with us where we can say: “Look, it’s part of a $2 million yearlong deal. You’re going to have a presence in these major events.”

Goldberg: Yeah, and that’s critical. You’d be surprised at how many investors don’t even distinguish. I tell them: “Look, Facebook and Google aren’t really equipped to do what we do. At best, they can run some rotational inventory, but it’s not going to be a fit for any fashion company.” I mean, could you imagine Gucci using ads on Google? Could you imagine Gucci having a tiny little icon on the Facebook screen?

They need more interesting, engaging ads and more contextual ads, and that was part of why we did the Outline deal. In addition, we did because our engineers said, “Hey, we like what these guys are doing with more complex advertising, and we want to be able to distinguish our ads from what you could buy with Google and Facebook.” And we have to be telling that story. And we’ve got to be living up to it.

Goldberg: Yeah. About two-thirds of our revenue is brand advertising. And that’s why we’re replacing magazines.

Goldberg: I mean, I think Vox does some things well. I just don’t think they’re in the right category, because they’re not in a lucrative brand-organizing category. They’re not doing beauty dollars, they’re not doing fashion dollars.

Goldberg: I think they’re a little bigger. They’re probably in the mid to high hundred millions, so they’re 30 percent bigger, 40 percent bigger. But the key thing is they raised three or four times as much money. That to me is sort of an efficiency thing. And you know they can’t really change that historic valuation.