The second half of 2023 and the beginning of 2024 have been a tale of two businesses.

On the one hand, our historical business in mass traffic and programmatic advertising has hit new levels of instability — much as we expected. I’d like to say it was the worst of times, but it can definitely get worse.

On the other, we’ve seen the kind of returns in our new lines of business — focused direct relationships with our readers and high-quality sponsor activations — that indicate it is time to see if and how far they will scale. 

If they prove scalable, then the best of times may still be ahead of us.

Financial Update

Overall, the group remained profitable in 2023, but the margin decreased as we saw traffic decline somewhat while we also made big investments in the new model. This year, after further instability in traffic and even more investments in our future, we’ve started at a combined loss through May 31. Given our expectations of platform instability (not to say hostility, but also not NOT to say that either), the loss was obviously not unexpected. However, as we’re gaining traction in the new business across the board, we hope to at least moderate the loss, while setting us up for significant growth and profitability in 2025 and beyond.

Nautilus

Last year, Nautilus produced a very strong monetization rate with an average of 100,000 monthly active registered users. Revenue was up 36% to the previous year, a 200% improvement in the growth rate. 

The rate of monetization beats many competitors, which validates the demand for both our membership and our sponsor products. But we’ve also seen some similar companies with larger audiences doing even better, meaning we’ve still got room to expand the monetization rate as well. 

Since the fall we’ve been focused on proving strategies to scale up the audience and the revenue alongside it – though we do expect there to be a lag between audience growth and revenue growth, both because of sponsor sales and conversion cycles and reaching “critical mass”.

At the same time, we’ve been refining the product and improving engagement, with recent numbers topping industry benchmarks across the board. That meant launching more short-form editorials that are still in keeping with the spirit of Nautilus to complement our long-form work. And we’ve begun working in new formats, with our first video podcast series launching a couple of months ago (artists read Nautilus articles). 

In early 2023, we went down a couple of blind alleys, but by the fall, we thought we’d found marketing and promotion strategies that could be very successful for Nautilus. We are now working to learn if the audience is scalable and if our economics hold even as we grow faster and faster. 

Passionfruit & One5c

Overall, we’ve seen good evidence that one5c and Passionfruit are at an earlier point on the same path. It’s too early to be very exact, but the data we have so far is in line or better than what we’re seeing at Nautilus.

Passionfruit has, I think, the strongest editorial voice among its competitive set undergirded by comprehensive platform news for the target audience and small (given it is still early stage) but strong community events, both online and off. In addition to superb engagement metrics, we get a ton of anecdotal evidence that the editorial is resonating strongly.

One5c is laser-focused on the green-curious—people who are early in their journey to climate friendliness. We’ve been methodically testing what works and have found that our audience is coming to us for practical advice, so we’re doing our best to give it.

Both have grown quite a bit and maintained their engagement even so. one5c now has more than 15,000 monthly active readers, and Passionfruit has more than 40,000. 

Neither, of course, has a fully operational sales team. However, both have shown impressive early monetization. 

Daily Dot

Daily Dot is experiencing the full measure of the platforms’ instability, resulting in erratic traffic even as monetization remains super strong. 

When it comes to membership, Daily Dot is unfortunately further behind than we’d like. Engagement showed very strong improvement throughout the year ending 2023 above benchmarks. However, we transitioned to a new ESP and have seen poor engagement ever since, a pattern that is not repeated at any other title, so we are unsure what to make of it. We still get tons of positive feedback from our audience and we are testing new marketing strategies, but it is not ready to get out of test budgets.

We have long expected the platforms to decline and so we have kept expenses carefully controlled even as we invest in a new model. As a result, Daily Dot has remained profitable — but of course, there are limits to everything so I cannot be sure how long it will remain so.

The good news is that this is exactly what we’ve been preparing for and we are concurrently ready to start scaling the new lines of business at our sister properties as outlined above.

***

Given the excellent return on investment we’ve seen at Nautilus, and the directionally similar data at Passionfruit, and One5c even at their small sizes, it’s time to see if those results are scalable.