Screenshot of TheMessenger website.
Source: The Messenger
The Messenger, the struggling news media startup co-founded by publishing veteran Jimmy Finkelstein, is urging potential investors to make a long-term bet on a dramatic rebound in advertising this year.
The company is trying to stop the cash burn that has put it in jeopardy.
CNBC has obtained an investor platform that The Messenger was using in late December to attract potential people or companies to pour $20 million into it.
The Messenger, which started in May, launched the idea of becoming a mid-tier digital news giant. It initially planned to hire about 550 journalists and generate more than $100 million in revenue by 2024, according to The New York Times. The company ended up hiring a staff of 300 people and has since had financial problems, leading to some recent layoffs, according to multiple reports.
The Messenger ended 2023 with a net loss of $43 million, according to the filings. The deck tells investors that with the infusion, the company plans to end 2024 in profit, with net income of $13 million.
The Messenger confirmed to CNBC that the platform was part of a “draft presentation” and said there have been “adjustments” to the figures within the documents and that the company intends to “earn $13 million and be profitable in 2024”.
“It's also worth noting that our traffic is growing at an enormous rate. The latest Comscore figures show that we generated 88 million page views in November, and Google Analytics shows that we generated 100 million page views in December. Our traffic is growing at a Huge pace. 30% monthly, which already puts us ahead of many major news publications,” the company spokesperson said in a statement to CNBC.
The documents say The Messenger plans to eliminate 40 positions and furlough 15 people for four months this year, representing an estimated annual savings of $6.2 million.
That's one of the details that's changed since then, according to a spokesperson. The company laid off about 25 people last week to save money, as The New York Times first reported.
“The layoffs affected two dozen people, not 40, which was one of the adjustments made in the presentation,” the spokesperson said.
Betting on the advertising change
The immediate change will be based on what could be an unbeatable increase in advertising sales. In 2023, The Messenger raised $2 million in direct advertising and $1.8 million in programmatic advertising. This year, The Messenger predicts it will raise more than $18 million and $37 million each, respectively.
“By 2024 The Messenger will be a well-known brand in the United States that users will know and make part of their daily media consumption habit,” the company states in its report to investors. “Media attention in 2024 is expected to be very high. We have a critical US presidential election in 2024 with political and related news content in high demand, as well as news events such as debates, primaries and conventions.”
While American companies are counting on political advertising to boost sales in 2024, digital media companies that rely on advertising have been devastated for years by Google, Facebook and Amazon, which have absorbed the available inventory. This has crippled companies like Vice Media and BuzzFeed, which grew too quickly amid declines in advertising revenue.
Messenger will rely on Google search to drive programmatic advertising. On the direct side, $10 million of The Messenger's anticipated $18 million will come from Messenger TV, a yet-to-launch service that will require 19 additional employees, the presentation shows.
The biggest part of the Courier's expenses has been headcount; He spent around $39 million in 2023 to hire hundreds of employees.
Despite hopes for a financial recovery, the deck indicates there are no plans for The Messenger to cut millions of dollars in expenses. For example, with the creation of Messenger TV, staff overhead will increase to more than $48 million in 2024.
The Messenger hopes to have opened its three facilities in New York, Washington, DC and West Palm Beach, Florida, according to the platform. Facility payments are estimated to exceed just over $240,000 each month this year.
Travel, dining and entertainment expenses at The Messenger are estimated to reach more than $1.7 million by the end of 2024, and the company is expected to spend more than $140,000 each month of 2024.
The Messenger highlighted the severity of its cash problems and illustrated the difficult sell it will have to make to investors to get more money.
The company had a negative cash flow of $3.8 million in October, according to the platform. It then added $5 million in November and an additional $1.7 million in “incremental investment” to curb the cash burn.
But the company has already incinerated the incremental investment in two months, the platform says. The Messenger ended December with $667,000 in cash. It plans to end January with a monthly cash burn of $4.2 million, which will push the company into negative cash territory by the end of the month.
While The Messenger plans for the advertising market to turn around later in 2024, it acknowledges the business will likely hemorrhage cash in the coming months.
Without additional investments, The Messenger predicts, its ending cash balance in June will be negative $16 million. The company predicts that operations will generate positive free cash flow in August.
