Why Medium Was Losing $2.6M/Month and How Its CEO Turned It Around | Tony Stubblebine - CEO, Medium

What I'd heard about turnarounds is that a lot of it, thematically, is just confidence. You're building confidence everywhere. So like I could handle the job early on because I had so much experience with the platform, so I was confident from day one in my plan, right? And that helped to be a stranger surrounded by people that aren't confident in me. It's like the only way I could stomach it is I was pretty strict and confident in my plan. When people hear about being directive, which is what I think founder mode is, they think oh that person is going to be a micromanager forever. And I think they're missing the point. I think situational leadership explains it to you. No, no, sometimes you should be a micromanager in order to move the person into a different quadrant so that you can just delegate to them through experience. Managers should have a big toolbox, and one of them is being directive and the other is being a great delegator, and you need both. And the whole debate seemed to have missed that. It's like, okay, my whole identity forever is founder mode. Like no, no, for a period of time.

Yeah, I'm the second CEO of Medium. I think that's what put me on people's radar again. I've had a long career in tech, first as a programmer and I think an okay one. I wrote a programming book back in the day. And so I usually would describe myself as an operator. I've done all of the pieces of a company nearly. And before being a founder and then being the replacement CEO at a notable struggling startup that we've done a good job of turning around. Who was the guy who was CEO before you? Yeah, Evan Williams, who's been my boss two times. So the first time was at Odeo, which was a failure mostly, except we spun out the side project called Twitter, which most people would consider a success even though it's gone sideways in recent days. And then again more recently, he's my boss as the chairman of the board here at Medium. But he was the founder of Medium, he was the founder of Twitter, he's the founder of Blogger. Yeah, like just has done more for online publishing than I think anyone on the planet. But Medium had gone sideways in a way that I think was really challenging for people. And I was the power user of Medium. I think something like 2% of Medium traffic was going through a publication I was running, which no one person on a UGC platform should have that much. And because I already knew Ev the whole time I was building that empire, I was telling him what I was doing ahead of time. So he knew not only did I know how to be successful on Medium, but I knew why I was successful because I was predicting it every time ahead of time. And so I got this job as a credible operator, certainly a bigger management job than I've ever had, but really like the definition of Medium subject matter expert.

It was attached to my prior company, which had started out as a habit tracker. I think most habit trackers that you see today are kind of based on this one that we had built called Lift, and then got involved in coaching. It was all about self-improvement. And so we had this opportunity to build a self-improvement and productivity focused publication on Medium called "That Are Humans." And we were so successful, we started trying that model on different subjects. So we did one for programming and we did one for marketing. And programming was always such a large topic on Medium that that was the one that was the biggest of the three. But they were all around this idea that I'd learned earlier in my career about how to build a publishing operation around subject matter experts rather than around professional writers. It's like, easier to teach a professional how to write than it is to teach a writer how to be a subject matter expert. I learned that at O'Reilly, which was a technical publisher. So it was all like, hear from a personal trainer, or hear from a software engineer or a software engineering manager, hear from an actual marketer, their advice on how to do something, and learn from them that way. And we were just really good at understanding how to scale that on Medium, how to hit within the network but also how to hit within SEO, how to find credible authors. And yeah, surprised myself even by how big that got.

Sure, sure. So Odeo is a podcast directory in 2005-ish, and this was before podcasting was sort of adopted, embraced by Apple. So podcast pre-iPod, podcast pre-iPhone, right? And I think what people missed, this is like a go-to-market insight, I think is people missed what makes something worthy of hype. So in hindsight, what I think happened is the press thought they missed the boat on blogging. Like they were too late to understand the power of blogging. So Evan Williams had founded Blogger already and had been a big deal there. But now he goes to podcasting and everyone's like, we don't want to miss the boat. So now all of a sudden they're talking as if podcasting is a big deal. But we know through the benefit of history, podcasting wasn't going to be a big deal for another 10 years. So we were just inherently way too early. And the press was too early because they were over rotating on this myth that they had earlier. There's just too much hype for podcasting for what it was in that moment. 2005 was the beginning of the web 2.0 era, where all of these entrepreneurs were showing a different way to build kind of beautiful web apps, right? And there's a huge explosion of them because of Ruby on Rails. And we were a Ruby on Rails shop. And so I think we were one of the companies that was showing what could be done in the new era. A lot of that was defined by design. It was definitely a high design concept, and we were game to do it. I joined as the head of engineering. So you know, I reported to Ev, and Jack Dorsey reported to me. And I gave him a raise. Don't worry, I saw his talent. I gave him that 10% bump in salary at one point, and probably still not even six figures back then. I think I'm his last boss. And that's just, like to me that blows my mind. I had no idea he would become who he would become. I gave him a raise because he was a really good engineer, and it was fun to work with him. But you know, no one thought oh he's going to be like a Titan of Industry. You can't see that stuff that early sometimes. And so we were all gung-ho to do it, and then out of the blue Apple launched a podcast directory, and we just realized we were dead. And Ev did this amazing thing: he admitted it early and put it out to the company. We got to change. Who has an idea? And so we started working on a lot of different ideas in parallel, and one of these ideas is Twitter. Like, came from Jack. I remember him presenting it to the company, and it just had so much overlap with other ideas in the company. It was like it was the most consumer friendly version of what everyone wanted to do, which is messaging over cell phone, over text messaging basically. So we carved out three out of 16 people to work on this thing. I mean, the thing that stands out to me is even though it was such a big success, and even though we believed it was worth our time, no one at that in the beginning thought oh we can see it all the way through. Even a year in, it felt like it was different things to different people. But the metrics probably showed it was working well. But yeah, the metrics back in that day were like 150 people using it.

Uh, it was really impossible. Well, yeah, I mean, Evan was an investor in a company I was at right after business school that did online video search. I started two weeks before YouTube got acquired by Google, which was bad for us being a video search company. But it was funny after that kind of wound down, somebody's like, oh you should call Ev and see if you could work with Twitter. And I was like, oh it's too late, it's already 45 people. I think I want to go to like a real early stage startup. So you know, it's the curse of my career is just calling stuff way too early, like you said about Odeo. But I think that it's hard for people to remember like 150 users back then, like there was no iPhone. Even 150 users today, you know people say get your first 100 users and see how they use your product. Right, like back then that was actually, you know, it wasn't a business yet, but it was like oh that's a lot of people. And you know what made it special, and this is a go-to-market, this is how I've always seen how to do go-to-market. There were 150 cool people. Right, right, yeah, it was very hip. So it was either like a Titan of industry or a direct relative or close friend of mine. Like everyone that I was connected to I had was very interested in being connected to. And like, you know, Facebook wasn't open at that point either, so interactions that you might have today on Facebook I had that with my youngest sister on Twitter because I couldn't connect to her on Facebook. But so that density, sometimes people tell you that when you get to 100 users, but it's like 100 users with a real density of passion for what you're doing. Right, and Ev has always been really good at that. I think he did a good job of that with Medium as well, where the early adopters were all people that wanted to talk to each other. And that's because he has a good network. And he's um, yeah, so that's that was a good lesson there. And we had that in Odeo too, that's why Odeo looked good for a moment, even though you know fundamentally it was never good work well.

Yeah, with Apple Podcast, like it was over. But I'm curious, like, was there anything you could have done? Or yeah, thing that really stands out to me with startups now versus then is we're much more willing to take a partially thought out idea. Like even back then, it didn't have a business hypothesis, it didn't have a super strong growth hypothesis other than maybe SEO or like people would put their podcast there and share it. So it's only really a partially thought out business. And now when I talk to entrepreneurs, I'm often really amazed by the depth and breadth of thinking that they have across the board. It's a little less throwing spaghetti at the wall sometimes with the best entrepreneurs. So I think it might never have worked just because structurally there was nothing in the concept that would equate to a full company. But I think the other thing was just too early. There weren't enough podcast listeners back then to make it a venture scale business, and the podcast market didn't materialize fast enough for this to be venture backed. I think you know, Libsyn is still around, right? Because they weren't venture backed. They structured their company to match the pace of the development of the market. And so I think that's really the reason that Odeo never would have worked even if Apple hadn't done anything. You know, we were trying to go big or go home, and there was nothing big to do until we're in the like mid 2010s.

Yeah, no, that's a great way to put it. I think to many people, I was like this, I was super attached to making my startup work because it seemed like it should work. And the more we tried to sell the stuff, the more it was clear that people didn't want what we were selling. The technology didn't quite do what it needed to do. And letting it go was super important in an ability to move on.

I mean, being a big partner with a bigger company, you know, being a partner to Medium, having a lot of the traffic going through my publications and like having it be a big part of my business makes you really sensitive to whether or not your partner—Medium in this case—is making the right decisions. I would just say I was livid. I was constantly livid, and I was not shy about telling Ev like what are you doing? This is wrong direction. Here's why, here's where it won't work. And you know, he's patient and we're friends and we had that level of trust. But yeah, I was pretty worried that this business that I built there was just never going to last because it seemed like Medium was going so sideways. And I also was close enough with him to understand that he was more than normal very frustrated. And the hold up for kind of having a conversation about me coming over and running it is that he tried to bring me in earlier to just be an exec, and I tried some version of the George Costanza, it's not you it's me. And what I told him is, I said I just didn't want to tell him that I would hate working for you, you know? I just, I'm too, I really like I value my freedom. I'm not cut out to be an exec. I'm cut out to be an IC or a founder, like one or the other. It doesn't have the skill set for consensus building that I think a lot of executives have. And so what I told him is, I've gone feral, and you're never going to catch me in an office again. So I used this like hyperbole to make him not feel bad. I was just like listen, I'm heading towards half retirement, I've got hobbies, you're not going to drag me into some office. And so he'd taken that to heart. So a year before I joined as CEO, I could see he was acquiring companies, and I thought that he was trying to acquire a replacement CEO. I said like what are you doing? Why don't you bring me in? I kind of pitched it a little bit. I actually pitched him to be the co, like a president partner, and it just didn't make any sense to him because I'd already told him I'd gone feral and I just can't walk it back. So then later, fast forward like nine months, he was contemplating a pivot that didn't make any sense to me. And so I called him up and I asked him, have you lost faith in your original hypothesis? Essentially that if you build a UGC platform around a subscription, you'll change the incentives in a way that's healthy and unique on the internet. He took a pivot away from ad businesses for a really strategic and mission-driven reason that I was fully bought into. And the second he did it, I could see like 10 years into the future why this is going to be good. And what he told me is, he said I still believe in the hypothesis, I just don't think we can execute on it. And that's when I just lost it. I was like, oh, you're sitting on a winner and abandoning it because you can't execute on it is a dumb reason. Winners are precious. You know, there's so few winners on the internet, especially one that could do real good in the world. And counterbalance all the content mill content you see the rest of the internet. We have our own lower content mill, but what we're generally recommending to people is just very different and much deeper than anywhere else. I just thought like what are you doing, dude? Don't do this. If this is just a matter of execution, can I propose that I take over the execution? He's like well, and I was like listen, let me apologize. I thought about why he'd turned me down nine months prior. I said let me apologize about this "gone feral" comment. Here's what's actually going on. And so I promised my partner Sarah that we'd have a vacation. I was like no work, I swear, no work. But then I at the same time promised Ev I'd get him a proposal. And so we went to the Caribbean. I basically we sat by the pool, and I was like she was reading and I was thinking it out in my head, and then occasionally turn to her—she's a tech executive—turning there and being like hey what do you think about this? What do you think about this? And then I just bust out this strategy dock essentially that ended up being like 88% of what we actually implemented. I just could reason it out from having been a longtime part of the platform, and it's what we've used over the last two years to turn Medium around.

This experience has been really validating for me. I've been a CEO of my own companies, I think for 15 years, and I'd always managed to drag them to break even. I would really have a point of professional pride around we're not starting products, we're starting businesses, and businesses make money. I've just always kind of had that mindset, which is not the universal mindset for Silicon Valley startups. But you know, I'd done that, but they weren't really big successes. And enough that maybe I was comfortable telling people I was half retired. But I really thought I could have done more, and I just hadn't had the opportunity. And so to come in and do a turnaround, I don't go like pitch though I'm a great CEO. Like, most companies fail. I ran something that worked, right? And so now I get to feel like okay, those 15 years of grinding away on pretty mediocre companies actually did learn something. And could come into a bigger, more important organization and feel confident about doing that work. But yet it was not, I mean, 15 years, that's like what I want to underline. It took me 15 years to be like, yeah, okay, I'm okay at this, you know?

Yeah, I mean, there's so many lessons in having to make payroll. I think without getting investor money to make payroll, that's not a lesson that anybody really benefits from. But like the point, I mean, it was one company I worked with where somebody wanted to give everybody a day off for Employee Appreciation Day. And maybe I'm old, but I was like, I don't remember this being a thing. And anyway, we have unlimited PTO, like why? Right? But do you know how much that costs the company? Like we're not making money, and you're going to give everybody just shut. Like, if you've run a company that actually has to make money to pay people, you're like, no, there's no free day off just because it's a thing. That isn't a thing. And I think it's hard, what's right? I don't know, they both could be right. But I think if you put yourself in a position where you're always needing investor money, you can end up not getting more. I don't know what's right for other people, but that's why I called that a point of professional pride. For myself, I think we're building businesses, and so I have to think that way, and I have to try to make that actually happen. Well, and as you said, as a partner right with 2% of the traffic, you want a company that's a going concern and not dependent on its benefactor to continue to exist. Right? There's a fundamental philosophical difference.

Yeah, it's interesting. I've never really seen a blogging platform stick around. You know, it's like no one's had 20 years of ambition. So it's always like temporarily a competitive market. I'm always unclear if it'll stay that way. I'm really hoping like we can put Medium in a position where it can keep its ambition for a long time. The reason I think is so interesting about having done Medium versus having been part of Odeo is Odeo never would have worked no matter how well we executed. But Medium is the same product, same strategy, same idea, and it was operated in one way that wasn't working and in a different way that is working. Right, so it's like you get a clean AB test of entrepreneurship very often. It's like this way or this way. And what's cool also is I get to talk about it because Ev already has this reputation as great ideas, not a great operator. People already think that about him. So I sort of had this like green light to say I am operating Ev's idea, and maybe mistakes were made, but not ruining his reputation. He still created you know most of what we read on the internet came because he made happen. So I came in and here's the problems. It was very expensive to operate. We were losing $2.6 million a month. Like how does that break down? I'm just, as an entrepreneur, it's like okay, well is it all AWS? Is it salaries? Is it we have a nice offsite every quarter? Well now we do have offsites, we have the money to have two offsites a year. Offsites are surprisingly not that expensive. We do around $55 million a year on gross revenue right now, and the offsites cost us about $200,000 each.