Screenshot of the TheMessenger website.
Source: TheMessenger
The Messenger, the struggling news media startup co-founded by publishing veteran Jimmy Finkelstein, is urging potential investors to make a long-shot bet on a dramatic rebound in advertising this year.
The company is attempting to stop the cash burn that has put it in jeopardy.
CNBC has obtained an investor deck The Messenger was using as recently as late December to entice potential individuals or companies to infuse it with $20 million.
The Messenger, which started in May, launched on the idea of becoming a down-the-middle digital news juggernaut. It initially planned to hire around 550 journalists and generate over $100 million in revenue in 2024, according to The New York Times. The company ended up hiring a staff of 300 people and has since struggled financially, which has led to some recent layoffs, according to multiple reports.
The Messenger ended 2023 with a net loss of $43 million, according to the documents. The deck tells investors that with the infusion, the company plans to end 2024 profitable, with net income of $13 million.
The Messenger confirmed to CNBC that the deck was part of a “draft presentation,” and said there have been “adjustments” to the numbers within the documents and that the company intends to “make $13 million and be profitable in 2024.”
“It should also be pointed out that our traffic is growing at an enormous pace. Comscore latest numbers 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 30% a month, already putting us ahead of many major news publications,” the company spokesperson said in a statement to CNBC.
The documents say that The Messenger is planning to eliminate 40 positions and furlough 15 people for four months this year amounting to an estimated $6.2 million in annual savings.
That’s one of the details that’s since changed, according to a spokesperson. The company laid off about 25 people last week to save cash, as first reported by The New York Times.
“The layoffs impacted two dozen people, not 40, which was one of the adjustments made to the presentation,” the spokesperson said.
Betting on advertising turnaround
The immediate turnaround will be based on what could be an insurmountable climb in advertising sales. In 2023, The Messenger took in $2 million in direct ads and $1.8 million in programmatic advertising. This year, The Messenger forecasts it will bring in more than $18 million and $37 million for each, respectively.
“By 2024 The Messenger will be a known brand in the United States which users will know and make part of their daily media consumption habit,” the company says in its investor deck. “The attention paid to media in 2024 is expected to be very high. We have a critical U.S. Presidential Election in 2024 with political and related news content in high demand as well as news events such as debates, primary voting, and conventions.”
While U.S. companies are counting on political advertising to boost sales in 2024, digital media companies that rely on advertising have been ravaged for years by Google, Facebook and Amazon, which have sucked up available inventory. This has crippled companies such as Vice Media and BuzzFeed, which grew too quickly amid advertising revenue declines.
The Messenger will be relying on Google search to drive programmatic advertising. On the direct side, $10 million of The Messenger’s forecast $18 million will come from Messenger TV, a yet-to-be-launched service that will require 19 additional employees, the presentation shows.
Most of the Messenger’s expense has been head count; it spent about $39 million in 2023 to hire hundreds of employees.
Despite the hope of a financial turnaround, the deck indicates that there is no plan for The Messenger to cut back on millions of dollars in spending. For instance, with the creation of Messenger TV, overall personnel expense will rise to more than $48 million in 2024.
The Messenger expects to have open its three facilities in New York, Washington, D.C., and West Palm Beach, Florida, according to the deck. The facilities payments are estimated to exceed just over $240,000 each month this year.
Travel, meals and entertainment expenses at The Messenger are estimated to be more than $1.7 million by the end of 2024, with the company expected to spend over $140,000 each month of 2024.
The Messenger highlighted the severity of its cash problems and illustrated the tough sell it will have to make to investors for more money.
The company had negative cash flow of $3.8 million in October, according to the deck. It then added $5 million in November and an additional $1.7 million in “incremental investment” to stem the cash burn.
But the business has already incinerated the incremental investment in two months, the deck says. The Messenger ended December with $667,000 in cash. It plans to end January with monthly cash burn of $4.2 million, pushing the company into negative cash territory by the end of the month.
While The Messenger plans for the advertising market to turn later in 2024, it acknowledges the business will likely hemorrhage cash in the coming months.
Without additional investment, The Messenger predicts, its ending cash balance by June will be negative $16 million. The company predicts operations will generate positive free cash flow in August.
