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Medium CEO Tony Stubblebine declared on Friday that the platform has maintained profitability since August last year. That milestone evidenced the beginning of Medium’s profitability turnaround after years of financial struggle and operational missteps.
Additionally, Stubblebine detailed the path to profitability, which involved product changes, investor restructuring, and hard cost-cutting decisions. The Medium profitability turnaround began with layoffs, downsizing office space, renegotiating loans, and simplifying company governance.
Furthermore, he revealed that the company was losing $2.6 million per month in 2022 and was facing investor fatigue and subscriber loss. Similarly, Medium had no acquirer, and its membership was declining. Consequently, this development further emphasizes the urgent need for a profitability turnaround.
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Stubblebine said the only option left was clear: “Make Medium profitable or shut down.” Fortunately, the stark choice shaped the Medium’s strategy for turning around its profitability.
Medium Profitability Turnaround: Strategic Cost-Cutting Measures That Rescued Medium
Moving forward, the platform’s business model also contributed to its issues. Particularly, this is a single bundled subscription split among all writers. Medium also diverted focus to professional editorial content, overshadowing everyday writers sharing valuable real-life and academic insights.
At the time, Medium had over 760,000 members but was haemorrhaging cash. The profitability turnaround required bold changes across every department.
Product Innovations and Investor Restructuring Explained
On the product side, Medium launched Boost to enhance recommendations with human curation. Meanwhile, this was part of its turnaround in profitability. The Partner Program also changed to reward thoughtful writing, thereby boosting quality and user engagement.
The Featuring tool enabled the curation of valuable stories, helping Medium highlight quality content during the phase of profitability turnaround. Financially, Medium owed $37 million in loans and had $225 million in investor liquidation preferences. These liabilities were choking growth. Therefore, Medium had to address them as part of the Medium profitability turnaround.
Governance was a nightmare. Significantly, five investor tranches had to approve major decisions. Simplifying that this update was non-negotiable.
Medium renegotiated loans, eliminated liquidation preferences, and cut governance to one tranche, all under the profitability turnaround plan. It sold two acquisitions and shut down a third to streamline operations. Cleaning the cap table was vital. Initially reluctant, Stubblebine later agreed it was essential for the Medium’s profitability turnaround.
Moving Forward
It is noteworthy that the company convinced loan holders to convert debt to equity, threatening management’s exit otherwise —that forced movement. Only six of the 113 investors participated in the recapitalization. Stakes were diluted and governance rights given up to advance the turnaround.
Stubblebine praised easy-going VCs like Ross Fubini, Mark Suster, Greylock, Spark, and a16z for supporting the shift. Layoffs were also critical. The team reduced from 250 to 77 during the Medium profitability turnaround process.
I’m the same, same Cloud costs were optimized from $1.5 million to $900,000. Medium also exited an expensive $145,000/month lease in San Francisco. Employees received new equity because the old shares became worthless after the recap, a hard but necessary decision.
Previously valued at $600 million, Medium didn’t disclose its new valuation. It was inevitable that the post-profitability turnaround would be much lower. Stubblebine concluded, “I have no ego about valuation.” He added, “We are profitable. Others are not. That matters more.”
