Medium’s CEO Explains How the Platform Halted a $2.6 Million Monthly Loss and Achieved Profitability
Medium CEO Tony Stubblebine recently announced a significant turnaround for the popular publishing platform, confirming its profitability since August of last year. This remarkable achievement follows a period where the company was hemorrhaging $2.6 million per month, facing subscriber attrition, dwindling investor funding, and a lack of acquisition interest. Stubblebine’s detailed account reveals a multi-faceted strategy involving drastic product overhauls, comprehensive investor restructuring, renegotiated loans, the disposal of office space, and substantial layoffs, among other difficult cost-cutting measures.
Stubblebine, who took the helm in 2022, was confronted with a stark reality: “make Medium profitable or shut down.” At the time, despite boasting over 760,000 members, the platform was bleeding financially. A key challenge stemmed from its business model, which offered a single bundled subscription and had experimented with high-quality professional editorial content that inadvertently overshadowed the amateur writers – those sharing personal and academic insights crucial to Medium’s unique value proposition.
The path to profitability necessitated a robust intervention on several fronts. Product-wise, Medium introduced ‘Boost,’ a feature to integrate human expertise into content recommendations, refined its Partner Program incentives to reward thoughtful writing, and launched a ‘Featuring’ tool allowing publications to curate and promote compelling stories. These changes were aimed at fostering higher quality content and better engagement within the platform.
Financially, Medium faced a staggering $37 million in loans and its investors held an additional $225 million in liquidation preferences, which meant investors would be paid before employees in a liquidation scenario. Furthermore, its governance structure was overly complex, requiring approval from five separate investor tranches for major decisions. To rectify this, Medium embarked on a challenging financial restructuring. This included renegotiating loans, eliminating liquidation preferences, and streamlining governance to a single tranche of investors. The company also divested two acquired entities and shuttered a third.
A critical step involved cleaning up the cap table by renegotiating with investors, a move Stubblebine initially resisted but ultimately recognized as essential for the company’s survival. He noted that the business had to be “good enough to save, but not so good that there were other options” for this restructuring to succeed. Six out of 113 investors participated in a recapitalization, which diluted existing investor stakes and saw them relinquish special rights like liquidation preference and governance roles. Stubblebine publicly acknowledged venture capitalists like Ross Fubini at XYZ, Mark Suster at Upfront, Greylock, Spark, and a16z for their constructive engagement.
Cost-cutting measures were equally severe. Medium reduced its workforce from 250 to just 77 employees. Engineering optimization slashed cloud costs from $1.5 million to $900,000. The company also exited an expensive San Francisco office lease that was costing $145,000 per month for a 120-desk space. To compensate employees whose existing equity was likely devalued after the “cram-down round,” new equity was granted.
While Medium’s previous valuation topped $600 million, its current valuation after these extensive changes has not been disclosed, though it is considerably lower. Stubblebine, however, remains unfazed: “…I have no ego about what our current valuation is,” he stated. “But I’m also not going to tell you because I don’t want that used as a point of comparison with other startups. We are profitable and they are not. That’s a comparison point that serves us better.”
