The Business of TPM

During the course of 2012, the founder and editor of TPM, Josh Marshall, realized things weren’t working. The company had taken some investment money in 2009 with the intention of growing. However, by three years later, it was clear that the company was spending too much money and making too little. Without a serious “retrenchment,” the company’s future was in jeopardy.

“I let myself be influenced and took some guidance from people, sort of ‘upward or bust’ and ‘you gotta spend money to make money — it will come together,’” Josh told me recently. “There were a lot of expectations built up in the organization, and I had built a lot of them up, and had allowed them to build up in me.”

It’s not an unfamiliar narrative: Invest a bunch of money into the company, get way bigger and “take it to the next level.” Sometimes it works out. But more often, it does not. For TPM, it was not.

And so, in 2012 and into 2013, Josh committed to a new approach that required cutting spending, including cutting a couple staff positions, which is never easy. And it required a sober explanation to the staff.

“It’s very hard to tell an organization collectively that we need to pull back a bit, that we need to retrench a bit, this idea that we’re going to be twice as big next year, and the year after that — it’s not going to happen,” Josh recalled.

Several people left the company around this time, and Josh admits it was one of the most, if not the most, difficult periods in TPM’s history.

But, the retrenchment worked. And now, roughly eight years later, as TPM is celebrating its 20th anniversary, Josh says he is more proud of emerging from this period intact than he is of starting the company in the first place.

The origins of TPM as a money-making business were modest, and likely familiar to anyone traversing the web in the early aughts — tip jars and referral links. It was only a couple hundred bucks a month, but it supplemented Josh’s income from freelancing for other news outlets.

The first real breakthrough came in 2003 with a company called Blog Ads, created by Henry Copeland. Blog Ads was a sort of proto-programmatic digital advertising company that paired publishers with advertisers.

“It was Blog Ads that got me out of being dirt poor and barely being able to support myself, to where I didn’t have to do other things besides TPM,” Josh told me.

While Josh was blogging and beginning to make some real money, Millet Israeli, his then-girlfriend and now-wife, was working behind the scenes to make TPM a real “business.” Formerly a general counsel at Dow Jones, she incorporated the business, and, over time, put in place the nuts-and-bolts processes we still use today — payment processing, bookkeeping, a 401(k) plan, various compliance and legal frameworks.

She also developed TPM’s first “direct” sales strategy — reaching out directly to publishers and explaining to them why TPM’s audience was a perfect fit for the books they were trying to sell.

Israeli was the mastermind behind one TPM’s most creative ad campaigns, for the DVD release of the 2005 American geopolitical thriller, Syriana. The movie poster featured George Clooney in a blindfold, so TPM put its own spin on it, blindfolding Josh.

“This was my big idea to the marketing company, the production company — let’s put a blindfold on Josh,” Israeli said. “They loved it, they said ‘that’s awesome.’”

This sales strategy — persuading potential advertisers that what TPM lacked in sheer size, it made up for in a dedicated, trusting and intelligent audience paired with innovative and engaging advertising “products” — became a cornerstone of TPM’s business strategy.

While Blog Ads was critical to TPM’s early success, it was the direct sales market that would take TPM to the next level and enable its early growth. In parallel to the direct sales market, a new form of advertising was quickly becoming ubiquitous — programmatic advertising.

Programmatic (also known as remnant or third-party) advertising is when a company sits between advertisers and publishers and matches ads with websites. The most prominent programmatic advertiser is, of course, Google’s AdExchange. Programmatic advertising rates are much lower than direct advertising rates, but because there is little-to-no sales process (no cold calling, no pitching, no creative development) they are less resource-intensive. The income from them is also highly predictable.

For the next several years, TPM’s income was split pretty evenly between direct ad sales and programmatic advertising. However, in 2010, the two income sources started to diverge and in 2011, income from direct sales accounted for nearly twice that of programmatic advertising.

Though direct sales numbers were high, they weren’t nearly as high as they needed to be to cover increased spending. So as the first part of retrenchment, the company did a crash course refocus on programmatic advertising, which had been left more or less on autopilot while the company focused on building direct sales. Although programmatic revenue nearly doubled, the increase in spending that was intended to fuel growth resulted in TPM losing more money than any other year in TPM’s history. This was also the year TPM launched TPM Prime.

I came onboard Jan. 7, 2013 and was tasked with increasing programmatic revenue by as much as possible. I heard whispers that TPM was in trouble. I was told by some that I was joining a sinking ship. Maybe I was naive, but it didn’t feel like I was joining a sinking ship. Over the next few years we hired several people who were critical to the change in strategy. Amanda Hale came on and was eventually our sole ad seller. Derick Dirmaier (now TPM’s head of product) joined toward the end of 2013. Gayatri Surendranathan began as a publishing associate and Christine Frapech joined as design fellow (and remains as senior designer). A few years later, Jackie Wilhelm (who is now our associate publisher) joined. In a lot of ways, this group was the core of TPM’s business-side “retrenchment” for several years

In 2013 and 2014, our primary focus was building our direct ad business and our programmatic business. And we were good at it. In 2014 we hit new highs in both areas, reaching a company high in revenue and profitability. Critically, by this point, the company’s expenses were dramatically lower than they had been in 2012.But, we weren’t resting on our laurels because we all knew how quickly things can change.

So, in 2015, we began spending more time on TPM Prime. It was baby steps at first — making the simple pitch to readers that memberships would improve our journalism and help us survive. The readers responded, and we more than doubled our membership revenue in 2015 — which more than offset slight decreases in advertising revenue — making it another record-setting year for TPM.

Around this time, the programmatic industry was booming. Money was pouring into ad tech and third-party advertising. The reader hears a lot about Google and Facebook, but you probably didn’t hear as much about smaller programmatic ad sellers such as SayMedia, Martini Media and a slew of others. The combination of increasing programmatic revenue, membership growth and an election year audience surge pushed us over the $3 million revenue figure in 2016 for the first time. Our membership revenue doubled again and programmatic revenue reached a new peak. The time invested in building Prime in 2014, 2015 and 2016 turned out to be pivotal because it positioned the company for the tech platform-driven crisis in ad revenues which began to hit with a vengeance in 2016-17 and cratered numerous publications. 

From 2016 until now, our focus has been almost exclusively on membership growth and everything that goes with it. We still sell direct ads, and we still drive programmatic revenue, but it was clear that memberships were the core of our company ( not just for financial reasons, but also for philosophical ones, which I’ll get to in a minute). We made a lot of difficult decisions along the way such as abandoning the custom CMS we had been building and moving to WordPress. We skipped over a lot of trends — we never “pivoted to video,” for example, as so may other digital media operations did

From its beginning, TPM has been a reader-centric publication. This informs all of our decisions. From 2013 to 2020, possibly the most consequential decision we made was to eschew scale — which is inherently an avenue to maximize profits for investors — to build a sustainable business that is laser focused on serving its readers. Would we like to get bigger? Sure. We believe in our journalism, and therefore we’d like as many people to read it as possible. But the journalism comes first, and when journalism really, truly is the most important thing, it aligns the interests of the readers and the employees.

This is why, in so many ways, the shift toward memberships felt natural for us. A critical aspect of TPM’s culture is that everyone either was a journalist or loved journalism. This extends all the way to our developers. Matt Wozniak read TPM in college, Jacob Harris worked at another publisher before TPM. This is not to say driving memberships is easy — it’s not. But now, everyone’s incentives were aligned. Our “business” was no longer about selling ads — it was getting people to pay for the journalism itself. That meant the whole of TPM — those on the business team, the writers, and the editors, shared a goal: making great journalism and figuring out how to justify to our readers that it was worth paying for.

The falling ad market and lessons about the unpredictability of market trends factored into the decision to focus heavily on memberships. But so did something more psychological about what focusing on memberships means as a company.

“Advertisers couldn’t care less if you go out of business,” Josh said. “Your readers, if you do a good job, care greatly if you stay in business…. [We wanted] to make our financial well-being dependent on things that we could be good at and have some control over.”

In other words, the work everyone does at TPM contributes to the organization’s success, and thank God for that because it has taken each and every person at TPM to get us to where we are today.

We now have 35,000 members. In 2013 when I started, we had around 3,500. In 2021, we’re projecting to have more reader revenue than we had total revenue in 2013. Along the way (with help from the TPM Union, no doubt), we raised our salary scale, we increased benefits and we’ve invested more in journalism.

Again, because it’s so important, this means: Our interests are all aligned from reader to worker to founder.

Josh has said that the first decade or so of TPM felt like the company was in an updraft, that basically history and the trends were so much on TPM’s side that everything just worked. Then, for a few years, it felt like everything was against TPM from a business perspective. This is why, if you ask Josh what he’s most proud of professionally, he won’t say starting TPM — he’ll say emerging from the darkest time in the company’s history and navigating us to where we are now, something he didn’t think was the logical or even likely outcome.

And yet here we are, about to begin 2021, emerging from the retrenchment as a strong, profitable company with a solid foundation and full of optimism about the future.

“I can really say the company is in better shape than it’s ever been,” Josh said.