Feb 13, 2024 - Business

Exclusive interview: Finkelstein tells how Messenger spent its way to oblivion

Photo illustration of Jimmy Finkelstein next to a pattern made from the logo of The Messenger.

Photo illustration: Brendan Lynch/Axios. Photo: Charles Eshelman/FilmMagic

The Messenger CEO Jimmy Finkelstein told Axios he did not mislead a New York Times reporter about the company's revenue while he was trying to raise money to save the startup.

What they're saying: In an hourlong sit-down at the Harvard Club in New York City, Finkelstein maintained that the company's business model would have succeeded if only he could have raised money to keep The Messenger afloat until it became profitable.

  • He said he didn't anticipate how much last year's bear market and bad press would hamper his ability to woo investors.
  • "I have absolute confidence that by August we would have been profitable," he said. "If we raised the $20 million, we would have been absolutely profitable."
  • So I think that our model — which everybody decided on their own was an old model, it's just not their model — was working."

Driving the news: A Messenger spokesperson told the New York Times in a January story that the site booked as much revenue in January as it did in all of 2023.

  • That story was published two days after Axios reported that Finkelstein was trying to raise around $20 million to keep the business alive.
  • But a source formerly with the company who is familiar with its finances told Axios that figure was intentionally misleading and was provided at the direction of Finkelstein.

Asked about the statement to the Times, Finkelstein said, "That is either the wrong quote or he interpreted that wrong." But Times reporter Benjamin Mullin told Axios he wasn't misinterpreting it.

  • "We booked as many advertisers, as we had booked for the months before," Finkelstein told Axios. "The revenue would have come," he said.
  • Later in the interview, he said, "We sold as many accounts — not for January, but in January — that we sold literally for the six months before."

By the numbers: The company brought in roughly $3 million in revenue in 2023 and was projecting more than $60 million in 2024, down from initial projections of $100 million last spring and $75 million in December.

  • Finkelstein said the site's traffic was growing so fast that eventually — once more automated advertising bidding companies were onboarded — The Messenger would have started to make a lot more money.
  • The Messenger did see significant traffic growth in January, a point one investor noted to Axios as a case to be bullish. But it's unclear whether that increase would continue or ever support the firm's aggressive 2024 projections.
  • Finkelstein said if the outlet continued, "This year, we would have had 300 million to 400 million (page views), and we would have been profitable by June to August."
  • Finkelstein cited Google Analytics data that showed the site receiving 119 million page views in January, up from 101 million in December and 77 million in November.

The big picture: In the interview, Finkelstein said he felt remorse for his fired staff and took responsibility for the site's failure, but denied that his spending levels for the company were unrealistic.

  • "At the end of the day, there's only one person who deserves the blame, and that's me," he said.
  • He rejected the notion that he dramatically over-hired, arguing he hired far less than the 500+ people he originally budgeted for. Salaries accounted for 82% of the company's expenditures, he said.
  • "If we stayed in business, if we had to, we might have made a decision to cut more people," he said. "But at the end of the day, we thought that ... this was the amount of people that we needed to deliver the mission that we started with."

Between the lines: There are several examples of areas where The Messenger clearly overspent, including leases for big offices in Washington, D.C., and New York City and inflated salaries.

  • Reports suggest at least one top editor was making over $900,000 in an annual salary, a figure most business-side executives don't see in their lifetimes.
  • Asked about that number, Finkelstein said, "He wasn't making it for a long time," and said that he and other executives took cuts to their salaries when money began to run short.
  • Finkelstein wouldn't say how much he was paid, but said he took "a 50% cut for a large time — much more than other people took."
  • He said Richard Beckman, the company's former president, did not get any severance pay when he announced his departure in January, but was paid out on his salary through the end of January.

Flashback: The company cut two dozen people earlier in January, when it became clear that it was close to running out of cash. Those laid-off employees did receive severance, but the employees fired at the end did not.

  • Asked why he didn't fold the site sooner and use the remaining funds to pay employees' severance costs, Finkelstein said he believed he could raise the cash needed to stay afloat.
  • As for suggestions that he pay for the employees' severance himself, Finkelstein, a multimillionaire who made his fortune buying and selling media assets, said, "I put a lot of money into this site at the end to keep it going."
  • Finkelstein said he put in "millions toward the end" to save the company. Some of the site's initial investors, which include Loews CEO James Tisch, Apollo co-founder Josh Harris and others, also put additional money in, he said.
  • "They put in money on the faith that we all had that we were going to get to heaven," Finkelstein added. He declined to provide deal terms regarding those investments. The Messenger raised $50 million ahead of its launch last year, a large sum relative to other media startups at the time.

Finkelstein came close to a deal to sell his company to the Los Angeles Times at the last minute, but the deal fell apart the day he decided to shutter the site. "I can tell you that we had legal papers completed at 4 in the morning, the day the site went under," he said.

  • "I was making calls until 2 or 3 in the afternoon," he said, noting that other investors were committed to putting money into the site if he was able to raise more from others.
  • The New York Times reported that the site was shuttering shortly thereafter, before employees themselves learned about its demise. "People blame me that they learned from the Times, but believe me, I didn't give it to the Times," he said.
  • Asked why he didn't sell the site to a group of conservative operatives that offered him $30 million for majority control, Finkelstein said the deal "really didn't feel right" since the Messenger aimed for down-the-middle politics.

Zoom out: Finkelstein blamed his financial woes on launching the company six months behind schedule in June. That meant the Messenger burned through $20 million before the business could ramp up.

  • "We had a large group of people for that six months were not developing a website," Finkelstein said.
  • Asked why he started so late, Finkelstein said, "We didn't get the complete staff that we wanted. ... And that really was the majority of the $20 million that we sought at the end."
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