How VCs can cripple a promising category; It’s time to build something new

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VC you on the other side

Food delivery app Gopuff is on the hunt for a $300 million ‘cash cushion’ The Wall Street Journal reports, to help weather tough economic times and diminishing returns in the super-fast food delivery startup category.

SoftBank, a gigantic Japanese fund and pre-existing Gopuff investor, sets up a loan.

The delivery category in general and SoftBank in particular are examples of how VC dollars can lead to Pyrrhic wins without lasting winners.

SoftBank didn’t just bet big on Gopuff. He dabbled in the category, supporting Uber and Uber Eats, as well as food delivery startups around the world, including Gorillas, JOKR, Swiggy and Loggi.

Diversification makes sense for SoftBank. But when companies like Gorillas, JOKR, and Gopuff end up with hundreds of millions of dollars in venture capital money — and adopt a growth-at-all-costs mindset — they force themselves to operate in an unsustainable and spend too much on advertisements and promotional offers. (A delivery service can’t afford to give people just $20 off their first orders for so long when they’re already underwater paying cyclists to deliver a candy bar to an apartment.)

Earlier this month, SoftBank disposed of its Uber holdings and already sold half of its DoorDash stock last year. JOKR and Gorillas, meanwhile, retreated to their core US markets, including New York and Boston.

construction sites

Site-building technology company Brandcast was acquired by Times, the former publisher of Time Magazine which itself was acquired four years ago by Salesforce co-founder and co-CEO Marc Benioff (who is, uh… also an early investor in Brandcast).

Brandcast will become a new group called Time Sites which builds sites and content for advertisers, Axios reports.

Quick, short-term site building has real value. People might click on a product link if they’re about to buy, but that doesn’t happen often, and almost no one deliberately clicks on a generic display ad.

A car brand may prefer to drive traffic to a site about car trips or electric vehicle reviews rather than placing digital billboards on the web. Additionally, if an advertiser owns the burner’s site, the company may collect first-party cookies. It’s a rare treat for brands that see virtually no paid or organic traffic to their own content.

The idea is not new. In 2018, L’Oréal piloted a site ownership plan with pop-up media brands posing as fashion or makeup editors on Facebook and Instagram. But that might be more appealing as third-party cookies go away and Apple iOS blocks the ability to track deep-linked traffic between social apps and web browsers.

The whipping post

The Washington Post is considering newsroom and other cuts after ad revenue drops, The New York Times reports.

The Post’s digital ad revenue in the first half of 2022 fell 15% year-over-year to $70 million, and the company is on course to lose money this year.

In response, CEO Fred Ryan announced the elimination of 100 newsroom positions through a hiring freeze or “other means”. WaPo, for what it’s worth, says it won’t reduce its current newsroom headcount by about 1,000.

Some WaPo executives blame Ryan for failing to expand the paper’s coverage, mismanaging the brand, and failing to acquire a title like The Associated Press, The Economist or The Guardian.

Donald Trump’s defeat in the 2020 election is an excuse for the Post’s struggles. Although The New York Times and The Wall Street Journal have both added subscribers since 2020, WaPo’s paid subscriber count has now fallen below the 3 million mark reached in 2020.

The Post is looking to diversify its coverage beyond politics to reach five million paying subscribers by 2025.

Related: WaPo doesn’t do much more than snippets of Hollywood deals inspired by its reporting. [Vanity Fair]

But wait, there’s more!

YouTube is testing a new “Promotions” tab. [Search Engine Land]

The pitch deck that VidMob used to raise its recent $110 million Series D. [Insider]

Twitter was going to launch a subscription product to compete with OnlyFans, but scrapped it because it couldn’t effectively detect harmful sexual content and child pornography. [The Verge]

Robert Kyncl is stepping down as chief commercial officer of YouTube. [Variety]

A new book offers insight into how ad boycotts forced YouTube to crack down on extremism. [Bloomberg]