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News Startups May Not Be Long for This World

With fewer ad dollars to go around, it's hard to see how a dozen or so new ventures are going to survive.

The proliferation of online news sites might lead you to think now's the time to jump in. Many analysts fear there's a bubble, however, according to The Wall Street Journal, and if you ask ad buyers, it's already all but impossible to turn a profit when prices are down by as much as 70 percent. 

"It's becoming a very crowded market," Neil Doshi, an Internet analyst at CRT Capital, told WSJ.

That hasn't kept eBay founder Pierre Omidyar from sinking $50 million into his highly anticipated news venture, First Look Media, or Jason Calacanis from remaking the long-dormant into a mobile news startup. (Inside's app launched on Tuesday.) Even wunderkind Ezra Klein is getting in on the action, ditching The Washington Post to launch his own big data-driven venture under the Vox Media umbrella. 

The first two entrepreneurs seem to view themselves as saviors of new media, with Omidyar vowing to build a "new and exciting platform" for journalism and Calacanis calling "the next CNN." To his credit, Omidyar is trying to sidestep the traditional paid advertising model, building a hybrid organization comprised of a for-profit media technology company and nonprofit journalism organization. 

Calacanis has employed a small army to scour the Web for the best journalism--and then condense each story into 40 words or less, just enough text to skim quickly on a smartphone screen. The idea, he said in a video interview, is to "compress the time between when you see a headline and you get the information. ... We want to decrease the amount of time you spend with us but increase the amount of knowledge you get." 

Still, he's betting on ad money. Despite having some venture capital in the bank from his failed database venture Mahalo, Calacanis and others like him face an uphill battle, especially since most readers tend to gravitate toward more substantive original content. It is also unclear what Inside's business plan is beyond delivering content on multiple platforms, unlike the number of online news startups that have managed to eke out some revenue hosting conferences, selling customized research, or partnering with brands on sponsored content. 

For Inside and other startups that don't explore those and other potential revenue streams, it's hard to tell how they'll survive in this climate. 

Last updated: Jan 28, 2014

JILL KRASNY | Staff Writer

Jill Krasny is a staff writer for Inc. magazine, where she covers the intersection of entertainment and startups. Prior to Inc., she was a writer for MTV and Esquire and an editor at TheStreet. She is a graduate of the University of Southern California with a degree in communication. She lives in New York City.

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