This Startup Sold to CNN for a Reported $25 Million–Despite Generating Zero Revenue

When Casey Neistat, the YouTube influencer and filmmaker, first launched his app in 2015, it garnered a massive 1.2 million downloads. The app, called Beme, let users share short videos on their mobile phones.

It didn’t hurt, of course, that Neistat had millions of followers on YouTube, and managed to raise more than $2 million in seed funding. (In total, Beme has raised $6 million–including from prominent VC firm Lightspeed Venture Partners.) But, over time, the company couldn’t sustain its growth.

“Launch week was great, but no matter what, you’re going to crash,” recalls Beme co-founder and CTO Matt Hackett. He admits the app struggled to retain users. “You won’t know how hard, and you won’t be able to tell [you’ve crashed] until you’re way deep in it,” he said. By January 2016, the co-founders attempted to re-launch the app. Soon after, Beme considered being acquired, and a major suitor took the bait.

On Monday, CNN announced that it would absorb Beme for a reported $25 million. (Hackett declined to comment on this figure.) While terms of the deal were not disclosed, the companies agreed to shut down Beme, and instead give the founders the creative freedom to launch a new venture under the CNN umbrella, coming as soon as next summer.

Of course, you’re probably wondering why CNN–which grew its primetime viewership by 38 percent in 2015–would acquire a fledgling social media company that, to date, has generated zero revenue. According to the network’s global head of digital, Andrew Morse, the answer lies in the demographic that Beme has lured onto its platform in just over one year.

“Casey [Neistat] has tapped into nearly six million really powerful viewers, most of which do not tune in to CNN,” Morse told the New York Times.

Added Neistat, in an interview with The Verge: “There is a tremendous distrust between the audience that watches my content online and the information that is put out by traditional media. Our broad ambition is to figure out a way with tech and media to bridge the gigantic divide.”

To his point, Americans are growing wary of news sources, especially in light of Donald Trump’s surprise victory in the U.S. Presidential election this year. The trust in media to report the news “fully, accurately and fairly” has dropped to its lowest level in history, according to a September Gallup poll. And, the president-elect has referred to the media as “crooked,” and “rigged,” and threatened to sue organizations like the New York Times.

Only two of the top 100 major American newspapers (by circulation) had endorsed Trump for President ahead of the Election, with most major outlets predicting victory for Hillary Clinton on Election Eve. Thus, regaining credibility in the aftermath has been something of a challenge. Meanwhile, many argue that the proliferation of “fake news” — or false information presented as fact, and spread across social media sites such as Facebook and Twitter — may have influenced the result.

But the founders argue that Trump’s victory has “enlivened” Beme’s business model. On election night, the app launched a series of live “Exit Poll” videos, including perspectives from those who voted for the billionaire real estate mogul.

“There were tons of voices we hadn’t seen before,” Hackett remembers. “That has enlivened us enormously, and made it so clear that we are living in filter bubbles.”

After all, the goal with Beme has been to bring a diversity of viewpoints to the fore. The discrepancy between what most outlets predicted for Trump, and the reality of his imminent presidency, proved to Hackett that his business could bring some value to larger networks.

Austen Fankhouser, a digital marketing associate at social media consulting agency Room 214, says that Beme attracts exactly the type of audience that outlets like CNN are hungry for: Millennials, or those between the ages of 18 and 34.

“Millennials were born into a media saturated world and are more picky than any other generation about which content they allow in their lives,” she tells Inc. “They largely see traditional news channels as broken, and seek information and news from sources that they deem more authentic–like social media personalities and online reviews.”

“I would push back against what is an easy position, which is to say that these are surprising perspectives,” Hackett added of Trump voters. “There are a lot of ways in which we need to collect them better, and show them better, and find ways to voice them.”