What the Re/code acquisition says about the future of media by Mathew Ingram @FortuneMagazine 11:13 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons In the larger scheme of things, the acquisition of a relatively small technology news website may not seem like that big a deal—and perhaps it isn’t—but the news that Kara Swisher and Walt Mossberg’s site Re/code was being bought by Vox Media hit the media-sphere like a hand grenade on Tuesday afternoon. At this point, journalists are so gun shy about the financial prospects of the media business that virtually any news seems to trigger a kind of post-traumatic-stress response. In part that’s because Re/code was just the latest news bomb: Gigaom, where I used to work, shut down suddenly in March after it ran out of money (and is apparently being re-born as a kind of SEO play), Read/Write was sold for the second time and is now doing crowdfunding to try and pay the bills, and AOL and its media assets were just acquired by Verizon. And it’s not just the smaller sites that everyone is looking at, wondering whether they have enough money to survive, and who will be the next to either close down or be bought by a larger entity. Fusion, the ambitious effort from Univision and Disney/ABC that only recently was hiring dozens of star journalists, has yet to prove that all the money poured into it can translate into an audience. How long will that last? The bottom line (in more ways than one) is that size still matters for media companies. Maybe it shouldn’t, and maybe it’s a function of an advertising industry that still hasn’t figured out how to adapt to its own disruption, but the reality is that it still matters—a lot. According to the New York Times, Re/code only had 1.5 million unique visitors a month, which is tiny compared to behemoths like BuzzFeed and Vice. As Swisher said: “Everybody is bigger than us. It’s not a secret that being a smaller fish is really hard.” As I tried to point out when Gigaom shut down, there’s an ongoing barbell effect in the media landscape. Being small and/or hyper-targeted seems to work, at least for sites like Techdirt and Search Engine Land and The Awl, or one-person shops like Ben Thompson’s Stratechery (although they can end for other reasons, as Andrew Sullivan’s Daily Dish did). And being really huge can work, if you are BuzzFeed or Vice or Vox, because you have the kind of scale and reach that matters to advertisers. Between those two ends of the spectrum, however, lies the valley of death. Re/code was able to convince someone like Vox to buy it in part because it had a well-known conference business, and because it had the star power of Swisher and Mossberg. But the hard fact is that it couldn’t survive on its own, even with financial help from Comcast/NBC (which now owns a stake in Vox Media from two different directions as a result of this deal). The only sizeable media entity I can think of that has been able to navigate the valley of death single-handedly is Gawker Media, which founder Nick Denton has funded from the beginning—although he now owns only 68% of the company—and is expanding into a new office in Manhattan. Gawker’s audience is substantial, with about 125 million unique visitors a month, and experiments with revenue-generating methods such as e-commerce seems to be paying off, but the company’s financial status is known only to Denton. It’s an open question whether even Vox Media itself can survive as a standalone entity, although founder Jim Bankoff maintains that it can. The company has raised $110 million in venture capital, giving it a theoretical market value of about $400 million, but what does the end game look like for Vox? Does it become as large as Vice somehow? Does it go public? Or does it ultimately just get acquired by another larger media entity such as Comcast (with whom it has already been talking)? Ultimately, this isn’t just about a small tech blog being acquired. This is about what is happening to the media landscape as a whole. Newspapers are finding that paywalls may not be a long-term strategy (which doesn’t seem to have stopped magazine publishers like Time Inc., which owns Fortune, from continuing to try), and so they either have to go broad and mass like The Daily Mail or find another monetization strategy like The Guardian, which has a trust fund that was generated by selling its stake in Auto Trader for $1 billion or so. That’s partly why media companies are so willing to play ball with Facebook and its “Instant Articles” project—they are effectively running out of other options. For some, the end game might even include being acquired by Comcast or Verizon or some other deep-pocketed tech company. But what does that mean for the media and journalism those companies will produce? Does it just become a loss leader for other business interests, or lead generation for the marketing department? The ironic thing is that the Internet and the social web were supposed to allow anyone to become a media entity in their own right, and they have done that in spades—but no one said anything about them providing a way to make a living. And so the great media consolidation train continues to roll on. Who will be the next example of the barbell effect? The betting window is now open.