A media startup with just 10 million uniques is on pace to generate $20 million this year

When Ryan Harwood left Goldman Sachs in 2009 to start a media business, he thought he was going to launch a men's lifestyle site. But he quickly realized it wasn't a good idea.

As he dug into the numbers, Harwood found that women were far-and-away a better target audience than men for lifestyle content, he tells Business Insider. Women dominated social media and commanded better ad budgets, he explains.

And during research, Harwood saw there was a demographic of late-20s to early-40s women who were bored of the deluge of digital content being pitched to them as "moms." Mommy bloggers had exploded in popularity on the internet, but they couldn't define an entire age range. Many of these women weren't moms, and the ones who were didn't like being put in that box all the time.

This realization led Harwood to abandon the male reader in 2010 and launch PureWow, a women's lifestyle digital outlet that has since built up a startlingly efficient revenue machine. This is all the more noteworthy in a media climate that has, recently, seen many venture-backed startups struggle to figure out how to turn on the money jets before they completely blow through their capital.

Just how efficient is PureWow at making money?

Hardwood says PureWow is closing in on 10 million monthly uniques. That's a respectable number, but a source familiar with the company's finances says PureWow is on track to generate a much more impressive $20 million in revenue in 2016 off of those readers, up from about $10 million last year. Campaigns on PureWow, this person says, range from $100,000 up to $2 million depending on how much content PureWow is creating for the advertiser.

And that revenue estimate is based on current revenue, not on any presumed bump in traffic (which has grown 100% year-over-year, according to Harwood).

Let's put those numbers into perspective.

Millennial women's site Bustle, which has hit 45 million monthly uniques, generated $10 million in 2015 (and is said to be on track to generate $20 million on 2016). That means PureWow is generating as much revenue as a outlet with 4.5 times its reach, and Harwood says the company has been profitable for several years - with about 30% profit margins.

A controversial way to make money

How does PureWow do it?

The key, Harwood says, lies in premium native advertising, including branded video, which Harwood says accounts for 85% of PureWow's revenue. It's easy to see why native advertising has been such a runaway success for PureWow, and for its younger-audience competitor, Refinery29. PureWow's main topics are fashion, beauty, food, how-tos, and so on - subject areas that are intimately intertwined with brands, and lend themselves to casual sponsorship.

Here is what a few of PureWow's native ads look like (the company counts Procter & Gamble, Cover Girl, Olay, Cartier, and Sephora as clients):

And here's an example of what one looks like when you click in:

When PureWow first started, native advertising wasn't even on the map, Harwood says.

"Our editors actually came up with the idea [that we should try native advertising], about four years ago," Harwood says. "'Let's write content in our own voice, integrate it.' Native wasn't even a word yet."

From the start, part of the success of PureWow's native advertising was that it came from the same editorial team that writes normal articles, which now numbers 18 full-time employees. That's a bit controversial, since many newsrooms believe there should be separation of church and state between the business/advertising side of media, and editorial teams who create content.

But "there is no [separate advertising] content studio" at PureWow, Harwood says. "[Our writers] know the voice."

Harwood says PureWow's native advertising has the same entertainment value as its other content. His emphasis on "entertainment" is telling. When that is the metric you (and your audience) are judging your articles on, it can soften the credibility hit a sponsored post might take.

And indeed, Harwood says one of the reasons PureWow can charge so much for native ads is that they perform roughly in line with what normal articles do, on both pageviews and social shares. He does, however, admit that native ads often have have more resources behind them than the average post. "They look nice," he finishes.

Harwood says one of the blessings of this native ad revenue stream is that PureWow hasn't had to relentlessly chase scale. It also helped that PureWow hasn't had a bunch of venture capitalist investors to please. The company has only raised $2.5 million in funding, and Harwood says his investors focused more on profit than scale. As did he.

"I come from Goldman [Sachs]," he explains. "I think, 'What if the cash dried up?'"

But PureWow's lack of scale could actually be hiding one potential pitfall: it's hard to scale native advertising. Native advertising powerhouse BuzzFeed (disputedly) missed its 2015 revenue projections by a hefty margin, according to the Financial Times. One theory is that BuzzFeed's content machine outgrew its native advertising stream, which relies on premium custom content. And much of the distributed content sites like BuzzFeed are producing for Facebook and other platforms isn't yet very monetizable.

Even if native advertising proves hard to scale, PureWow's comfortable profit margins still put it in a good position to weather a potential 2016 storm in digital media, which has been kicked off by layoffs at sites like Mashable, IB Times, and Salon.