The millennial news website Mic has sacked most of it staff and is preparing for a fire sale to a rival at a discount price, in a move that raises doubts about the viability of a number of online media startups that have struggled to turn a profit.

Mic, founded in 2011, was one of the many viral websites which boomed when Facebook began prioritising news content in the early part of the decade, swamping newsfeeds and reaching hundreds of millions of viewers around the world with snappy explainers on complicated issues, aggregated material and original news content.

The New York-based site, with more than 100 employees, focused on social justice issues and benefited from Facebook’s decision to prioritise video content. However, Mic executives partly blamed the cancellation of the site’s Facebook Watch series – which saw the social network directly pay for videos from the company – for the decision.

Billions of dollars of venture capital money poured into Mic and similar viral sites such as BuzzFeed, Vox and Mashable during the early part of the decade, as publishers attempted to take advantage of the rapid growth in demand for viral news and investors competed to own what they thought would become the dominant news website of the future.

However, many such sites have struggled to turn a profit from online advertising despite burning through large sums of money. Instead, traffic growth has stalled as Facebook downgraded professional news and video content in its newsfeed and publishers have instead turned to other forms of revenue – such as Vice’s decision to make television shows for the traditional broadcaster HBO.

Only last year Mic received another $21m (£16m) of funding, in a deal which valued the company at well over $100m, allowing it to continue operating from its plush offices in One World Trade Center.

Eighteen months later the company was in the process of being sold for less than $10m to its rival Bustle, according to The Information. A spokesperson for Mic declined to comment on the figure or the number of staff departures, which were first reported by Recode.

Several major US-based new media companies have quietly discussed the idea of combining their businesses in order to stay viable and the BuzzFeed founder, Jonah Peretti, has gone public with the idea of a mega-merger with rivals in a bid to compete with Google and Facebook for online ad revenue.

However, there was little sign as yet that firm discussions were underway and doubts over whether a combined business would be an attractive prospect for investors who have been keen to take their money out of the companies. Mashable, which boomed in the early part of the decade, was sold for less than $50m.