The new Gawker Media
Gawker Media’s big company-wide redesign, a year in the making, will finally come out of beta on January 3. It will the biggest event in Gawker Media history, for all three arms of the companyâ€”editorial, sales, and technology. It’s a concerted attempt for Gawker Media to stop being a blog network and start being something much more ambitious. And while that will be most immediately visible in the way that the blogs look, a massive change is taking place on the sales side, too: Chris Batty, Gawker Media’s semi-legendary head of sales, is leaving the company.
Gawker Media has had more than its fair share of staff turnover, of course. Much of it, especially at the Gawker flagship, has been detailed obsessively in the press. But above the editorial fray, the executive team has been constant all along: Nick Denton, the owner and CEO; Gaby Darbyshire, the general counsel and COO; Tom Plunkett, the CTO; and Batty, the VP of sales and marketing, working alongside the VP of sales, Gabriela Giacoman. Batty’s departure marks the first visible fracture in this team, and is a sign of just how far-reaching Denton’s changes really are.
This is a monster post, so I’ll put the rest below the fold. The stuff about Batty and Gawker Media’s revenues comes near the top, the stuff about corporate structure and valuation is near the bottom.
Gawker Media’s new formatâ€”which can be previewed, in slightly glitchy form, at beta.gawker.com, beta.lifehacker.com, beta.kotaku.com, beta.deadspin.com, beta.jalopnik.com, beta.gizmodo.com, and beta.fleshbot.com (that last one NSFW, obvs)â€”leads with one big story. That story is presented on the home page in full, complete with outbound links, meaning that
the redesign will be the first time in years that Gawker Media sites will have outbound links on their home pages. (Update: My bad. The sites do have a handful of outbound links on their home pages now.)
The homepage story can sit there for as long as the editors want; new posts appear on the right-hand side, in a “latest headlines” box. Never again will Gizmodo have to simply stop publishing new blog entries, as it did when it broke the iPhone story, just to keep its biggest story at the top of the home page’s reverse-chronological flow. When you click on one of the headlines in the right-hand rail, the story in the main slot simply changes: there’s no longer really a home page you need to return to in order to navigate between stories, generating additional pageviews along the way. All pages are identical from a navigation standpoint: the way that Denton puts it, he’s “turning every page into a front page.” That’s very useful now that Gawker Media has eight years of archives attracting a steady stream of long-tail traffic: any time Google sends you to an old post from 2002, you’ll see the same list of the most recent headlines that a visitor to the home page would.
The sites will always put any big scoop in the main slot on the home page: if you know that Deadspin has a scoop about Brett Favre’s penis, say, and you go to Deadspin.com to check it out, the scoop will be right there. You won’t need to click through to that specific blog entry. (When there isn’t a big scoop, the editors will have a lot of freedom to feature the full range of their output in that coveted spot: it won’t always go to the stories getting the most traffic.)
As a result, I suspect that Gawker Media’s pageview numbers will fall substantially when the new design is introduced. A lot of sites have tried to emphasize the primacy of audience metrics over clunky old pageview metrics, but the chase for pageviews stubbornly persistsâ€”even sites which carry no advertising have been known to do things like break stories up into multiple pages so that they can bask in artificially-inflated pageview numbers.
That’s maybe why no other major site has decided to adopt this kind of design, and it might also help explain Batty’s departure. The way that Denton explains it in his memo, he’s chasing audience while Batty was chasing revenues, and as a result “Chris and I diverge seriously over strategy.”
Denton spins this admission as a result of being “allergic to corporate boilerplate,” but it still sounds like corporate boilerplate to me. So let me try to be more specific still: if there was one area of disagreement between them which took long-simmering tensions to the point at which the two had little choice but to part ways, it was the fate of the sponsored post. Batty is a huge fan of the format: in May 2009 he told Zach Seward that the majority of Gawker Media’s advertising revenue would come from sponsored posts within 3-4 years. Less than a year later, his deputy, Erin Pettigrew, was already declaring that he had been proved correct:
In January 2009, we launched the Sponsored Post. It has since become the atomic unit of Gawker Media’s branded content offering. The Sponsored Post delivers bespoke brand messaging in a familiar format â€” the blog post. Inserted at the top of the editorial flow at publish time, the post then paces along with the day’s news chronology. The Sponsored Post can be issued singly or strung along in a series to form a brand narrative within our own editorial narrative. In addition, the Sponsored Post has all of the bloglike properties that make it as sharable, extensible, and long-lasting a piece of content as has ever existed in the online landscape. Most importantly, a permalink keeps the messaging available for reference and residual value accrual.
With the redesign, the “editorial narrative” disappears: when there isn’t a stream of reverse-chronological posts on the home page in which to insert a sponsored post, the attraction of the format dissipates rapidly. From a sales point of view, Denton’s redesign essentially sacrifices the idea of having a sponsored post on the home pageâ€”something Batty was almost religious aboutâ€”and replaces it with interstitial videos which aren’t nearly as sharable, aren’t extensible, and quite possibly won’t even have permalinks.
Pettigrew, back in May, was “encouraging brands to let down their guard and be as authentic as possible in their conversations,” but that’s much less important with the kind of brand advertising that Denton now envisages. Blogs are interactive, conversational things, in the way that television is not; and Denton is “moving beyond the blog,” in the words of his memo’s headline, to a path which is much more familiar to brand advertisers. Advertising which is so good it’s even more attractive to readers than the editorial content? Gawker Media got there at times, and that it did so is one of Batty’s crowning achievements. I look forward to his next venture, which will be partially bankrolled by Gawker Media, and which I suspect will go further down this path.
There’s a whopping irony here. Denton was the first person to turn blogging into a large-scale commercial venture: he bet on the potential of the blog medium earlier than anybody else, and to a large degree he’s personally responsible for the reputation that blogs have among the population at large. He then brought on Batty to try to sell ads against this strange new reverse-chronological stream of disparate posts. Now, however, it’s Batty who is fighting for what he calls the “narrative carrying capacity” of that reverse-chronological stream: it’s Batty, the ad guy, fighting to preserve what you might call the essence of blog. And it’s Denton, the original Blogfather, who’s aggressively throwing it away.
Denton’s also cutting off a possible future income stream, one which is a great hope of many MSM publishersâ€”app revenues. The new design is stunning, both in terms of looks and in terms of usability, when viewed in Safari for iPad — indeed, it’s referred to within Gawker Media as “the iPad design.” Given that, there’s no reason for Gawker Media to develop its own iPad apps. Gawker’s sites have always been creatures of the Web; attempts to branch out into other media have not fared well. The new design makes it clear that while the sites will look great on the iPad, Gawker Media has no strategic interest in entering the app space.
All of this is a welcome development for readers, who will enjoy Gawker Media’s sites, with their new, more visually striking look and feel, more than they used to. But what will happen to Gawker Media’s revenues, and to the value of the company?
I’ll come back later to the question of Gawker Media’s corporate structure and its shareholders’ concerns. But it does seem pretty clear that in the short term, at least, the revenues are bound to go down. With a drop in pageviews and the loss of Batty, Gawker Media is certain to see its revenues fall in the first quarter. But Denton isn’t worried about that: he has a massive cushion of $8 million in cash and receivables which he can use to ride out the transition to Gawker Media 2.0. And in the long term, the new design could do incredibly well, from a business perspective, while the old model, innovations like the sponsored post notwithstanding, looks increasingly doomed.
The problem with Gawker Media’s current modelâ€”and this is true of many other sites, too, including the Huffington Postâ€”is that it’s based on pageviews and those tyrannical CPMs. It’s essentially a junk-mail direct marketing model, which Batty is very comfortable with: watch him talk about how Gawker Media has “massively scaled our ability to deliver consumer activations,” whatever that means.
But the amount of inventory online has been growing much more quickly than advertisers’ demand for that inventory. As a result, CPMs have been falling for years, and Denton says that since 2008 he has been getting only half the revenue per page that he used to get in 2004. What’s more, it’s getting harder for Gawker’s ad-sales staff to charge a premium over what Gawker could get simply by signing up for an ad network: the difference between the two ratesâ€”and, by implication, the amount of value that Batty’s dedicated ad-sales team can addâ€”has been shrinking too.
The CPM game, then, is looking increasingly like a race to the bottom, where publishers desperately try every trick in the book to boost their pageviews and ad impressions, just to compensate for the fact that their revenues per page are very small. The results — sensationalism, salaciousness, and slideshows — only serve to further erode the value of the sites in the eyes of advertisers, and put ever more downward pressure on those CPMs. It’s a vicious cycle, and Denton has decided that now is the time to break it: no longer does he want to deal with advertisers looking idiotically at clickthrough rates. “Clickthroughs,” he writes, “are an indicator of the blindness, senility or idiocy of readers rather than the effectiveness of the ads.”
To break out of the current painful loop, Denton has decided to emulate his beloved television and move to “a programming grid which owes more to TV than to magazines.” Gawker Media has a rudimentary calendar for its current sites, but that will become vastly more sophisticated post relaunch: he envisages saving up a few personal-finance posts at Lifehacker, say, putting them all up at 3pm on a Friday with the best one sitting on the front page for an hour, and then selling every ad on the site to Visa for that hour. At that point, if all goes according to plan, Gawker’s no longer competing with lots of other personal-finance sites for Visa’s ad dollars; instead, Visa is competing with other financial advertisers for the right to buy that hour.
This is something it’s hard for old-school web or print publishers to get their head around: the idea of selling time, rather than space. But it’s not entirely new to the web: Fortune, for instance, will quite happily sell against the spike in traffic that it knows will come on the day it puts up the Fortune 500. Advertisers, too, are very comfortable with the idea, since they’ve been buying time on TV and radio stations for decades. If I’m browsing Lifehacker during the personal finance hour, I might see what Denton calls “a storyboard of advertising,” a sequence of ads which work over a relatively short space of time. It’s an intriguing idea, and it’ll be very interesting to see how and whether Batty’s successor can sell it to notoriously-conservative media buyers.
At least in the first instance, there will still be multiple ad units per page: the beta sites right now have one at the top of the headline list, another nestled into the main story, and a third underneath it. Denton’s vision is for a single big, moving ad right in the stream of contentâ€”just like TVâ€”but he’s not going to go straight there, because it’s going to take him (and his new sales director) a while to sell those media buyers on the new paradigm. In the meantime, if you have three ad units on a page and sell that page to an advertiser, the media buyer can report back that they got a CPM rate one third of what they would have paid if they’d just bought a single ad unit on the same page for the same price. Even though both Gawker Media and the media buyer know that it’s the big main ad which matters, media buyers still want to be able to report low CPMs to their clients, and buying silly small ads around the periphery of the page helps on that front.
In the medium term, then, Denton’s ambition is to be able to charge premium rates for delivering large, high-quality, video-based ads to a young and deep-pocketed generation which is becoming increasingly difficult for advertisers to reach.
To do that, he’s going to have to sell his editorial staff on the change as well; one of the reasons that the beta sites have been public for months is to enable Gawker Media’s bloggers to get comfortable with the new format and its new demands. Many of those bloggers will in any case shed few tears at Batty’s departureâ€”the fights between editorial and advertising have in classic Gawker style sometimes played out in public, on the site. Choire Sicha, for instance, exhorting Batty to “stop the encroaching madness,” or Alex Balk saying that Batty is “actually kind of a dick.”
Admittedly, both those examples are more than three years old. Since then, as Gawker Media has grown, and has professionalized, and has moved into new offices, such tensions seem to have simmered down a little bit, or at the very least moved off Gawker Media’s blogs themselves. (To find that insidery tone, one needs to look deeper into the comments, or at the bloggers’ personal Tumblr pages.)
And lot of that is due to the fact that the editorial staff is very different now to what it used to be. Sicha and Balk have long since moved on to found their own site, along the lines of what they might ideally have wanted Gawker to be. Their successors come literally from a different generation, and Denton is hopeful that they will take to the new world of images and videos as naturally as Sicha, Balk, and their contemporaries invented the art of text-based blogging.
Denton today considers the vision behind Gawker Media 1.0â€”a site with a well-defined literary style, armored with snark and irony, happier to say witty things about the news than to break itâ€”to be a dead end. Looking at his current crew of writers, he sees a substantial cultural change: recently he posted on Facebook that “the current cohort of Gawker Media writers seem much less conflicted than the Sicha-Lisanti-Cox-Leitch generation.” It may or may not be a coincidence that Denton published his Gawker 2.0 manifesto three years to the day after the earlier generation gave him back the keys to the shop in the form of a long blog entry about a literary novelist.
(In case you were wondering, Mark Lisanti is the brilliant founding editor of Hollywood gossip site Defamer, which got crushed by much less brilliant competitors like Perez Hilton, and which eventually got folded into Gawker. Ana Marie Cox founded Wonkette and needs no introduction. Will Leitch founded Deadspin, and now writes beautifully-crafted long-form columns for New York magazine.)
Denton is convinced that his present staffers see no conflict between their literary ambition, on the one hand, and putting together blog posts for a machine like Gawker Media, on the other: they haven’t internalized the idea that still, in some grand scheme of things, books are higher than magazines which are higher than newspapers which are higher than blogs. (It’s that same idea which leads people to think that they’re doing me favor by calling me a “columnist” or an “editor” rather than a “blogger.”)
In his Facebook post, Denton went on to refer to his current bloggers as “the kids” and people for whom “maybe the literary or magazine career never seemed a possibility.” It’s classic Denton: obnoxiousness with a dash of insight. But it’s certainly true that if you only really grow up when you have children yourself, Gawker Media really is a company of kids: to this day, substantially all of Gawker Media’s 130 employees are childless, and nobody I talked to there could think of a mom on the payroll.
(A moment of disclosure, here: I’ve known a lot of Gawker types — Denton, Darbyshire, Sicha, Balk, Steele, Spiers, etc — since 2003-4, when the blogosphere really started getting going in New York. The only one I see regularly is Darbyshire, and she’s the only one I’ll never use as a source for stories about Gawker. Since she’s the head of HR at Gawker, she’s the person to ask about how many moms there are. Feel free.)
In any event, the post-literary vision of what Gawker can and should be is the underlying explanation for the otherwise inexplicable decision to fire Gabriel Snyder as editor of Gawker, and replace him with Remy Stern. For whatever reason, Denton felt that Snyder had taken Gawker as far as he could, and that he needed Stern to turn the site into something bigger still and qualitatively different. That firing took place back in February, which gives an idea of how long Denton’s been mulling this move to Gawker Media 2.0.
(Update: This was too simplistic; the firing of Snyder had complex reasons. Before he left, Snyder was actually keen on exactly the kind of changes that Denton wanted to see in the post-blog era: bigger exclusives, less blogginess. But he was fired anyway, about four months after Denton started talking in detail about the kind of post-blog changes he was thinking about — moving to the kind of site that Denton would dream about when he was editing Gawker in 2008 and wanted to be able to make a bigger splash with his Tom Cruise Scientology exclusives.)
For all their real or imagined differences from the bloggers of old, Gawker Media’s editorial staff still looks much like it ever did: young, urban, smart, hard-working, childless. It’s a demographic which lends itself to the anarcho-ironic worldview which has always defined Gawker Media in the public mind, even as it never applied to hugely successful sites like Lifehacker. These are the bloggers who will now be asked to produce great web content rather than write juicy blog posts; there’s no reason to think they won’t be able to do so, while keeping their still-distinctive voice.
If Gawker’s journalists have changed over time, Denton has changed more, and specifically his vision of what his company can and should be. And in the move to Gawker Media 2.0, I see Denton making a second attempt to build a technology company, rather than a media company. This is where it becomes genuinely impossible to value the company: it’s a media company now, but if it ever succeeds in becoming a technology company, its valuation naturally skyrockets.
Denton has always been hugely ambitious, and he’s always been keenly aware of the limitations of the blog format: as long ago as 2004 he was telling the New York Times that “everyone has this illusion that blogs have taken the world by storm, but blogs have probably only reached 10 percent of the internet population.” With classic Denton chutzpah, he added: “Our goal is to reach the remainder.”
That attemptâ€”a new site called Kinja, which tried to make it incredibly easy to follow various different sites and blogsâ€”never really took off. But it was actually the heart of what Denton originally wanted to do when he founded his new company, then called Blogwire, in Hungary in 2002, and he still says that Kinjaâ€”or the technology that Kinja becameâ€”underpins his entire empire to this day.
It’s worth remembering, here, that before Nick Denton was a media mogul, he was a dot-com millionaire. Not only did he make a fortune from selling networking site First Tuesday for $50 million at the height of the dot-com bubble, but he founded a technology company, called Moreover, in the late 1990s. He left when the board wouldn’t let him buy Blogger for $3 million, and went on to get a large payday when Moreover was sold to Verisign for $30 million in cash.
Denton registered Blogwire.com on May 19, 2002; the name sounds like a cross between RSS readers Bloglines and NetNewsWire. Kinja was an attempt to bring RSS to the masses, launched in conjunction with Meg Hourihan, the co-founder of Blogger; the Kinja.com domain name was registered on May 24, 2002. It wasn’t until July of that year that Denton registered Gizmodo.comâ€”his first foray into producing content rather than aggregating it. And Blogwire Hungary exists to this day, a significant technology company which Denton sees employing 30-40 people in the near future (it has a dozen or so today), all of them employed to develop state-of-the-art content management and delivery systems.
Gawker Media has been going through a big corporate revamp over the past year or so. The ultimate parent company has never been in the U.S.: it used to be Blogwire in Hungary, but now Blogwire Hungary has become a subsidiary of a Cayman Islands entity called Gawker Media Group Inc, which also owns various U.S. operations like Gawker Media LLC, Gawker Entertainment LLC, Gawker Technology LLC, and Gawker Sales LLC. (And what, exactly, is, or was, “Nick Denton Engineering“?) It’s unclear how many Cayman companies there are (I think there’s just the one), how many corporate entities there are in Hungary and the U.S., and whether there also might be companies in other jurisdictions. Only three people know for sure: Nick Denton, Gaby Darbyshire, and John Duncanâ€”a lawyer whose official bio says that he’s an expert in corporate governance and taxation, as well as a graduate in Slavic languages.
What is clear is that most of the value of Gawker Media Group is to be found in the Hungarian subsidiariesâ€”since it’s the Hungarian companies which own Gawker’s technology and its intellectual property. The main company there is Blogwire Hungary Szellemi AlkotÃ¡st HasznosÃtÃ³ KorlÃ¡tolt FelelÅ‘ssÃ©gÅ± TÃ¡rsasÃ¡g, which translates as Blogwire Hungary Intellectual Property Exploitation LLC; it came into being on October 1, 2002, and was officially registered on December 10 of that year. Denton has Hungarian citizenship (his mother, Marika, was Hungarian), which helped in terms of setting up the Hungarian company and getting associated tax breaks. I’ve put Blogwire’s most recent reported earningsâ€”for 2007â€”at the bottom of this post, which were retrieved by the wonderful Sandor Peto in Budapest; they show a net profit of $82,080 on pre-tax earnings of $93,273 and total revenues of $479,480, which include $15,996 in “revenues from financial transactions.”
The Hungarian companies get all of Gawker’s international income, which flows in from 13 different salespeople in ten different countries and which, since it’s international income flowing to a Hungarian company owned by a Cayman Islands parent, is basically pure profit which never comes close to being taxed in the U.S. The result is a company where 130 U.S. employees eat up the lion’s share of the U.S. revenues, resulting in little if any taxable income, while the international income, the franchise value of the brands, and the value of the technology all stays permanently overseas, untouched by the IRS.
All of this would be devilishly hard for a professional venture capitalist to value even after weeks of due diligence. Most of the value of Gawker Media lies in Hungaryâ€”but how much value is there, really? To a large degree that depends on what Denton decides to do with his proprietary technology. Other blogging platforms are worth nine-figure sumsâ€”Tumblr just got a valuation of $135 million, while Automattic, the parent of WordPress, turned down a $200 million acquisition offer three years ago, when it was much smaller than it is today, and subsequently raised money at a valuation north of $150 million. I know a lot of people at big media companies who struggle with the limitations of WordPress, and who would pay good money to license an alternative web publishing technology, if it was robust and proven. Big companies are already licensing the NYT’s Press Engine mobile-publishing technology, and it’s rumored that at one point Denton was talking to Bonnie Fuller about licensing his technology to her nascent website, although that never happened.
Gawker’s web publishing technology, known within the company as Gawker Media Editor, or GED, is by all accounts much slicker and more powerful than WordPress, although it’s probably not as sophisticated as the software used within HuffPo. GED is particularly good when it comes to resizing images and editing on the iPhone or iPad — capabilities much appreciated by blog editors who hate wasting time struggling with technology.
The idea of Gawker as technology company is not treated with much respect among rival technologists, who tend to note Gawker’s sites having tech issues semi-regularly. Certainly the beta sites are far glitchier than you’d expect given how much time the tech team has had to work on them, and observers expect the grand roll-out in January to be anything but smoothâ€”at Gawker, these things never are. So maybe the idea of valuing Gawker Media as Gawker Technology is one whose day has not yet come.
Still, if the big redesign works, Gawker Media could make money in other ways, such as becoming an acquisition machine: buying up other web properties, replacing their back ends with Gawker technology, and plugging them in to Gawker’s sales network. If the redesign works in arresting the fall of CPMs, then simply being taken over by Gawker could mean a monster step up in a site’s revenue per pageâ€”a clear win-win deal for acquirer and acquiree. Again, this is something Denton has thought about, sometimes out loud, but hasn’t really done yetâ€”the acquisition of Cityfile was small, and was primarily a way of getting Remy Stern, rather than his website.
For the time being, then, Gawker Media remains a media company: it might have some clever technology, but the value is in the media brands, their Google juice, and their extensive archivesâ€”as well as in the company’s future advertising revenues. Denton is letting
key employees convert their quarterly bonuses into shares of Gawker Media at $30 apiece, which corresponds to a valuation of $30 million; he has also offered to buy back current shareholders’ holdings at the same price. Most observers, myself included, reckon that valuation is ridiculously low.
Denton’s taking advantage of the fact that he’s the only buyer, and he expects his stake in the company to go up, rather than down, as present and former employees in their 30s decide they need to diversify their portfolios and start wanting to spend money on things like houses and children. After all, even if you think that $30 million is low, there are still lots of good arguments for cashing out at that level rather than going into debt. And no one’s going to be making monster overnight profits from buying at these levels: Denton has said loudly and repeatedly that he’s not going to sell, not even a minority stakeâ€”so if the price does rise, it’s likely only going to be as Denton himself slowly navigates it upwards, much as a gallerist raises her artists’ prices with each solo show, making sure that they’re always at least a little below market.
It certainly suits Denton for the official valuation to be low, not least because he aspires to being a net buyer of shares, and Gawker Media employees don’t have valuation considerations foremost in their mind when they decide to sell. But the valuation has been rising impressively, all the same: the last valuation, a couple of years ago, was $15 million, just half the value Denton currently puts on the company.
Back then, the share price was highâ€”$1,500 a share, to be paid out of staff bonuses only to buy stock in Gawker Media LLC, the U.S. subsidiary. Unsurprisingly, few of Denton’s bloggers took him up on his offer: these weren’t people who could easily afford to spend $1,500 of their bonus on a single share, even if their bonus was that large, which in many cases it wasn’t. Nowadays, after an effective stock split (Gawker Media Group has 1 million shares outstanding, compared to 10,000 shares in the old entity), the share price is much more approachable: just $30 per share, for those who fancy tying up their bonus money in highly-illiquid equity which for the foreseeable future will only ever have one buyer.
That said, however, Denton’s employees aren’t provided with anything like the information necessary to determine whether the $30 price is a good one when they’re given the opportunity to buy. Denton has absolute control of the company, and the way that it is structured, so minority shareholders have every reason to worry that he couldâ€”if he so desiredâ€”move things around so that he and maybe a few close associates ended up with 100% ownership of the most valuable bits of the company, while the other shareholders ended up with very little.
I don’t believe that Denton has done that, and I don’t believe that he will. By all accounts there’s now only a single class of shares, in the Cayman parent: once the restructuring is finished, very soon, all shareholders will own identical shares in exactly the same company. (Some of them will have options, as well as sharesâ€”something else which serves to consolidate Denton’s control.) But none of the employees know that, for sure, and they haven’t been told it in writing. Instead, they just get occasional cryptic communications from Darbyshire, informing them of dividends or restructurings, and occasionally telling them to sign and send back various pieces of incomprehensible legal paperwork. They do what they’re told: they have little choice. And they’re probably correct to simply assume that Denton and Darbyshire wouldn’t do to them what Mark Zuckerberg and Peter Thiel did to Eduardo Saverin. But they’ve allâ€”literallyâ€”seen the movie: they know it’s possible.
In his October profile of Denton, the New Yorker’s Ben McGrath said that Denton owns “around sixty to seventy per cent” of Gawker Media; I think the true number is closer to the top end of that range. But that still leaves a large chunk of about 30% of the companyâ€”worth $9 million even at Denton’s current lowball valuationâ€”spread between 30-40 current and former employees, most of whom have stakes of significantly less than 1%.
The significant shareholders, besides Denton himself, are Gaby Darbyshire, Chris Batty, Gabrielle Giacoman, Tom Plunkett, and Lockhart Steele. It’s reasonable to assume that all of them, at this point, have at least a million dollars in Gawker stock, unless they’ve decided to sell their shares back to Denton.
Then there’s everybody else. The earliest editorial-side employees, Elizabeth Spiers of Gawker and Pete Rojas of Gizmodo, do not have equityâ€”indeed, Denton’s refusal to give Rojas a stake in the company was the main reason that Rojas defected to found the rival Engadget with Jason Calacanis. But Matt Hamer, who was put in charge of Kinja, does own sharesâ€”a sign of how seriously Denton took the Kinja project.
Choire Sicha has a Gawker shareholding too, as do Valleywag’s Ryan Tate and Gizmodo’s Brian Lamâ€”immersed in Silicon Valley culture, they know the value of early-stage equity better than most. Some senior sales and marketing types (Michael Cascio, who’s leaving with Batty; Erin Pettigrew) have been given Gawker stakes, as has tax lawyer John Duncan. Beyond that, all site leads and some other senior editorial-side employees have been given the option to buy shares at $30 each with their bonus money; most spend some of their bonus on equity, but not all. And at one point there was a system whereby site leads who outperformed their pageview-growth targets would get something called Equity Bonus Plan Units, which weren’t technically shares, but which are now in the process of being converted into the same shares in Gawker Media that everybody else owns.
The question is: why keep all these people in the dark as to what exactly they own? Over the years, there has been a lot of speculation that Gawker Media’s incomprehensible legal structure was a way of protecting its assets should an aggressive litigant successfully sue them for damages. Denton won’t admit that’s true, but he will say that it’s useful that people think it’s true. With 40-odd shareholders, some of whom are disgruntled former employees, it probably wouldn’t be particularly hard for such a litigant to obtain all of the information that Gawker gives out to them.
I’m not sure that really explains the secrecy, though; I suspect a lot of it is simply that Denton doesn’t want his revenue and profit numbers to leak all over the internet every quarter. (Gawker, like any media organization, is by its nature very leaky; Denton could no more prevent the numbers from being made public than Paul Singer can.) On top of that, he doesn’t really respect most of the bloggers who make up the majority of his shareholders — as is evidenced by the ease with which he fires them. It’s his company, not theirs.
One theory, which I like, is that Denton simply loves having control of his company, and has a deep-seated hatred of other shareholders trying to tell him what to doâ€”a hatred which dates all the way back to when the Moreover board vetoed his acquisition of Blogger. Or maybe he just doesn’t like having to explain anything to anybodyâ€”he has had a habit of bumbling his way into hugely successful decisions, and while there’s no doubt that he’s incredibly smart, it’s not always obvious that he can see quite as far ahead as people have often given him credit for.
Another question is: why this big restructuring, and the move to the Cayman Islands? I’m sure there are good tax reasons, but it also looks as though Gawker is moving from something held together with the legal equivalent of duct tape and twine to something more robust and permanent. It’s part of the professionalization of the company, alongside the way in which all mention of Fleshbot has disappeared entirely from all the other Gawker Media sites, especially the main site for advertisers, and the way in which Gawker started offering benefits to employees after Sheila McClear successfully applied for unemployment when she was laid off, despite having been paid as a freelancer. It’s also worth noting, on the professionalization front, that Gawker Media Group’s address in Grand Cayman is also the address of the Cayman arm of Close Brothers, the small yet venerable UK investment bank.
And so the corporate groundwork has now been laid for the long company-wide walk away from the world of blogs and towards Denton’s new promised land of cable TV. There will be more videoâ€”much more, both in posts and in ads; expect the new director of sales to have TV experience. As Denton said six years ago, blogs have probably only reached 10% of the internet population. But now he’s taken note of the fact that the other 90% spends hours per day in front of the telly. He couldn’t grab them with Kinja, but he hasn’t given up on reaching them yet.
|Blogwire Hungary Szellemi AlkotÃ¡st HasznosÃtÃ³ KorlÃ¡tolt FelelőssÃ©gű TÃ¡rsasÃ¡g||2007.01.01 – 2007.12.31|
|P&L for Simplified Annual Report||
|I. NET SALES REVENUES||
|II. CAPITALILSED VALUE OF OWN PERFORMANCE||
|III. OTHER REVENUES||
|of which: reversal of impairment loss provision||
|IV. MATERIAL TYPE EXPENDITURE||
|V. PAYMENTS TO PERSONNEL||
|VI. DEPRECIATION CHARGE||
|VII. OTHER EXPENSES||
|of which: impairment loss provision||
|A. TRADING PROFIT||
|VIII. REVENUES FROM FINANCIAL TRANSACTIONS||
|Of which: Valuation difference||
|IX. EXPENDITURES OF FINANCIAL TRANSACTIONS||
|Of which: Valuation difference||
|B. FINANCIAL PROFIT||
|C. PROFIT ON ORDINARY BUSINESS||
|X. EXTAORDINARY REVENUES||
|XI. EXTRAORDINARY EXPENDITURES||
|D. PROFIT ON EXTRAORDINARY EVENTS||
|E. NET PROFIT BEFORE TAXATION||
|XII. TAX LIABILITY||
|F. AFTER TAX PROFIT||
|G. NET PROFIT PER BALANCE SHEET||