The economics of Business Insider
Henry Blodget has a great post about the Business Insider business model, in which he reveals that his mini-empire basically broke even in 2010 on $4.8 million in revenue. There was a pretty impressive profit in the fourth quarter of the year — breaking out the Photoshop measure tool and applying it to this chart makes me think that TBI made about $210,000 in those three months, on about $1.9 million in revenue.
Payroll for the quarter was 45 full-timers, plus a bunch of paid interns and freelancers. That makes sense: if TBI’s all-in cost of employing someone, including finding office space for them, averages out to say $10,000 a month, that works out to about $1.35 million in the fourth quarter, plus interns and freelancers, plus other expenses like hosting fees and travel. All in all it’s easy to see how expenses could be about $1.7 million in the quarter.
But there’s something else quite interesting going on in the chart. Look at the difference between revenue and operating income to get quarterly expenses, and it ends up looking something like this:
Compare that to the readership chart:
What you wind up with is something like this. It’s necessarily a bit fuzzy: I’m using quarter-end uniques as a proxy for uniques over the quarter as a whole, and the numbers are volatile. But the big trend is pretty clear:
What’s happening here is that since TBI really started getting going at the beginning of 2008, its expenses have been rising at pretty much exactly the same pace as its audience — it’s been spending between 23 and 36 cents per unique visitor the whole time, with the trend decidedly flat.
This is probably just as it should be: a startup should ramp up its expenses as it grows. Still, I’m not seeing any economies of scale, not even in that huge fourth quarter, where expenses managed to rise just as fast as the visitor count. Maybe there were year-end bonuses or something in there, skewing the figures. But the overall impression is that when Blodget wants growth, he has to pay for it, leaving little money left over for high-prestige luxuries like, say, John Carney. (See that drop in expenses in the third quarter of 2010? A chunk of it is Carney’s departure.)
Our newsroom salaries for full-time employees, for example (which include bonuses and benefits) are now higher than at many companies in the traditional news industry. Because the digital news business is quite different from the traditional news business, we often promote from within, and we’ve had the huge pleasure of watching folks who joined us as interns grow up to take leadership positions. True, we can’t yet toss around the $300,000-$500,000 a year per brand-name columnist that Huffington Post and Daily Beast are now reportedly tossing around. But, in future years, if we keep doing what we think we can do, we should be able to pay our top people a lot more than we do today.
(We also give our folks stock options, which helps make them feel and act like they own some of the place. Which they in fact do.)
TBI doesn’t really go in for brand-name writers: there’s talent on the masthead, but nothing that Tina Brown would want to poach for $500,000 or even $200,000 per year. The firing of Carney sent a clear message that insofar as there’s a star culture at TBI, it’s internal, based on pageviews: external fame and visibility is not something Blodget is particularly interested in seeing in his staff.
TBI got some decidedly backhanded respect from Time magazine today, when it placed 25th out of 25 on Time’s list of top financial blogs. Most of the write-ups on the list came from other people on the list, but the magazine doesn’t seem to have been able to find anybody willling to write about TBI, with the result that Time’s Stephen Gandel had to do it himself. “The thinking man’s finance blog it is not,” he wrote, adding that “the site has a reliable market commentator in Joe Weisenthal, though the length of his articles, like those on the rest of the site, seems to have dramatically shrunk”.
It’s pretty clear, at this point, that Blodget has given up on the idea of producing premium content for an elite Wall Street audience. Just like Nick Denton before him, he’s decided that there’s no money in micropublishing, and that if he wants to be very profitable, he’s going to have to go mass-market. Already he claims 8 million unique visitors, and he clearly looks forward to seeing that number rise substantially; there’s nothing elite about an audience that size, and when blogs grow that big they invariably leave their more elite readers behind.
So when Blodget promises that TBI is “going to get bigger and better”, I believe him on the first count. But I’m not so sure about the second.