Wonkonomics

By Felix Salmon
April 9, 2014

My article on the wonk bubble, at Politico, came out not only at the same time as the launch of Vox.com, but also, coincidentally, with the release of comments from both Michael Wolff and Marty Baron on the same subject.

Baron is much more constructive and optimistic than Wolff, but he shares with Wolff a certain skepticism when it comes to what Ezra Klein, in particular, is doing. It’s worth quoting Baron at some length:

What Ezra said when he came to senior executives at the Post — and I was the first one he came to, as far as I know — was that he wanted to create an entirely new news organization, something entirely separate from the Post. And that he would be in charge of it — he would be the president, the CEO, the editor-in-chief, he would select the technology, he would select the advertising chief — pretty much everything. And it would exist outside the framework of The Washington Post.

It was not a request for more financing for his venture within the Post called Wonkblog, which we had financed to the tune of millions of dollars over many years — we had grown it. I don’t know how well people knew Ezra before he worked at The Washington Post, but I know that after he worked at The Washington Post, they knew him quite well. It was a great platform for him, and he was great for us as well…

What he had in mind was a separate news organization. And what he really wanted to know — what he wanted to know was whether Jeff Bezos would be willing to finance that.

And that’s fine, and we obviously ran that up the pole. But I don’t have a venture capital fund available to me. I’ve looked all around — I’ve looked in the files. I don’t have a venture capital fund. And our publisher, I don’t believe, has a venture capital fund either. The company is owned 100 percent by Jeff Bezos, so any decision to fund a new venture would be his to make. And, as it turned out, the amount of money that apparently was being sought, you know, was somewhere roughly equivalent to 10 percent of our newsroom budget. And, you know, I think it’s safe to say that I would not have been too happy if 10 percent of my newsroom budget had been earmarked for [this project].

The first thing to note here is that Baron is factually wrong when it comes to whether his publisher has a venture capital fund: Bezos does indeed invest venture capital into news projects, most visibly into Business Insider.* In principle, therefore, there was no particular reason why Bezos might not support Klein with a similar sum of money, especially when that sum would get him 100% ownership of the new product, rather than just a minority stake in somebody else’s business.

But of course there was a much bigger problem than Bezos. Baron was clearly quite offended that Klein would want to set up an arm’s-length business in parallel to WaPo, rather than simply expanding Wonkblog under the existing WaPo umbrella. After all that the Post had done for Klein, all of the millions of dollars it had paid him and his team, all of the brand value it had gifted him, it was downright ungrateful for Klein to want to move as far as he could from the newsroom and the Post’s CMS.

Baron’s reaction was understandable, since Klein was in effect saying, with his proposal, that he didn’t think the Washington Post could really do something revolutionary given its existing architecture and leadership. No boss likes being told that he’s part of the problem.

But here’s the thing: Klein was right. Just as the big sell-side banks proved incapable of keeping up with the small nimble high frequency trading shops, big legacy media organizations are never going to be able to move with the speed and inventiveness of the best new-media shops. Vox is a great case in point: Klein joined on January 26, and launched the new Vox.com on April 6. That’s 15 weeks, which is less than half the amount of time it took Nate Silver to launch fivethirtyeight.com. (Silver joined ESPN on July 19, and launched his site on March 17.) And while both sites are very much still works in progress, Vox.com, at launch, is definitely a more advanced product than fivethirtyeight.com — despite, or perhaps because of, the fact that his corporate parent has almost infinitely deep pockets.

In general, the bigger and more entrenched the media company you’re part of, the harder it is to get stuff done. (I should know.) Klein had intimate, first-hand experience of the Washington Post bureaucracy, and he also saw the way in which Kara Swisher and Walt Mossberg managed to build a world-class franchise in AllThingsD, once they negotiated for themselves almost complete independence from their corporate overlords. They would never have had the same success had they been part of WSJ.com. What Klein wanted — and, ultimately, received, from Vox — was just the freedom to build something new and potentially amazing, outside the strictures of Marty Baron’s newsroom. Baron, and his employer, said no, as was their right. But you can feel the defensiveness in Baron’s remarks.

In case you didn’t notice Baron’s rhetorical sleight of hand, when he says that “the amount of money that apparently was being sought, you know, was somewhere roughly equivalent to 10 percent of our newsroom budget”, he is not saying what he seems to be saying. He’s deliberately conflating stock with flow: while Klein was reportedly asking for a total investment of roughly $10 million, Baron’s newsroom budget is $100 million per year. In other words, for a total investment of 10% of just one year’s budget, Klein was offering to create something which could profoundly change the course of digital journalism — and to keep all of the intellectual property within the Washington Post.

Baron and Bezos, of course, passed on the opportunity, which Vox Media jumped at. And the Posties passed despite being acutely aware of the Politico precedent. That outcome was probably for the best: I’m sure that Klein is much happier at Vox than he ever would have been trying to build something akin to Vox.com from scratch. Vox is a technology product as much as it is an editorial product, and Klein is no technologist: he has been given a massive headstart thanks to Vox’s first-rate technology team and content management system. Insofar as Vox ends up being a success, then, that doesn’t mean that it would have done just as well as part of the Washington Post Company.

Still, Baron’s defensiveness is not a positive sign, if you’re someone who wishes the best for the Washington Post. His newspaper’s natural local-news monopoly is not remotely sufficient to support a $100 million-per-year newsroom, which means that he’s going to have to start getting a substantial national audience somehow. Bezos paid $250 million for the franchise; he’s also beefing up the newsroom’s digital staff, which is a welcome development. But there’s no reason for him to have all of the Washington Post’s eggs in a single basket. The Klein opportunity was a rare one: no one else of Klein’s caliber would have approached Baron with the opportunity to fund their startup. And Baron’s language is a clear indication that he has very little interest in building a sandpit where anything else can thrive, either. At least the old Washington Post had the Slate Group; the new one has nothing.

If Baron is optimistic about the Post’s business, he should read the Michael Wolff interview. Wolff has a blinkered view of the world; he thinks that the only way that journalism will ever generate meaningful revenue is by selling adjacencies to advertisers, just as it has done for decades. And because that business doesn’t work well online, Wolff is a perennial digital bear. I’m much more constructive than Wolff is on the economics of things like Vox, because I know that there are lots of potential revenue streams associated with the format. Just about every company with a reputation problem, for instance, should be jumping at the opportunity to be able to tell their story using Vox’s technology and platform.

But if Baron is going to overcome the Wolff diagnosis and build a sustainable digital franchise for the long term, he — and his new owner — are going to have to take some risks. As I say in my Politico piece, the wonk space is exactly where a huge amount of of news innovation is happening right now, and I’m frankly doubtful that the Post’s newsroom is the best incubator for such ideas. Baron has made some great hires, including my friend and former colleague Ryan McCarthy. But it’s really, really hard to turn a print newsroom into something natively digital. Klein had the right idea: do something at arm’s length first, and then let the technology and ethos trickle back to the mothership. Because if you try to build something new within the mothership, it’s often liable to get suffocated.

*Update: OK, if you want to pick nits, the publisher of the Post is Katharine Weymouth, and Bezos is the proprietor. But since Weymouth is spending Bezos’s money, the distinction doesn’t seem to be hugely important to me.

Comments
6 comments so far

“Just as the big sell-side banks proved incapable of keeping up with the small nimble high frequency trading shops”

This analogy’s wrong. In terms of technology and algorithmic sophistication, the smart routers of all the big sell side banks are right up there with the best of the best HFT firms. They weren’t “incapable” of creating them, it’s just that the entire profit pool for HFT has never been more than $10bn a year, and the revenue pool for sell-side algo trading is worth three or four times that per quarter. Since prop trading has been on its way to being banned, and combining any sort of prop with agency business is an ethical and compliance minefield in any case, it’s not surprising that the sell-side banks decided to stick to their knitting and deploy the same technology to improve their service to clients.

Posted by dsquared | Report as abusive

Come now – you don’t get to call Marty Baron out for a “factual error” and then accuse others of “picking nits” when it turns out your own error accusation was itself in error.

Posted by RyanTate | Report as abusive

I agree with Ryan Tate. The underlying meaning of Baron’s point is abundantly clear – giving Klein the deal that he wanted would require approval at the Bezos level, not just from the day-to-day management team at the Post. Felix calls him Baron out for a factual error but presents no evidence to contradict that basic point.

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