Felix Salmon

Viral math

Felix Salmon
Feb 2, 2014 15:23 UTC

This chart, from Newswhip via Derek Thompson, has been doing the rounds, and causing a bit of debate:


The question: What on earth is Upworthy doing so right? How is it that Upworthy’s articles shared a good order of magnitude more often than anybody else’s?

Part of the answer is that Upworthy simply doesn’t publish that many articles overall — a couple of hundred a month, each one carefully and laboriously optimized, through extensive A/B testing, to be as socially infectious as possible. But that doesn’t fully explain how Upworthy’s articles can be so much more viral. For that, Upworthy needs the help — either on purpose or inadvertent — of Facebook.

Facebook is the monster in the publishing room: a traffic firehose which can be turned on or off at Mark Zuckerberg’s whim. Right now, it’s turned on, and while a lot of sites are feeling the love none is doing so more than Upworthy. (Except, maybe, ViralNova.) So, how does Facebook give Upworthy such a big boost?

Let’s start with the basic mathematics of virality. Start with an article, any article; let’s stipulate that it gets 1,000 pageviews, naturally, just by dint of being published on a certain website. Now, let’s say that 1% of that article’s readers decide to share it with their friends, and that each reader has 100 friends. That means 10 people sharing, and 1,000 new people seeing the link. How many of those people will click the link? Let’s say it’s 10%. Which means that the article gets a boost of 100 new pageviews. Those extra pageviews cause their own viral loop, which generates an extra 10 pageviews, and that’s where the cycle pretty much peters out. Thanks to sharing, the article has been viewed 110 times, over and above the original 1,000 pageviews.

This requires a formula. Call the basic strength of the website PP, for publisher power: that’s the number of pageviews you can expect to get when you publish an article on your website. You then multiply that by S, or shareability: the likelihood that a reader will share your article on Facebook. That in turn gets multiplied by F, or the number of friends per reader, and then by C, which is the clickbaitiness of the headline.

The key number here is S·F·C, or shareability times friends times clickbaitiness. In our model, that’s 0.01 * 100 * 0.1 = 10%. If you increase any of those numbers — if you make people more likely to share your article, or more likely to click on the headline — then you’re going to increase the virality of the piece. For instance, if you double the proportion of people sharing the article and also double the probability that someone is going to click on the headline after seeing it, then S·F·C becomes 0.02 * 100 * 0.2 = 40%. If you start with 1,000 pageviews, then you’ll get another 400 viral views which in turn will generate another 160, and so on: your viral boost goes up from 110 views to 660 views.

You can see that a relatively small tweak to the variables in the S·F·C formula can make a very big difference to your total pageviews. Pretty soon you can double your initial pageviews, or treble them — and, then, when S·F·C exceeds 1, you achieve escape velocity: your article just keeps getting shared more and more and more. Getting S·F·C > 1, then, is the goal of all would-be viral content, and it’s by no means impossible: if 5% of an article’s readers share it, and those readers have 200 friends each, and 25% of people who see the headline click on it — well in that case, S·F·C is a whopping 2.5, or 250%.

At those levels, it almost doesn’t matter what PP is — how many pageviews you seed your article with before it goes viral. PP still matters, however — which is why so many viral sites have pop-up boxes which try to harvest your email address. It turns out that emailing lots of people with links to new content is a great way to start the ball rolling.

But there’s a fly in the ointment, here — something which makes achieving escape velocity much more difficult. Let’s call it FBT, for Facebook Throttle. If you share an article on Facebook, and you have 100 friends on Facebook, that does not mean that your 100 friends are all going to see that article in their newsfeed. Far from it. After you click “share”, Facebook then decides whether the article you just shared is going to appear in your friends’ feeds or not. (This is a very big difference between Facebook and Twitter, which shows you everything your friends are sharing.)

As a result, the important formula isn’t S·F·C; rather it’s S·F·FBT·C, where FBT is the probability that the article you’re sharing is going to actually appear in your friends’ feeds. In recent months, Facebook has been taking its foot off the throttle quite dramatically — but no one knows how long that’s going to last.

Which brings me to Upworthy. We know that Upworthy spends a lot of time optimizing for maximum S and maximum C. It more or less invented the “curiosity gap” headilne, for instance, which turns out to be a great way to boost C. In other words, Upworthy is maximizing the variables under its own control.

What’s less well understood is that there seems to be a direct correlation between C and FBT. While Facebook controls its own throttle, it does so in response to user behavior: it wants to show its users more of what they want to see, and less of what they don’t want to see. And it’s easy to tell what Facebook’s users want to see: just look at what they’re clicking on. As a result, there’s a direct feedback loop between C and FBT: the higher your clickbaitiness (C), the less that Facebook will throttle you, and the more likely that your articles will be seen by your readers’ friends.

To put it another way: at the moment, Facebook assumes that people click on exactly the material that they want to click on, and that if it serves up a lot of clickbaity curiosity-gap headlines, then it’s giving its users what they want. Whereas in reality, those headlines are annoying. Curiosity-gap headlines are a bit like German sentences: you don’t know what they mean until you get to the end, which means that the only way to find out what your friend is saying is to click on the headline and serve up another pageview to Upworthy. (Or ViralNova, or Distractify, or whomever.) It’s basically a way of hacking real-world friendships for profit, and there’s no way Facebook is going to allow it to continue indefinitely.

All of which is to say that the massive advantage which Upworthy has, as seen in the chart at the top of this post, is certain to go away. It’s a temporary phenomenon, a function of the fact that Upworthy is better than anybody else at turbocharging virality by using artificially-optimized curiosity-gap headlines as a way of sending a (false) message to Facebook that those headlines are the stories its users really want to read. Upworthy’s formula will work until it doesn’t. Which is why I think that Dennis Mortenson is going to win his bet against James Gross.


AbeB makes a good point. Computing the average for an extremely skewed distribution is next to worthless.
I just want to point one other thing out… the data is not for Facebook shares! If you read the paragraph before the chart, it clearly says they took the number of Facebook Likes divided by the number of articles published. I don’t know how correlated FB Likes and FB Shares are but I presume them different unless otherwise proven.

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Digital media goes highbrow

Felix Salmon
Jan 27, 2014 23:35 UTC

‘Tis the season, it seems, for high-minded new media launches. Last week Arianna Huffington unveiled her new website, The World Post, in front of a group of well-fed plutocrats in Davos; this week it’s the turn of Ezra Klein to announce that he’s going to build a new news site under the Vox Media umbrella, and for Pierre Omidyar to release a video outlining his own journalistic ambitions.

In each of these cases, the principles of the sites are pretty much indistinguishable from the principals of the sites. Omidyar is by far the most ambitious: he wants to build a global news organization with multiple brands, deep pockets, fearless journalists, top-notch support services, and even its own technology company. You can see how he could get to $250 million pretty quickly, at that rate. That’s a lot of cash — but it’s still less than a single year’s journalism budget for Bloomberg, Reuters, or the BBC. Omidyar needs to make his money go a long way: he’s building not only an international virtual newsroom (with real physical newsrooms in more than one city) but also an elaborate technology, sales, and even legal infrastructure.

Klein’s venture, while ambitious, is not quite as ambitious as Omidyar’s. Rather than building his own infrastructure, he’s using Jim Bankoff’s, at Vox: that’s surely a good idea for anybody who doesn’t consider himself first and foremost to be a technologist. And rather than trying to be all things to all people, Klein is taking the thing that he’s best at — clear explanatory journalism — and simply extending it into new areas.

Most interestingly, Klein is ditching what he calls “the constraint of newness”. He has been talking about this for many years now, and he’s absolutely right: what most people want to know, when they’re reading about (say) the riots in Kiev, is not some incremental news article about what has changed in the past few hours. And yet that’s generally what they get. Here’s what he wrote back in 2010:

If I edited a major publication — or even a medium-size one — I would begin each major legislative battle by detailing a few of my smartest, clearest writers to create a hyperlinked, fairly comprehensive, summary of the basic legislation. That summary would be updated throughout the process, and it would be linked in every single story written on the topic. As reader questions came in, and points of confusion arose, it would be expanded, so by the end, you’d have a document that was current, comprehensive, navigable and responsive to the questions people actually had about the legislation. Telling people what just happened is undeniably important, but given that most people aren’t following that closely, we in the media need to do a better job of telling people what’s been happening.

Expand that vision beyond just legislation to news more generally, and I think you’ll have a pretty good idea of what Klein’s going to try to build at Vox. It’s an exciting move for Klein, who gets to try to reinvent the way that journalism is done on the internet, and it’s pretty much a no-brainer for Bankoff, who, like Omidyar, has calculated that it’s a lot more efficient to build than it is to buy. Vox Media will have 100% ownership of Klein’s operation, and also gets to turbocharge its growth by allowing Klein to use Vox’s proven technology. As a result, Bankoff’s return on investment could be very substantial indeed.

And then there’s the World Post, which is a joint venture of Huffington Post and something called the Berggruen Institute on Governance. BIG is the main project these days of Nicolas Berggruen, who’s almost a caricature of Davos Man: a billionaire financier, industrialist, philanthropist and all-round schmoozer with an unparalleled rolodex. Berggruen had a byline on the World Post’s lead story, the day the site was launched, and the tone is unmistakeable: “China,” he declares in his opening sentence, “looms larger than ever”. He then continues in this vein for another 2,400 words, concluding boldly:

The next ten years under Xi Jinping will be the ultimate test of whether China’s system of governance ends up on the wrong or right side of history. Either outcome will fundamentally affect the state of our world.

This is Davos bloviation masquerading as journalism, complete with boldface names:

Along with other members of the Berggruen Institute’s 21st Century Council, we had the opportunity to gain a firsthand glimpse into the mindset of China’s new leadership during a rare, wide-ranging discussion with Xi Jinping… We also met with Premier Li Keqiang as well as top generals of the People’s Liberation Army and other ranking officials from National People’s Congress as well as governors and Party secretaries from Zhejiang, Guangdong and Yunnan provinces.

There’s lots, lots more where that came from: similarly vapid articles have already been contributed to the World Post by a host of Davos types such as Bill Gates, Fernando Henrique Cardoso, Yo-Yo Ma, Elon Musk, Larry Summers, Richard Branson, Parag Khanna, and many others. Call it the International Brotherhood of Privilege.

The thing that makes Berggruen so very Davos is not just that he knows all these people, but rather that he only knows these people. If you live your life shuttling from private jet to Four Seasons suite, you end up in an echo chamber where everybody is urbane and friendly and comfortable, and where it seems crazy that big problems can’t get ironed out in a rational manner with the application of a little goodwill and a fair amount of high-minded talk.

That idea is the driving force behind Davos, and it’s also the driving force behind the World Post. If you weren’t invited to Davos, and want exposure to the kind of stuff that’s said on Davos panels, then you should definitely be reading lots of World Post articles. Similarly, if you’re Nicolas Berggruen, and you think that the kind of thing that’s said on Davos panels is incredibly important and deserving of wide distribution, then you’ll set up the World Post with Arianna Huffington, in the hope that a decent chunk of her 95 million global readers will find your stuff and read it.

From Huffington’s perspective, the whole thing is a win-win-win. She gets a bunch of new bigwigs blogging for her site; she gets an entree into Berggruen’s rarefied social circle (and also into his private jet); and she gets a substantial check every year from Berggruen, who will happily pay for HuffPo employees to man the phone banks, ready and willing to take dictation from any plutocrat who wants to share his opinion on the state of the world.

As a business model, the World Post is fascinating: it’s essentially low-priced native advertising for Berggruen. He’s subsidizing the site to the tune of about $850,000 per year; while I’m sure that’s very welcome income for the Huffington Post, it’s also a veritable bargain for a brand wanting to permanently sponsor an entire HuffPo vertical.

In any case, between these three sites, we have a pretty broad range of business models for those who would aspire to the Reithian project of informing the world about what’s important. Any one of them might be considered a random folly, but if all three are happening at once, then we might as well declare a trend. As David Carr says,

With high broadband penetration, the web has become a fully realized consumer medium where pages load in a flash and video plays without stuttering. With those pipes now built, we are in a time very similar to the early 1980s, when big cities were finally wired for cable. What followed was an explosion of new channels, many of which have become big businesses today.

It’s not unreasonable to think that at least some high-quality journalism will make its way into the list of the big digital-media businesses of the future. Certainly Pierre Omidyar and Jim Bankoff and Ezra Klein and Nicolas Berggruen and Arianna Huffington think that it will. It might take a while to get there. But the potential global audience is exploding, and for the first time it’s possible to imagine a digitally-native journalism venture being genuinely global. It’s an enticing dream — and it’s reasonable to expect that someone will get it right.


Re. Vox Media,
much to be said about neat archives.

Reuters does a nice job giving context – continued, comprehensive coverage must surely help [cudos intended].

Google News is not dead. I wish this project on them !

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NYT vs Pirrong and Irwin: David Kocieniewski responds

Felix Salmon
Jan 8, 2014 05:01 UTC

At the end of December, I wrote about the non-scandal of Scott Irwin and Craig Pirrong, a response to a hit-piece in the NYT by David Kocieniewski. Later that week, Kocieniewski offered to answer questions about his article, so I provided some. Here are my questions, along with Kocieniewski’s answer:

Q: Concerning “Academics Who Defend Wall St. Reap Reward,” I would love Mr. Kocieniewski to respond to criticisms of his piece by myself, Craig Pirrong and others, including, but not limited to:

-Why does Mr. Kocieniewski believe that the money flowing to the University of Illinois business school is a reward for research by Scott Irwin, when Mr. Irwin doesn’t teach at the business school?

-Does Mr. Kocieniewski believe that Irwin has violated the A.E.A. code of ethics? If not, does he believe that the A.E.A. code of ethics doesn’t go far enough? What would he like it to say?

-Does Mr. Kocieniewski believe that Mr. Pirrong is anything other than a straight shooter when it comes to his own opinions? Does he believe that Mr. Pirrong’s opinions are shaped by the money he’s getting from consulting contracts?

-Mr. Kocieniewski says that “major financial companies have funded magazines and websites to promote academics with friendly points of view.” Which companies? Which magazines? Which websites?

-Would Mr. Kocieniewski agree with Mr. Pirrong that most of Mr. Pirrong’s consulting engagements “have been adverse to commodity traders and banks?”

-Mr. Kocieniewski says that Mr. Pirrong has written “a flurry of influential letters to federal agencies.” How many is a flurry?

More generally, does Mr. Kocieniewski believe that Mr. Irwin and Mr. Pirrong are especially worthy of being singled out in this article and in this manner? Or was this just a case of finding a couple of professors at public universities which could be FOIAed? — Felix Salmon, Reuters columnist, New York

A: Despite the disclosure requirements of the American Economic Association and the University of Houston, Mr. Pirrong did not release details of his paid consulting work with 11 different clients until The New York Times filed repeated requests under the Freedom of Information Act. Among the businesses paying him were the world’s largest commodities exchange, the Chicago Mercantile Exchange, and one of the largest commodity trading houses, Trafigura.

Mr. Pirrong was also a paid consultant of a Wall Street group, the International Swaps and Derivatives Association, which is funded by Goldman Sachs, Morgan Stanley and other major traders, at the time the association was quoting his research extensively in a lawsuit that for two years blocked attempts to regulate speculation.

Mr. Pirrong declined to answer questions about how much he was paid or the nature of some of his consulting work. The article nonetheless cited one instance in which his findings went against the interests of the Wall Street affiliated group that had funded his research.

Mr. Irwin, as the article notes, did report his financial ties in his disclosure form with the University of Illinois. In describing the Chicago Mercantile Exchange’s dealings with the University of Illinois, the article also pointed out that Mr. Irwin’s only direct request for money from the C.M.E. was denied.

Emails obtained under the Freedom of Information Act nonetheless show a close relationship between the exchange’s public relations and research departments and the university’s academics — helping Mr. Irwin get his opinion pieces placed in newspapers, trying to schedule him to testify at congressional hearings and, when that failed, using his research to shape its executives’ testimony.

The university development office was also involved in scheduling Mr. Irwin to speak at the C.M.E. at the same time its fund-raisers were soliciting donations from the exchange for the business school, the emails show. Last fall, the C.M.E. also named Mr. Irwin to its Agricultural Markets Advisory Council, the emails show. Mr. Irwin subsequently said that he, like other academics on the committee, is paid a $10,000 annual stipend.

Finally, while friends and colleagues of Mr. Pirrong and Mr. Irwin may complain that they are being singled out for scrutiny, public records show just the opposite. Since this debate began more than five years ago, there have been many media references to the financial ties of those who have argued that speculation is responsible for price increases — whether they were academics performing industry funded research or hedge fund managers whose holdings in autos and airlines would benefit from regulation that might reduce oil prices. By reporting where the financial interests of Mr. Pirrong, Mr. Irwin and the universities that employ them intersect with those of speculators, the article gives readers additional information that they may wish to consider when weighing the professors’ public statements. — David Kocieniewski

The failure of Kocieniewski to answer any of my specific questions more or less speaks for itself; I won’t belabor it, except to note the irony involved in him complaining about Pirrong doing the exact same thing.

I will push back against the “friends and colleagues” line, however: I, for one, am a friend of neither Pirrong nor Irwin. To my knowledge, I have never met either of them. And I don’t think that, say, Thomas Sowell has, either.

It’s also worth mulling over the idea that Kocieniewski’s article was merely designed to provide “additional information” for readers who might have noticed that the 21st paragraph of a Financial Times article in August 2011 drew a passing connection between an academic, Kenneth Singleton of Stanford, and the Air Transport Association of America. I’m sure that both of those readers appreciated the new light that Mr Kocieniewski shed on this issue from his platform on the front page of the NYT. Still, I can’t quite understand how public records could possibly demonstrate that Pirrong and Irwin were not being singled out for scrutiny, as Kocieniewski avers. After all, Kocieniewski himself was the person singling them out. It’s rather worrying that he now seems to deny that he was doing any such thing.


“1. He is typically deceptive in invoking the AEA disclosure policy. This relates to articles submitted to journals. I submitted no article relating to speculation or commodities generally to any journal that received financial support from anyone. So the AEA policy is not relevant and Kocieniewski is dishonest in insinuating it is. Or maybe it’s just that he doesn’t know what the policy is, and doesn’t care.” – Pirrong

Well, no. From the American Economic Association Disclosure Policy –

(7) “The AEA urges its members and other economists to apply the above principles in other publications: scholarly journals, op–ed pieces, newspaper and magazine columns, radio and television commentaries, as well as in testimony before federal and state legislative committees and other agencies.”

Pirrong’s response appears to be stupidly and carelessly wrong or stupidly dishonest.

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Can you fact-check a twerking video?

Felix Salmon
Dec 10, 2013 23:09 UTC


Josh Benton of the Nieman Journalism Lab writes in, asking for a 2014 prediction for the world of news. My answer: 2014 is going to be the year of a big debate about what news is —and especially about whether and how news organizations can ethically report on activity in the virtual world.

The first time I saw this debate take place in public was in October, on Nick Denton’s Kinja commenting platform, where a fascinating conversation broke out between Denton, the founder of Gawker Media; John Cook, the editor of Gawker; and Neetzan Zimmerman, the viral wunderkind who singlehandedly generates most of Gawker’s traffic. Zimmerman had put up yet another of his dozen posts a day, all of which feature (which is to say, recycle) various pieces of content found on the internet. This post was headlined “Grandpa Writes Letter Disowning Daughter After She Disowns Gay Son”, and featured a letter which Zimmerman found on a gay-friendly t-shirt site named FCKH8.

Denton quickly jumped into the comments, saying there was something fishy about the way in which FCKH8 kept on finding such heartwarming letters; he also pointed out that the company’s founder, Luke Montgomery, has a long history of “stunts”.

Cook replied to Denton:

Part of our job is to make sure we’re writing about things that people are talking about on the internet, and the incentive structure of this company is organized to make sure that we are on top of things that are going viral. Neetzan is explicitly tasked with doing so. Unfortunately, that involves covering charlatans and bullshit artists, whether it’s Montgomery or Jimmy Kimmel

I’d rather be calling bullshit on stuff like this than calling attention to it… But we are tasked both with extending the legacy of what Gawker has always been—ruthless honesty—and be reliably and speedily on top of internet culture all while getting a shit-ton of traffic. Those goals are sometimes in tension.

Zimmerman, who’s surely one of the world’s greatest experts on viral content, then replied to them both, pointing out that the tension was even bigger than that:

Most viral content demands from its audience a certain suspension of disbelief.

The fact is that viral content warehouses like BuzzFeed trade in unverifiable schmaltz exactly because that is the kind of content that goes viral.

People don’t look to these stories for hard facts and shoe-leather reporting. They look to them for fleeting instances of joy or comfort. That is the part they play in the Internet news hole.

In other words, there’s things which are true on the internet — like that letter from a disappointed grandpa, or a video of a failed twerk. The internet is getting increasingly good at generating such content — so good, indeed, that the bar is getting raised, and the chances of successfully-viral content simply emerging naturally from the world are getting ever slimmer. There’s now so much fake content out there, much of it expertly engineered to go viral, that the probability of any given piece of viral content being fake has now become pretty high.

The result is stories like this one, in the NYT, headlined “If a Story Is Viral, Truth May Be Taking a Beating”, which says that “digital news sites are increasingly blurring the line between fact and fiction”:

When the tales turned out to be phony, the modest hand-wringing that ensued was accompanied by an admission that viral trumps verified — and that little will be done about it as long as the clicks keep coming…

Gawker, BuzzFeed, The Huffington Post and Mashable among them — do not see invented viral tales as being completely at odds with the serious new content they publish alongside them.

The NYT story even quotes Elan Gale, who hoaxed the internet with his Thanksgiving plane-ride tweets, saying that the people who embedded and Storified his tweets were “deceiving their audience” by doing so. The appeal of the moral high horse appears to be irresistible: look at Dave Weigel, for instance, tearing into BuzzFeed for their rebroadcast of the Gale tweets, calling it “the sort of shoddy reporting that would get a reporter at a small newspaper fired”.

What Weigel misses — and even Gale too, it would seem — is that the BuzzFeed story is not a journalist reporting about happenings on a plane. “Someone is rude on a plane” is not a news story. The BuzzFeed story is rather a journalist reporting about happenings on the internet — specifically, on Twitter. Here’s how BuzzFeed CEO Jonah Peretti sees his publication:

I think of BuzzFeed as this platform that enables us to understand how people are sharing and distributing things like entertainment content, journalism, branded content, all these various types of content that we distribute on this platform that we built…

What we’ve found is that content spreads on different networks for different reasons. There are underlying human dynamics for social content. There are reasons why people share.

This is where the tensions come in: the reasons that people share basically have nothing to do with whether or not the thing being shared is true. If your company was built from day one to produce stuff which people want to share, then that will always end up including certain things which aren’t true. That’s not a problem if you’re ViralNova, whose About page says “We aren’t a news source, we aren’t professional journalists, and we don’t care.” But it becomes a problem if you put yourself forward as practitioners of responsible journalism, as BuzzFeed does.

It has become abundantly clear over the course of 2013 that if you want to keep up in the traffic wars, you need to have viral content. News organizations want to keep up in the traffic wars, and so it behooves them to create viral content — Know More is a really good example. But the easiest and most infectious way to get enormous amounts of traffic is to simply share the stuff which is going to get shared anyway by other sites. Some of that content will bear close relation to real facts in the world; other posts won’t. And there are going to be strong financial pressures not to let that fact bother you very much.

Indeed, that fact doesn’t bother me very much. I very much love Analee Newitz’s “valley of ambiguity”:


It seems to me that if a site has a bunch of viral content, and some of it is on the left hand side of the valley and some of it is on the right hand side of the valley, then it’s entirely reasonable to apply journalistic strictures to the right hand side but not to the left hand side.

It’s also possible, if Facebook really does start cracking down on the left hand side of this valley, that the incentive to create fake viral memes will naturally dissipate. But that’s not going to happen in 2014. So expect, over the course of the coming year, a large quantity of debate about questions like whether it even makes sense to fact-check a twerking video.

My undergraduate philosophy thesis was about the semantics of belief ascription, and the way in which “Lois Lane believes Superman can fly” is true, and “Lois Lane believes Clark Kent can fly” is false, even though Superman is Clark Kent. I think this debate is similar: when you point to a twerking video, are you pointing to the video, or are you pointing to the actions which take place in the video? BuzzFeed says it’s doing the first kind of pointing, which means that it’s true, while the likes of Dave Weigel see instead the second kind of pointing, which means that it’s false. To a large degree, this is a discussion which only journalists, and maybe the occasional underemployed philosopher, could ever care about. But it’s going to be hard to avoid in 2014.

Update: In fact, you can fact-check a twerking video.


I am fascinated and interested in the internal Gawker debates. In the “old” world, we have tabloids and we have “real” newspapers. It is very clear which is which. This becomes difficult on the Internet because of the business model constraints, especially the fight over traffic. Part of the problem lies with us readers – clearly lots of people don’t care for the truth and just want to be entertained – somewhat delusionally believing they are reading news. This is analogous to the idea of reading Playboy for the articles.
I encounter this problem especially in science reporting. There are way too many sensationalist headlines and mis-reported results which are then passed around confidently. And then you mix in Big Data and we have one big mess.

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The truth about Blackstone and Codere

Felix Salmon
Dec 6, 2013 23:19 UTC

I’ve always felt that the Daily Show should do more financial stuff, and there’s no doubt that Wednesday’s piece on Blackstone was funny. But it was also extremely credulous about a single Bloomberg article from October.

Jon Stewart — a man who, according to the NYT, might be “the most trusted man in America” — said that the Bloomberg piece was “unbelievable story” of how Blackstone engaged in “incredibly egregious behavior” which “should be illegal” — strong words, which elicited smart reactions from both Matt Levine and Dan Primack.

In a sign of the degree to which Bloomberg is implicitly trusted, however, all concerned — Bloomberg View, the Daily Show, Fortune — take at face value the core assertion made by Bloomberg News: that Blackstone made a profit of “from 11.4 million euros to as much as 13.7 million” on its Codere trade.

The article attributes those numbers simply to “data compiled by Bloomberg”, but in fact it’s quite easy to see where they came from. Blackstone, according to Bloomberg, “held 25 million to 30 million euros” of credit default swaps on Codere. It then forced Codere into a technical default (repaying a loan two days late) — which triggered those swaps and forced a payout at 45.5 cents on the dollar. Therefore, the amount that Blackstone received on its CDS position was somewhere between €11.375 million and €13.65 million.

But that number is gross revenue, not profit. The profit on Blackstone’s CDS position can be looked at as being the difference between that payout, on the one hand, and the amount that it spent buying the CDS in the first place, on the other. (Although in fact, as we’ll see, it’s more complicated than that.) Unless we have some idea of Blackstone’s cost basis on this trade, we have no idea what its profit was. Bloomberg, however, seems to simply assume that Blackstone’s cost basis for the CDS was zero — that it managed to accumulate all that insurance without paying anything for it whatsoever.

To be sure, Blackstone are smart operators, and I don’t doubt that they’re making a profit on this trade. But we really have no idea how big that profit was.

And in any case the whole thing was part of a much bigger trade, which has yet to be unwound. Primack explains that “in the first half of 2013, Blackstone affiliate GSO Capital Partners purchased debt and credit default swaps in Codere” — in other words, it entered into a basis trade, where it bought debt in a troubled company and also bought insurance on that debt. But Codere was already a deeply troubled company in the first half of 2013, which means that Blackstone would have had to pay some nontrivial amount of money to buy its CDS position in the first place.

So before we take Levine’s lead and admire the “majestic beauty” of the Blackstone deal, let’s wait and see just how profitable it was. We’re not going to know that for a while, since Blackstone is now a major creditor of Codere, which is (still) at very high risk of defaulting on its debt: when the original Bloomberg article was published in October, Codere’s bonds were trading at a mere 53 cents on the dollar.

The way that Blackstone made some unknown amount of money on the CDS leg of its trade, then, was to take a huge direct exposure to Codere on the other side of its trade. It’s still entirely plausible that Blackstone’s current exposure to Codere could be written down sharply, and could even end up being bigger than the profits on its CDS trade.

Two other points are worth making, here. The first is, as Primack points out, that absent new money from Blackstone, Codere was pretty certain to default in any event. As a result, Blackstone can credibly be painted as the white knight here — as the company which managed to find a way to funnel money from the CDS market back into Codere, thereby avoiding a bankruptcy filing. That’s certainly Blackstone’s view: spokesman Pete Rose says that the trade saved jobs at Codere, as well as lots of money for Codere’s supplier-creditors.

What’s more, it’s worth stopping to ask who Blackstone bought the CDS from, in the first place. Not many people are in the business of writing single-name CDS on a troubled company like Codere, and the people who do engage in such transactions tend to be highly sophisticated investors — and indeed are probably engaging in some kind of relative-value trade of their own.

Add it all up, and I really don’t think that what Blackstone did was particularly egregious; there’s certainly no reason to believe that it should be illegal. The Daily Show basically accuses Blackstone of setting fire to Codere so that it could collect the insurance proceeds — but in fact Blackstone’s actions were a large part of the reason why Codere managed to survive. Far from being a pile of ashes, Codere now has a real chance of avoiding liquidation. For a piece of clever financial engineering, that’s an uncommonly positive societal outcome.


Every contract, in the US at least, includes an implied covenant of good faith and fair dealing. Blackstone’s actions as described appear to violate that covenant. Moreover, I wouldn’t be surprised if a motivated prosecutor could find a criminal violation here. It’s disturbing that the article focused on the amount of profit Blackstone made, and not the allegation that the company created the default it collected on. If that is business as usual in the derivative markets, something has to change. Get your moral compass fixed, Felix! Then ask the counter-party how it feels about paying off after Blackstone’s manipulation.

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The evolution of Bloomberg News

Felix Salmon
Nov 19, 2013 15:58 UTC

Yesterday was a big day for layoffs over at Bloomberg, and Kara Bloomgarden-Smoke has the official memo from editor-in-chief Matt Winkler. In typical Bloomberg style, the defenestrations seem to be taking place in much the same way as they would on Wall Street, with reporters being escorted from the building, never to return. (Bloomberg has a formal policy that once you’ve left, even if your departure was not of your own choosing, you can’t come back.)

I got a phone call this afternoon from one Bloomberg employee of very long standing, who used terms like “Lord of the Flies” and “culture of fear”; he said that he had never seen anything like this during his long career at the company. Employees were even reportedly flocking to the local Starbucks to view the latest NMA video about Bloomberg News on their phones, because they didn’t dare watch it on their work computers.

If you take a step back from the chaos, however, it’s possible to see the beginnings of a deep change in how the Bloomberg newsroom is run. The message I’m getting from the layoffs is that Bloomberg is finally growing out of Winkler’s insecurities, and is beginning to shape the newsroom into more of a means to an end, and less of an end in itself.

To understand what’s going on, it’s important to have a vague feel for where the power really lies within Bloomberg LP. Winkler is undoubtedly a powerful man — he oversaw the rise and rise of Bloomberg News, and he is a close confidante of Bloomberg, co-writing Bloomberg’s autobiography along the way. But while Winkler is powerful, he’s no Tom Secunda. Secunda, a co-founder of the company, is the other Bloomberg billionaire, the man in charge of basically everything which makes money at Bloomberg. And Secunda is the opposite of a romantic press baron: all he’s interested in is profitability.

Winkler’s enormous achievement, of building one of the world’s foremost news organizations from scratch, required an aggressive, underdog spirit. Bloomberg News is a highly competitive organization, and Winkler wanted to beat everybody, on everything, all the time. His goal for Bloomberg News was always that it be faster, broader, deeper, more accurate, more trustworthy — on every story, compared to every competitor.

That goal, however, put Winkler at odds, to some degree, with Secunda, whose only priority is client service, and giving Bloomberg subscribers whatever they want. And it turns out that Bloomberg subscribers, although they definitely want market-moving news ahead of anybody else, are much less fussed about the broad mass of news stories which don’t move markets.

So while Winkler was building up a substantial investigative-journalism group, or creating the Bloomberg Muse franchise to cover the arts, Secunda was grumbling, asking why Bloomberg News needed to provide any of that kind of stuff. Couldn’t Bloomberg subscribers find just as good content in such areas from the New York Times wire, if they needed it? The answer, of course, was yes, but that was not an answer that Winkler ever wanted to hear: his competitive drive didn’t end at actionable news. He wanted to win everything, all the way down to sporting results and book reviews.

In recent years, Winkler has been losing a bit of his former power. New areas of editorial — most obviously Bloomberg View and Bloomberg Businessweek — have been set up largely outside his purview: while he’s nominally in charge of both, he has little actual control of either — as some of Businessweek’s most notorious covers will attest. And then, this summer, the Atlantic’s Justin Smith was hired to the newly-created job of Bloomberg Media CEO.

Smith’s main qualification for the job was that he took a company which was bleeding millions, and turned it into a profitable, digitally-savvy news organization. And while Bloomberg News doesn’t have a profit mandate — its main job is to provide news to terminal clients, not to be profitable in its own right — it was clear that Smith was being charged with making the organization rather less wasteful, and with ensuring that if Bloomberg was doing something, it was doing it for a good reason.

Thus was created a procedure which had never happened at Bloomberg News before. “We evaluated everything we’re doing,” said Winkler, in his memo, “to determine what’s working and what isn’t, with the single aim to ensure all we do has maximum impact”. No more would Bloomberg News try to beat everyone on everything: from here on in, it would concentrate only on those areas where it could really move the needle.

Put like that, it was pretty clear where layoffs would be coming. Bloomberg TV is watched by, to a first approximation, nobody — and loses more than $100 million a year. With costs so high and benefits so low, it was never going to maintain its former size. Bloomberg Muse created some wonderful content, but, again, almost nobody read it — and it was hard to make a case that it was producing extraordinary material that no one else could equal. And as for the investigative unit — well, investigations are part and parcel of any serious news organization, and Bloomberg News is nothing if not a serious news organization. But again, the unit was looking bloated, it wasn’t reaching a wide readership, and the terminal clients didn’t much care about what it produced. If they weren’t interested, then at the very least the investigations should have some kind of popular impact, and help to bolster the reputation of Bloomberg News within the global elite.

Thus did Smith give Josh Tyrangiel, the editor of Bloomberg Businessweek and one of the very few people inside Bloomberg News to have proven himself largely independent of Winkler, a broader remit, including pretty much all the problem areas: investigations, Bloomberg Muse, and — at least temporarily — Bloomberg TV as well. The pruning was severe, just as it was when Tyrangiel took over Businessweek. But Winkler is clear that even after these cuts, Bloomberg News is going to have a greater headcount next year than it did before this week’s firings. It’s still growing: it just no longer feels the need to try to beat every other media organization on things as peripheral to its terminal business as arts coverage and match reports.

All of this should make Secunda happy — while at the same time emphasizing the fact that Smith and Tyrangiel now have a significant degree of control over a newsroom which used to belong solely and unambiguously to Winkler. And while the Winkler regime had its idiosyncrasies, it didn’t pull its punches. Now, however, Bloomberg News is increasingly a direct threat to the success of Bloomberg LP, in a world where China represents the company’s biggest growth opportunity and just one of the two things that Mike Bloomberg has declared to be in his “long-range plans” after his successor’s inauguration as New York City mayor. (The other? Playing golf in Hawaii and New Zealand with Julian Robertson.)

This is the downside of having Bloomberg News act as some kind of service provider to the terminal-sales business: the terminal-sales business clearly wants to minimize the impact of any critical news articles about China. As Edward Wong reports:

Editors at Bloomberg have long been aware of the need to tread carefully in China. A system has been in place that allows editors to add an internal prepublication code to some articles to ensure that they do not appear on terminals in China, two employees said. This has been used regularly with articles on Chinese politics.

This is a textbook example of pulling punches: refusing to publish stories in exactly the country where they would serve the greatest purpose. I can’t imagine that Winkler would have initiated such a protocol: it serves no journalistic function. But it’s clear — for good and for ill — that Winkler no longer has the absolute control over Bloomberg News that he used to have.


How does it feel to have helped the tyrants lie about the jobs numbers and destroy Jack Welsh? You are an ass-hat.

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The financial-media rollup strategy

Felix Salmon
Nov 15, 2013 19:34 UTC

Financial news is a classic ripe-for-disruption industry. It generally makes its money by selling expensive subscriptions to the price-insensitive, but that model won’t last forever: it’s never been harder to find anybody under the age of 40 who pays for such things. The trick, for anybody looking to navigate the industry, is to create products which will have a much greater chance of gaining broad traction in a mobile-native world — and which can generate profits through as many revenue streams as possible.

If you’re ambitious, it’s easy to see an enormous opportunity here. The FT and the WSJ are both billion-dollar brands; Bloomberg and Reuters are worth much, much more. All of them have very substantial subscription revenues, which they can’t afford to endanger. (Well, Bloomberg probably can afford to endanger them, but it won’t.) As a result, if an aggressive digital financial media company starts going after their customers, the big guys are not going to fight back by lowering their prices.

Now, with today’s news that Deutsche Bank has been hired to sell Forbes Media, it looks as though the opportunity to create just such a company has arrived. Forbes is being sold relatively cheap: Bloomberg’s Edmund Lee reports that the asking price is in the $400 million range, while US ad sales alone were $275 million last year. Add in international sales, events revenue, and licensing revenue from software deals and things like Forbes Media Tower and the Forbes School of Business, and you’re talking about a sale price which is barely above 1X revenues.

Forbes is not the only digital financial-media property going cheap. TheStreet.com is publicly listed, and has a market cap of $75 million on annual revenues of $50 million. Chances are, any takeover offer would be taken very seriously.

Meanwhile, Andrew Edgecliffe-Johnson reports that Henry Blodget, the CEO of Business Insider, is “in full pitch mode”, saying that BI “would actually be perfect for a merger”. Blodget has been preaching the roll-up gospel for a while now, and would surely jump at the opportunity to get involved in one. He has revenues of about $20 million right now; BI is valued at much higher multiples than Forbes or TheStreet, but still surely less than $100 million.

Throw in a bit of extra cash to bring it all together, then, and for say $700 million — significantly less than it would cost you to buy the FT on its own — you could buy Forbes and Business Insider and TheStreet, and probably Seeking Alpha as the cherry on top. At that point, you have the makings of a real digital powerhouse.

The companies are complementary in many ways. Forbes has a big ad-sales base, as well as a storied brand name, a large events business, and a valuable network of thousands of editorial contributors; it is also furthest along in terms of building a strong native-advertising franchise. Business Insider has growth, attitude, aggression, speed, and by far the most web-native newsroom in financial media. It knows what people want to read, and it is extremely good at providing exactly that. TheStreet, meanwhile, has an enviable list of stock-market investors who are willing to spend serious amounts of money on newsletter subscriptions; it also has a very sophisticated video setup, and last year spent $6 million buying The Deal, which reaches pretty much everybody who matters in the New York financial industry. And Seeking Alpha has managed to build up an extraordinary base of reader-contributors, who between them provide some of the most timely and sophisticated stock-market analysis on the web.

The big question is, of course: who has $700 million to spend on such a roll-up, as well as the managerial and technological nous to get them all to play nicely together? The facile answer is: anybody who can afford to spend $400 million on Forbes alone can afford to spend $700 million on something which is much more likely to make a real impact. But still, we’re talking about real money here. Which means that one company in particular springs to mind as the place which could put a deal like this together: Yahoo.

Yahoo already owns Yahoo Finance, which is by far the most valuable financial property on the web. (It’s also, for my money, the single highest-quality product that Yahoo owns.) Yahoo is also in acquire-and-expand mode right now, buying up anything with buzz. $700 million is less than two-thirds what Marissa Mayer paid for Tumblr; she has $1.8 billion in cash alone, and might well come into even more, depending on what happens with Alibaba. On top of that, Yahoo Finance could provide the kind of readership and quality data services that all of the rolled-up companies would kill for: it has the makings of a great platform on which to build a truly formidable financial-media competitor.

Of course, getting all these different properties to work well together would not be easy, especially given geographical obstacles: Yahoo is in California, while Seeking Alpha is in Israel. Most mergers subtract value, rather than adding it. But we’ve reached a point, in financial media, where nimble digital companies have finally managed to build up the ability to constitute a real threat to the incumbent giants. That will take growth, and substantial investment. This isn’t the world of startups any more — these are real companies, with real revenues. There’s a strong case for a deep-pocketed player to roll them up and make them substantially greater than the sum of their parts.


to be a useful mobile-native news experience, it has to be linked to a trading platform. i don’t think yahoo could do that. or rather, if someone wants to do it, they can do it better building from the ground up.

forbes may have revenues but it has no future. it’s been devouring its own reputation for years.

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How the NYT neglects business journalism

Felix Salmon
Nov 15, 2013 06:52 UTC

Brian Abelson has a fantastic post about the performance of NYT articles. The main gist is that it’s possible to predict with surprising accuracy how many pageviews any given NYT article is going to receive, given just a few variables like the amount of time that article spent on the home page, and whether or not it was tweeted by the main @nytimes Twitter account.

There’s a lot of information in the post, however, and a couple of other things jumped out at me, seeing as how I’m a business journalist for a wire service. The first is the almost hilarious way in which the NYT seems to go out of its way to ensure that readers do not read wire stories on the NYT site, despite the fact that they make up the overwhelming majority of the content on the site.

Abelson put together a database, for this post, of 21,006 stories published on nytimes.com between July and August of this year. Of those 21,006 stories, 15,269 — or 73% — came from wire services (either Reuters or the AP); the other 5,737 were original content. But get this: any given piece of original content had a 21% chance of being tweeted out by @nytimes. A wire story, on the other hand, had only a 0.6% chance of being tweeted by @nytimes. Or, to put it another way, @nytimes tweeted out 1,273 different articles over the course of those two months — and of those articles, just 89 came from wire services.

Abelson says that these numbers make intuitive sense, on the grounds that “stories from the wire should not receive the same promotional energies as those that come from journalists working at the Times”. But I’m not sure what kind of work the word “should” is doing in that sentence. Is he saying that wire stories don’t deserve to be brought to the attention of the NYT’s readers? That, to a first approximation, only 0.6% of wire stories are likely to rise the exalted standards of @nytimes, while a full 21% of original stories do? Is he saying that the NYT has a good business reason to promote its own stories over those which originated elsewhere? Or is he just saying that news organizations should look after their own, and that it would be somehow disloyal for @nytimes to tweet out many stories which were written by wire journalists, even if those tweets were links to the NYT website?

Instead of trying to guess what Abelson means, though, we can just look at this chart that he put together instead.


What you’re looking here is a scatter chart of actual pageviews, on the y-axis, against the number of views that you’d predict any given story would receive, given variables like how much time it spent on the home page, whether it was tweeted by @nytimes, the number of section fronts it appeared on, etc. By using nine such variables, Abelson is able to explain 90% of the variance in pageviews. He explains one way to read this chart:

In the graph, the straight gray line signifies the threshold of a perfect prediction. Articles that fall above this line can be thought to have exceeded their expected number of pageviews while those below the line have underperformed. Computing the error of the model, or the difference between actual and predicted pageviews, allows us to calculate the degree to which any given article has performed in relationship to its “replacement”  —  or a hypothetically similar article which received the same level of promotion.

The interesting thing for me, looking at the chart, is the large number of outliers in the bottom-left-hand corner. This grouping is overwhelmingly wire stories which, according to Abelson’s formula, should get very few pageviews — and yet, despite that, and despite the fact that they were receiving no real promotion at all from the NYT, they did surprisingly well on the actual-pageview front. Indeed, it seems pretty clear from eyeballing the chart that wire stories are, in aggregate, significant outperformers when it comes to what Abelson calls his “pageviews above replacement” metric, which is an attempt to judge how many pageviews a story gets after controlling for the amount of promotional oomph it received from the NYT.

One way of looking at this is that the readers have spoken — and they’ve shown, quite clearly, that the NYT has made the right choice to pay Reuters and the AP for the right to run their wire stories. Another way of looking at this, however, is that the NYT systematically underutlilizes the wire stories it’s paying for. To be sure, those stories are available elsewhere on the internet: they’re not exclusive to the NYT. But readers don’t care about exclusives — even if they’re genuine exclusives, which, most of the time, they’re not. Readers just want to know what’s going on in the world — and the wires can do a very good job of telling the thousands of stories that a newsroom with finite resources can’t cover.

What’s more, from a business perspective, it would make sense for the NYT to put more promotional muscle behind the stories above the grey line. When a wire story starts performing surprisingly well — something which seems to happen quite frequently, according to this chart — then that’s a pretty good sign that the NYT should start putting it on more section fronts, tweeting it out, and generally giving it substantially more prominence. Given the limited space available on section fronts and in the NYT’s Twitter feeds, doing so would help to maximize pageviews and would deliver more of what the NYT’s readership is demonstrating that it wants to read. One of the great weaknesses of news organizations in general is that they don’t give nearly enough respect to stories they didn’t write themselves. That weakness costs valuable pageviews, if you’re already paying to be able to run those stories on your own website.

And then there’s the business-news perspective. Here’s another of Abelson’s charts:


This one’s a bit harder to read, but in the first instance, just look at the blue circles. The size of the circle shows how many articles there are in each section, while the position of the circle, from left to right, shows how many pageviews the average story in that section receives. The magazine and the dining section, for instance, don’t run a lot of stories, but the stories which do run tend to get a lot of pageviews. And then there’s the business section — which runs a large number of stories, but whose articles get fewer pageviews, on average, than any other section.

Now it’s not that the NYT’s readers don’t want to read business stories. The left-right positioning of the red circles shows how well each section’s stories are doing, given how much promotion they receive. On this basis, the magazine outperforms; the dining section does the worst. And the business section is right there in the middle, performing just as well as any other section. Give business stories a bit of promotion on the home page and on Twitter, in other words, and they’ll get you just as many pageviews as anything else, on average. But it turns out that the business section is systematically shortchanged by the people making those promotional decisions. Maybe (I’m not sure) because it has a higher concentration of wire stories.

Again, this looks like strategic short-sightedness. Business-news pages are some of the most valuable on the website, in terms of the amount that the NYT ad-sales team can charge for them. (They’re so valuable, in fact, that the entire Dealbook section remains outside the NYT paywall, in an attempt to garner it as many pageviews as possible.) By promoting more business stories, even if they are (horrors!) wire stories, the NYT could make more money, and everybody wants that — including the readers, who have shown that they have more interest in such things than the NYT’s editors think that they do.

What would be lost by such an approach? Very little: a few dining and metro stories might get viewed less often, if their promotional muscle started getting transferred to the business section. And maybe a few NYT egos might get a little bruised, if they discovered that their snowflakes weren’t quite as precious, to the outside world, as they liked to think, at least in comparison to the wire. But the website should be run for readers, not for journalists. And improbable as it might sound, it looks very much as though those readers would be best served if the NYT made it significantly easier to find wire stories, business stories, and — especially — business wire stories.


Btw, this snapshot analysis also missed the interdependence (over time) between disproportionately popular wire stories and the promoted exclusive content. I think it not debatable that readers like the NYT for its exclusive content. While they’re there, they check out interesting stories that happen to be wire stories. Take away the promotion that draws them to exclusive content and soon enough the so-called high-performing wire stories will also fall…

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Content economics, part 4: scale

Felix Salmon
Nov 11, 2013 08:05 UTC

The big blog news of the day is that Vox Media has acquired Curbed Network. Why is the news so big? Because, until now, if a major blog property was sold, it was always sold to some media giant — more often than not, AOL — which wanted to add another bloggy arrow or three to its massive content quiver.

This time, by contrast, the likes of AOL (which bought Weblogs, and Techcrunch, and Huffington Post); Condé Nast (which bought Ars Technica and Reddit); Disney (which bought Babble); and Turner Broadcasting (which bought Bleacher Report) were either outbid or were not in the running at all. The buyer here is native: Vox doesn’t need the Curbed team to understand the world of online publishing, since it has been even more successful at that game than Curbed has. (Vox, with more than 40 million unique visitors per month, has raised some $70 million to date; Curbed is being acquired for somewhere in region of $25 million.)

Rather, the Vox-Curbed combination is the beginning of a phenomenon that Henry Blodget has been anticipating for a while. Last month, he talked about a “digital equivalent of Time Inc”, where various standalone publications would operate under a larger corporate umbrella. Last week, at a now-notorious breakfast with Gawker Media’s Nick Denton, the two CEOs talked about a possible merger of their companies. And on Friday, in a Google Hangout hosted by Howard Lindzon, I took the opportunity to ask him to elaborate. Could Business Insider and Gawker Media continue as independent sites while sharing back-end technology and sales teams? Here’s what he said:

I do think that over the next five years, what you’re going to see is a lot of consolidation. The fact is, there are way too many digital news and media organizations out there right now. There will be a lot of consolidation. As they come together, you will get huge economies of scale on the sales side, on the tech side, and on some of the other areas as well. And then you’re going to see these companies produce good profits…

Right now there are 30? 50? 100? news organizations online that are effectively just general news sites. Do all of those brands have to exist? I would say no. I would say a lot of them could be combined under a big brand. We like brands. And I think ultimately companies like Huffington Post, or maybe it’s BuzzFeed, maybe it’s CNN, will build a global news organization that is vastly larger than anything that’s out there now. Now, basically, if you don’t have 100 million uniques as a general news organization, you might as well mail it in, because that’s the size that most of them are now. Over time, that will be 500 million uniques. It will be just inconceivably large audiences. Because they will bring a lot of what other sites are doing onto their one platform. They will be much easier for advertisers to deal with, because advertisers don’t actually want to do deals with 75 tiny little sites: they’d actually much rather work with a big site with much more reach…

Somebody’s going to build the Time Inc of digital media. There are going to be a few big properties, and they are going to hang on this central platform that will have the same technology, the same international sales layer, the same administration. Each publication will be very big and successful unto itself, but they’re sharing some of these services. That will work very well… Many, many companies have a shot at this. AOL. Glam. Vox Media is going after this aggressively.

Little did Blodget know, as he was saying that, that Vox Media was putting the finishing touches on its deal with Curbed — the first in what will surely be a string of acquisitions aimed at creating exactly the behemoth Blodget is talking about. Indeed, Business Insider might, conceivably, be next on Vox CEO Jim Bankoff’s shopping list — it shares a similar demographic to sell to advertisers, and Bankoff has chosen Business Insider’s Ignition conference as the venue from which to formally announce the acquisition.

The Blodget vision — which is clearly shared by Bankoff — is of a publishing platform on which any number of websites can be built. That vision isn’t a new one: both Gawker Media and Weblogs Inc were based on pretty much the same idea. But neither of them ever managed to expand by acquisition. And it’s notable that while Denton was an angel investor in Curbed Network (which in turn means that he’s now a small shareholder of Vox Media), no one ever gave serious thought to building the Curbed sites on the Gawker platform.

Similarly, while BuzzFeed is a traffic monster, its content management system — the all-important technology which in large part drives the success or failure of any online publishing operation — is so narrowly optimized to the unique BuzzFeed voice that it’s hard to see it being extended across a broad swathe of different sites.

It’s almost impossible to overstate the importance of the CMS when it comes to the question of who’s going to win the online-publishing wars. As Blodget said on Friday, if you’re going to make serious money in this business, you need serious scale. If you want serious scale, you have to be able to expand not only organically but also by acquisition. And if you want to be able to scale up through dealmaking, you need to have a technology and sales platform which can support large-scale acquisitions.

Vox Media’s platform, called Chorus, fits the bill — it does everything well, from video to real-time storytelling to sophisticated ad integration. AOL, too, has an excellent CMS. In fact, when Jim Bankoff, in an earlier incarnation, acquired Weblogs Inc for AOL, he did so in large part for its CMS, rather than for any of the site brands. But other potential players are seriously hobbled on this front. Off-the-rack CMSs like WordPress and Drupal are OK for small-to-medium sites, but aren’t particularly well suited to be the framework for a major publishing operation*. Narrowly bespoke CMSs like BuzzFeed’s or Gawker’s Kinja can be very good at what they do, even while they’re less well suited to powering a broader range of sites. And if you’re a legacy media company of any description — be it in newspapers, or TV, or radio, or even financial-information terminals — then a large part of your CMS is going to be devoted to integrating digital content with your legacy product, and is therefore going to be a little bit clunky and unwieldy if you try to use it for any pure-play digital operation.

My feeling, then, is that there’s a strong argument that a franchise like Business Insider belongs on a platform like Chorus. Business Insider is like Curbed Network in that it is pushing up against the limits of its current CMS, and faces a decision point. Should BI to make a large investment in product and technology, to support its future growth? Or would that just be an exercise in reinventing the wheel, given that Chorus already exists? And while BI might be able to afford to invest heavily in technology and sales, other small-to-medium-sized blog networks, like Gothamist, as well as standalone sites like Salon, probably can’t. For them, a move to Chorus, or something like it, could be the only way to grow.

The question from Vox Media’s point of view, however, is a bit different. There’s an enormous number of websites out there which would become significantly more valuable overnight if they simply moved to Vox’s sales and publishing platform. So the arbitrage is clear: buy those sites at a relatively low multiple (Curbed Network sold for less than four times revenues), turbocharge them with Chorus, and then reap the benefits of seeing those sites’ revenues increased substantially — and being valued at significantly higher multiples than Vox paid in the first place.

On the other hand, as the NYT notes in its article about the Curbed acquisition, “Vox has earned a reputation for high-quality content, producing sleekly photographed articles that integrate multimedia in a smooth and sophisticated manner.” It’s that reputation which helps it maximize its ad rates — and if it becomes a company selling a hodge-podge of random sites, it’s going to find it difficult to maintain its premium pricing and desirability among advertisers.

What’s more, Bankoff seems to want to build or buy sites which have a realistic chance at dominating their respective fields — he doesn’t seem particularly interested in building a stable of sites which compete with each other, although that might change over time. After all, Condé Nast didn’t have a second food magazine to compete with Gourmet, until it bought Bon Appetit in 1993. In principle, if you have two similar sites and can therefore offer a potential advertiser twice the inventory and a significantly greater reach, that should be good news for all concerned.

Which brings me to the company which has been executing the publisher-as-a-platform strategy more successfully than anybody else for longer than anybody else: Glam Media. Glam is the publishing behemoth that non-insiders are least likely to have heard of, because it does a good job of hiding its own light under a bushel. Instead, it allows the sites on its network to build their own followings.

Glam started out as an ad network, basically. It would find publishers, mainly in the women’s-lifestyle space, and would do deals with them whereby it would sell ads on their sites. By aggregating a large number of sites, and starting a few of its own, Glam managed to achieve the kind of scale which advertisers demanded.

Along the way, Glam acquired an enormous stable of bloggers and writers — who were not only micro-publishers in their own right, but who were also creating some great content which deserved to be placed in front of a much larger audience. So Glam created a system whereby writers, photographers and other content providers could see their work appear on sites throughout the Glam network — and get paid every time that happened.

The difference between the Glam view of the world, which comprises thousands of publishing brands, and the Blodget view of the world, which involves only a relative handful, is that while it’s true that consumers like brands, it’s no longer true that one big brand is going to beat thousands of small brands. Smaller websites can feel much more targeted and personal, and can build up a much more loyal following, than sites which have millions of users. If advertisers can get their ads onto that kind of site, and reach just as many people as they would buying one huge site, they’re better off for it.

Glam, then, turned publishers into curators: they could produce their own content, or they could source content from elsewhere within the Glam network. If they hit a nerve and managed to gain serious traction with a niche audience, they could make good money from what they were publishing — and then they could make even more if their original content was used on other Glam sites. Best of all, none of the publishers had to worry about technology or ad sales — all of that was taken care of by the Glam mothership.

In many ways, Glam represents the ultimate triumph of technology over content. It does own valuable websites, but that’s not where the real value of the company lies. Instead, Glam has managed to build a system which controls more of the advertising stack than any other company, so that it can implement campaigns with more effective targeting and reach than just about any other online publisher.

And Glam isn’t stopping there. In 2011, Glam bought Ning for a reported $200 million — and now, finally, we’re beginning to see why. Look at Foodie, Glam’s shiny new recipe site — it’s powered entirely by Ning, and works a bit like Pinterest for recipes and restaurants. It’s a social discovery platform: it’s a place not only to find your favorite recipes, but also to collect them, to publish them, and to broadcast them to others. Glam, meanwhile, provides the technology which makes the whole thing incredibly intuitive and easy to use and navigate — both for individuals and for brands.

Foodie is still tiny — much smaller than Glam’s existing network of sites. But it also has significantly higher margins than classical publishing plays, partly because the cost of content is so much lower: like Pinterest and Yelp and Twitter, the content is often provided, gratis, by users. It’s a publishing platform which is open to anybody, a bit like Kinja — but it’s much easier to use than Kinja, and it’s naturally social in a way that Kinja isn’t.

Importantly, Foodie shares with the rest of Glam Media’s sites the fact that it doesn’t really do journalism, or news. Glam Media is a lifestyle publisher, specializing in things like fashion and beauty. That’s extremely attractive to advertisers, who in general don’t particularly like news: the reason that newspapers split themselves up into lots of sections is precisely because advertisers are much happier when their ads don’t appear next to hard, gnarly news.

Vox Media, too, is not really a journalistic organization; it breaks little if any news*. And in that respect Curbed Network is a good fit. As Bankoff told Jessi Hempel, he wanted Curbed because of its status in “consumer categories” — things which people want to go out and spend money on. His CMS is actually extremely well-suited to supporting a news site: it was designed to power SB Nation, his network of sports sites, and a sporting match is, in a manner of speaking, an exercise in continuously breaking news. I would love to see Business Insider powered by Chorus: I think that such a site would be much friendlier to both readers and advertisers, and could really come into its own on, say, the first Friday of the month, when the jobs report is released.

The question, however, is whether Bankoff would want Business Insider to be part of Vox. News is always a tougher sell, but at the same time it confers priceless legitimacy: BuzzFeed, for instance, is investing an enormous amount of money in its journalism, not because that’s a particularly cost-effective way to generate traffic, but rather because it means that both readers and advertisers take the site much more seriously as a result.

And with his most recent acquisition, Bankoff has proved that he’s OK with buying lower-multiple businesses. The reason that Curbed sold for less than four times revenues is that a very large chunk of those revenues is attributable not to advertising but rather to events. Eater, in particular, has a thriving events business, but events revenues are always going to be valued on a lower multiple than advertising revenues are. Still, events are a great way of adding a new revenue stream to an existing franchise, and of helping to take brands off the internet and into the real world. Don’t be surprised to see the existing Vox Media franchises doing many more live events now once the Curbed team is in place.

Vox Media and Glam Media, then, both clearly have a good shot at becoming Blodget’s digital version of Time Inc. AOL does too, especially if CEO Tim Armstrong can wrest his attention away from Patch: AOL’s publishing technology is excellent, and the way that HuffPo is expanding internationally is a great model for companies which have always struggled to monetize their non-US traffic.

Other, bigger, companies would love to enter the competition. Yahoo has made many attempts at doing so, but they always seem to end in bureaucratic suffocation. Disney has many digital powerhouses of its own, from Babble to Club Penguin to ESPN, but they’re too big and too disparate to form the nucleus of a publishing network. Condé Nast put a huge amount of money and effort into making a success of Conde Net, but at heart it simply isn’t a technology company; while it might be a perfectly good quiet minority investor in the forthcoming site from Kara Swisher and Walt Mossberg, it’s not good at running sites itself. And of course soon-to-be-spun-out Time Inc has every intention of becoming the digital version of Time Inc itself. But it’s too slow-moving, and its fiefs are too politically entrenched, for that to happen.

On the other hand, maybe Time Inc isn’t the right metaphor. If you look at these slides over at the Glam Media site, which date back to August 2012, you’ll find the company comparing itself not to any print publisher, but rather to cable channel operators, like Disney or Viacom, which sit in the middle between advertisers, content providers, and content distributors. Glam, it seems, is interested in developing relationships with everybody in its ecosystem. It was even there at the beginning for Refinery 29, which has now become a major competitor.*

No one knows what the digital-publishing platform play will ultimately look like. I’m convinced that owning a first-rate CMS, one which makes publishing both compelling editorial and beautiful advertising a breeze, is a necessary precondition for success. Beyond that, it’s still far too early to tell what’s ultimately going to work. I’m fascinated by the Medium experiment: I think it has a lot of potential, especially if it starts to support custom domains, like Tumblr did early on. Looking at Medium, along with Vox, and Glam, and even AOL, I think I can begin to discern the vague outlines of how digital publishing might eventually be able to deliver the kind of scale and impact that brand advertisers demand from TV and glossy magazines. I don’t know who the winner is going to be. But I do think that Blodget is right about one thing: whoever the winner is, they will have to have some very deep pockets. Winning this game won’t come cheap.

(This is part 4 of an irregular series; it comes in the wake of part 1: advertising, part 2: payments, and part 3: costs.)

*Update: A few things worth adding/clarifying here. First, I shouldn’t have said that Vox “is not really a journalistic organization. That’s wrong: it does a lot of very good journalism. What it doesn’t do a lot of is the kind of investigative/breaking news which advertisers tend to shun.

Second, on WordPress and Drupal, there is an argument to be made for WordPress VIP, where improvements made for one client automatically apply to all other clients, and a tech company is in charge of tech rather than a media company. The problem is that they don’t integrate with the advertising stack as easily as they should, and they remain at heart blog CMSs, based on the idea that you basically have a single template which displays individual posts/articles in a standard manner. I think the web is moving on from there.

And finally, here’s something I had completely forgotten about, or never knew in the first place: Vox and Glam actually announced a significant partnership back in 2009. I wonder what happened to that.


This is basically about offering a lazy media buyer the opportunity to a) write a single check and to b) be able to tell the client what he/she is buying in a single sentence.

There’s nothing terribly exciting about CMSs from the perspective of competitive differentiation, absent good people and process. As long as you have good developers, building and supporting a great internal CMS is not especially difficult.

What’s not easy is getting the same great CMS to work on more than one site (or in innovating in UX if you have a third-party vendor offering). Given the context of an acquisition, CMS migrations are even less easy, just as migrating from one ad server (and migrating all of the other supporting systems and processes like ad trafficking systems) is expensive and disruptive for ad sales and editorial. The bigger the companies, the harder this gets.

So I am personally not sure that I see a genuine scale advantage here, barring a massive improvement in their ability to command higher rates.

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