Inside Business Insider

Perfectly timed and immaculately executed, but based on an unsustainable model


Founded by Henry Blodget in 2007, and having recently attracted two separate investments from Amazon CEO Jeff Bezos, Business Insider is a great example of a new type of online news site that reverses the business model that has underpinned news publishing for decades.

Emboldened by the apparent success of sites like Business Insider, plus others like Huff Post, Gawker, and BuzzFeed the last few months have seen the launch of a new wave of online news businesses; for example Re/Code (Kara Swisher, Walt Mossberg), Vox (Ezra Klein) and The Information (Jessica Lessin) – plus others (see our new report on Newspapers and the Internet for a full list).

(Indeed, we find this emerging sector so interesting that we’re seriously considering launching an online tech news service ourselves, and we’ll be inviting you to provide feedback on a pre-beta site we’re developed in the coming days...).

Anyway, Henry Blodget has been kind enough to publish a lot of interesting data about his business (see here – January 2013 and here – March 2011) and when that data is enhanced with some sensible analysis you can start to see a kind of  ‘blueprint’ for how to run a successful online news operation.

So, first up, here’s what we know about Business Insider:

Funding History of Business Insider

According to CrunchBase, Business Insider has raised a total of USD 30.6 million of venture capital in six funding rounds, with the two most recent rounds benefiting from the personal involvement of Amazon CEO Jeff Bezos (who, by the way, acquired the Washington Post in August 2013):

  • On April 5 2013 Business Insider reported receiving an investment from a number of investors including Amazon CEO, Jeff Bezos. The total investment was USD 5 million;
     
  • Less than a year later, on March 5 2014, Reuters reported that Business Insider had raised an additional USD 12 million in its most recent funding round which valued the company at USD 100 million. Jeff Bezos was also involved in this round.

Revenue and Traffic of Business Insider

Business Insider is the fourth-largest business news site worldwide which attracted over 25.4 million unique visitors in January 2014, according to ComScore.

Surprised by that? Thought so...

25.4 million unique monthly visitors is actually a pretty big number when it comes to online news sites: data published by the Pew Research Centre in its ‘2013 State of the News Media’ report contained this table which shows the traffic attracted by the top-10 online newspaper websites worldwide:

Pew’s table only includes internet websites operated by print newspapers which explains why Business Insider and other similar sites are not included.

Considering that some of the brands listed above have been in business for approaching 100 years, and most launched their internet websites as long ago as 1999, we’d say that Business Insider – launched in 2007 – has done a pretty remarkable job: Hurrah, Henry!

What's more, as we look into the future, the following chart indicates that Business Insider is currently established on a growth trend:

Future Growth Potential of Business Insider

While you cannot project future growth simply by extrapolating past trends, if we do look at past trends (above) and then factor in what we know about the growth trends of other similar sites, then it does seem pretty implausible that Business Insider’s traffic is going to plateau any time soon. Besides, the interest that the company has attracted from investors shows that some smart people foresee a ‘large’ amount of additional growth in the future.

At this point it is interesting to compare the growth that Business Insider has enjoyed in the past with the growth that US newspaper websites have achieved.

But first, here’s some relevant context:

According to data published by the Newspaper Association of America, US newspaper publishers earned USD 48.7 billion from print advertising in 2000. But by 2012 this had collapsed to USD 18.9 billion – a drop of over 60%.

So print advertising has cratered, but we all know that already.

Over the same period, the advertising revenue earned by US newspaper websites increased by just USD 2.8 billion, from USD 0.6 billion in 2000 to USD 3.4 billion in 2012. And even when subscription revenues are included, the total revenue earned from digital has been nowhere near enough to compensate for falling print revenues.

Again, we know this already.

But what you might now know is that the problem is actually worse than this: if we look at the last 5 years then the advertising revenue earned by US newspaper websites increased from USD 3.2 billion in 2007 to USD 3.4 billion in 2012, a moribund growth of just 6.5% over 5 years.

By way of comparison, figures published by Zenith Optimedia show that the total value of the US online advertising market was USD 14.4 billion in 2007, and USD 30.7 billion in 2012 – an increase of 113%. So US newspaper websites have been growing far more slowly than the overall US online advertising market – which explains why the US newspaper websites are accounting for a steadily falling share of the overall US online advertising market (22% in 2007 and 11% in 2012).

Here’s what you get if you put these two sets of data onto a single chart:

Compared with Business Insider, it is plain that US newspaper websites are going nowhere very interesting.

So what is Business Insider doing right that US newspaper websites have been doing wrong?

Business Insider: Source of Revenue

Business Insider’s primary source of revenue comes from a relationship with Google, under which Business Insider carries text and display ads that are served by Google and a relationship with the content discovery platform Taboola, under which Taboola pays Business Insider when users click on content items that are contextually placed on the pages of Business Insider's website.

The company also offers premium research content under the BI Intelligence brand which includes access to charts, data and analysis.  Business Insider increased the price of BI Intelligence in March from $499 to $995.

Judging by its relationship with Taboola, Business Insider is more willing to sell third party content than is the typical US newspaper website which theoretically provides an extra source of revenue. On the other hand, because of the style of content offered on Business Insider (see below), we think it is likely that the CPM rates for ads on Business Insider are likely to be significantly less than those for branded US newspaper websites. Therefore, when these two opposing effects are combined, the net effect on the difference in revenue is likely to be rather small.

The final possible difference lies in the sale of subscriptions to BI Intelligence, which are currently priced at $995 per user per year. Considering that Business Insider has just started to focus on this part of its business we do not think that this can account for the difference in the historic growth between what the site has experienced and what US newspaper websites have experienced.

Therefore, on balance, we do not see a big difference in the source of revenue between Business Insider and US newspaper websites: Business Insider is basically just an ad-funded website, just like most US newspaper websites.

Business Insider Content Strategy

While we do not see a lot of difference between how Business Insider is deriving its revenue and how US newspaper websites are deriving their revenue, we see a large difference when it comes to content strategy.

Our analysis is that the three most important factors that have driven the success of Business Insider to date are:

  • Focus on click candy
  • High rate of production of news stories
  • Low cost structure

Focus on click candy

With ‘serious’ news headlines (some professional journalists would question whether there is any ‘serious’ news content on Business Insider) posted next to more sensational headlines (see table below), Business Insider’s content proposition is aimed at maximising traffic and clicks: we do not think Henry Blodget is interested in winning any awards for journalism, and that is perfectly OK.

To better understand what Business Insider is doing with its headlines, consider the following 10 titles which were drawn at random from a cursory look at FT.com and Business Insider in February 2014:

While the FT.com is producing ‘serious’ content for a paying subscribership, Business Insider is producing content that is intended to garner a high number of page views.

We are definitely not saying that the FT.com should become more like Business Insider and produce material like “How to be a better man” but we are saying that online news sites will find it very hard to get anywhere very interesting with an ad-funded model if they only produce content that appeals to a niche audience.

It is clear to us that this requires a very different approach than simply publishing the same content that works in a printed newspaper on a newspaper website and hoping that will be enough, because it won’t.

High rate of production of news stories

Business Insider’s writing staff can produce articles at the rate of about one story every 10mins, or about 6 per writer per day. This is often accomplished by selecting a ‘trending’ story and then dividing that story into perhaps 5 or more aspects, each of which is then farmed out to a writer who then has to write a whole page of content – in about one hour. Sites like Business Insider are producing stories at a rate that puts even the biggest newsrooms in the shade

(And in case you’re wondering, I’ve been writing this article for hours 3 hours 45 mins now, and counting...)

Low cost structure

With interns being paid just $12 per hour (equivalent annual salary of USD 25,000), Business Insider is certainly not guilty of overpaying its staff.  Operating within a culture where content farms like Demand Media and others have been paying as little as USD 5.00 per ‘story’, Business Insider is focused on recruiting young writers who are skilled at creating stories that are based on web research, rather than conducting what some would regard as ‘proper research’ which is far more time consuming.

By comparison, the equivalent writer working at The New York Times might be paid approaching twice as much and produce half as much. In addition, the stories being produced by Business Insider’s writing staff are very cleverly and very deliberately designed to attract large online audiences.

All together, this is hugely significant difference: Business Insider’s newsroom is far more efficient than that of a typical branded news publication and the resulting content attracts more traffic. The aggregate difference in efficiency is possibly 10x.

The bottom line is that users and Google are lapping up the content being produced by Business Insider, while they are clearly a lot less interested in the sort of material that is being published on typical newspaper websites.

Business Insider Operating Profit

We have completed the following analysis of Business Insider’s operating profit which shows that the business last year was likely to have been highly profitable.

A cursory look at the numbers will reveal that there is no cost for the operation and maintenance of a legacy print operation: the cost for which would almost certainly swing Business Insider from turning a healthy profit into a terminally loss-making condition.

The conclusion is that even a well-executed online news business like Business Insider will be unable to generate enough revenue to support a print business, which means that if the print business cannot support itself then it should be closed.

Some newspapers might think that the key to success online is quality content, but this is clearly not the only factor that will determine success.

Our analysis is that there are two very different types of online news content, each of which has its own ‘ideal’ business model:

  • Populist News Content: Ad-supported model
  • Serious News Content: Subscription model

In essence, if editors want to make a success out of an online, ad-funded model then they need to go all out for page views, which is what Business Insider is doing. This means using a low-cost writing staff that can produce high volumes of what we have termed ‘populist’ content which, when well executed, can produce a high volume of page views and, therefore, ad revenue.

If editors want to focus on producing ‘high quality’ content then they should put that content behind a paywall and invest in a really excellent writing staff who can produce unique, value-added material that cannot be found elsewhere.

The only other option we can see is a kind of hybrid approach where an ad-funded model based on ‘populist’ content is used to finance the production of ‘high quality’ news content that is included on the main website – which is exactly what Buzz Feed is trying to do.

It is clear Henry Blodget and his team understand how to execute the online news business and while many newsroom editors might balk at the sort of content the company is churning out, they would hopefully agree that there is much to learn from how the business works.