What are they thinking? Axel Springer’s move to buy Business Insider
After being spurned at the last moment in its bid to buy the Financial Times in August, Axel Springer is getting close to buying six-year-old Business Insider, one of the globe’s fastest-growing business news sites.
Springer would pay in the neighborhood of €500 million, or $560 million, to gain a control of a company in which it now owns a little less than 10%, according to a report in Germany's Manager magazine last week. At such a price, a deal would vault Business Insider halfway into the new digital news unicorn club. Call it a demi-corn perhaps. At about half the audience and half the revenue of Buzzfeed, the market’s valuation of the top, global digital-only news sites now gains a certain consistency.
BI, like Vox Media and Buzzfeed, would ascend to those levels courtesy of old media money that seeks to buy in on the future. (“What are they thinking: NBCU and the Digital Dozen seek perpetual youth”). The Big Three of this era – Vox Media, Buzzfeed, Vice Media – would become the Big Four.
At time of publication, neither Axel Springer nor Business Insider would comment on the investment. While close to finalizing, perhaps within weeks, if not by year’s end, the deal could still fail to close, if other bidders step quickly into the action.
At that approximate $500 million price point, Springer would be spending a little less than half of what it intended to spend on buying complete control of the Financial Times. The company’s bid fell short by about $200 million, as the FT went to Nikkei for about $1.3 billion. Springer also bid for Forbes, before Hong Kong-based Whale Media offered and won that auction in July 2014.
For Springer, majority ownership of Business Insider offers a sweet spot: direction of a (mainly) English-language, global business news product. The fact that is it is entirely digital means that the company doesn’t further need to deal with print-to-digital transformation, as it assumes control.
Control of Business Insider would be much more than a consolation prize, after that agonizing, last-minute defeat at Nikkei’s hands in the acquisition of the FT. It signals Springer’s absolute determination to be a big, global player in English-language-based international media. Its investments are both large and small. Last week, along with Disney and Google Ventures, Springer invested in U.S.-based Jaunt, a virtual reality producer and distributor. That follows other investments in the Mic and Ozy news sites, and in Retale, an effort to digitize retailers’ weekly ads.
At the same time, the company is consolidating its leading position in Germany and central Europe. In July, it announced it would move ahead with some joint initiatives with Pro Sieben, Germany’s second largest private TV broadcaster, after failing to conclude a merger. Four days ago, it announced a new joint venture with Ringier, the largest Swiss media company, to combine operations.
For long-time Axel Springer CEO Matthias Döpfner, it’s now all about scale and reach, as he looks for a new formula for digital-centric success.
In the second quarter, Springer again displayed how difficult that transition remains, even for such an aggressive company. Though it reported seven percent revenue growth – and could count 62% of its revenue as digital – its profits were flat.
For Business Insider, the buy is an affirmation that the site — founded in and early on dismissed as a second-rung news aggregator — could find a new, middle space in U.S. and global business news. Further, it reinforces the value of quickly growing mass, through its management’s mastery of the search and social web optimization that’s become the hallmark of the most successful new news companies.
If completed, the agreement would likely leave current BI management in place, and would further accelerate its international growth. Like its fellow fast growers such as Buzzfeed, Vox, Quartz and the Huffington Post, BI has moved quickly to plant its flag overseas. It will field nine international sites by year’s end, including English-language sites in UK, Australia, Malaysia, India, Singapore and Indonesia.
In the fourth quarter, two new non-English language sites join Chinese-language site, partnered with Tencent. It will launch a Polish language, and a German language one. Axel Springer is a key partner in the German launch. That partnered global strategy – in which local media take the lead in ad sales and in-country journalism and BI provides infrastructure, brand and some content – becomes its likeliest model as it looks to literally hatch dozens of sites in the years to come.
Global syndication is an old magazine model, well employed by Hearst, Condé Nast and Time, but the fillip here is the digital-only entry point. It’s faster, cheaper and has already shown itself greatly capable of fast audience acceptance.
Since launching in the UK in November of last year, it is now a fifth-place player. In Australia, it ranks seventh; BI launched there in 2013.
Already, the non-U.S. business drives about a third of its traffic.
In the U.S., Business Insider has moved up two spots – to #2 – in Comscore’s measurement of the business/finance digital sector in the U.S, as seen below. It grew 54% year over year, moving ahead of both Dow Jones (including the Wall Street Journal) and Forbes in that time.
(Source: ComScore Multiplatform.)
Along with now-departed Guardian CEO Andrew Miller, Mathias Döpfner has been the most adamant and active European public media company leader in transforming his company for the digital age. He jettisoned lagging regional newspaper properties in 2013, and has made numerous investments since then.
In a wide-ranging interview with me in April, he laid out the thinking that drives the strategy (“The eight principles for transforming Axel Springer”). His fervent belief in tapping the entrepreneurial zeal of builders like Business Insider CEO Henry Blodget and COO Julie Hansen is clear.
“My most important point: If only driven by analog publishers in the digital world, it is not going to work,” he told me. “I’ll make a bet that as soon as the Buzzfeeds, the Huffington Posts and the Vox Medias of this world have a real share and real reach … they will start to monetize.”
All totaled, BI has taken in $55.6 million from 12 investors. Its latest investment – the $25 million one, placed by Axel Springer in January – looks like its most decisive one. Andreas Wiele, president of marketing and classified ad models for Springer, sits on BI’s board.
Former stock trader and analyst Blodget has been able to attract what turns out to be smart money, since he founded Business Insider six years ago. Those top investors include The company has investors including RRE Ventures and Institutional Venture Partners, Jeff Bezos, Gordon Crovitz, Marc Andreesen and Ken Lerer.
Blodget’s ability to exploit a hole in the global news market is what now attracts Springer to double down on the business, which it believes is capable of great growth – and profit down the line. What is that niche?
While the Wall Street Journal (even as it expands and regroups its international products) and the Financial Times (perhaps newly refueled with parent Nikkei funding) aim for the top end of the business reader elite, BI aims more squarely for the middle. BI aims for a more mass audience than two-year-old Quartz, Atlantic Media’s nichier business news start-up or Bloomberg Media’s more typical business audience. In a sense, BI has, in 2015, updated the claim of a “free” position in mass business news that Larry Kramer’s Marketwatch sought, until it was later bought by Dow Jones and then still later absorbed into the mothership.
Business Insider’s cost-per-thousand advertising rates fall below the Journal’s or the FT’s, but above general news sites, given its target business audience. That audience, says BI, can count 1 in 5 Internet of its users having a household income of $100K or more and can point to good representation of overall business and IT decision-makers. While those numbers hold a small candle to the Journal and FT, their breadth compensates with a mean age of 38 and an audience that is majority (51%) 18-34. Consequently, BI pulls in a blended cost-per-thousand rate in the mid-teens, again below the Journal and FT, but above general news sites.
Advertising provides about 75% of its revenue – which will top on somewhere between $45-50 million this year. BI, like its peers, seeks to diversify beyond advertising. Its events and research businesses have seen expansion as well, as BI has beefed and bulked up, with new investment. Tech Insider, its now-sister site, launched in August, backed by the new money as well. Then, there’s the global licensing business that produces its own beginning stream of revenue.
If and as BI moves forward under Springer direction, expect reader revenue strategy to move highly on the business’ priority list. Mathias Döpfner believes in it, as he told me in the spring, “Monetization will definitely not be only advertising. In the end, the reader is going to pay. Expect experimentation in everything from “premium” and “freemium,” initiatives to “membership” or even “contribution.”
Especially Given the Axel Springer joint connection, it’s intriguing to compare Business Insider and the Financial Times. The FT Group produced profit of $37 million in 2014 on $518 million in revenue and sold for $1.3 billion. It’s a majority reader revenue product, which works “discovery” on the web via search and social sites, but maintains the toughest paywall in the news business. Consequently its recent Comscore position in the U.S.: # 38.
Business Insider has flirted with profitability in its recent life, but given both its recent investment and the tough ad marketplace, isn’t in the black now. That’s typical of an audience-growth-comes-first digital news start-up. So, BI’s numbers: a profit of zero on $40-50 million in revenue and a value of about $500 million.
The Springer bet, then, is a big bet on future revenue and profit growth, as is that of NBC’s on Vox Media and Buzzfeed. Curiously, NBCU looked hard at Business Insider as it did its due diligence on digital news investments, but didn’t proceed.
For Springer, this investment joins its 50/50 joint venture in the POLITICO Europe launched in January as markers of its big ambitions. CEO Döpfner has run a company dependent on its 100-million strong German markets for about 52% of its revenues.
The Business Insider move helps Döpfner jump ahead in his goal of moving that German dependence quickly to an increasingly smaller minority of revenues, as the company, a sometimes controversial stalwart of German press, moves to become truly global. Springer continues to seed its operations and strategic thinking with in-depth visits of its top executives to both Silicon Valley and New York City; expect that traffic to only increase.
One last, intriguing question of the moment: If Springer had bought the FT, would it still be making this BI play now? Yes, I believe, after talking to numerous people in and around the deals – if it could have raised sufficient capital. No one can now doubt the ambitions of this once, all-German media. It intends to join the small select group I’ve called The Digital Dozen, taking a leading and owning role in reshaping news and information media in our day.