Is Business Insider Worth $100m?
It looks like Business Insider, the New York based news site is for sale as co-founder Henry Blodget does an extensive round of media interviews.
Blodget needs a high valuation so that he can discount the price against that, and please the buyer. It's always good to leave some money on the table, as Twitter did in its IPO, it sweetens the deal.
But how do you value a private media company? It all depends on the story you tell.
USA Today's media industry columnist Michael Wolff's recent column focused on "savvy operator" Henry Blodgett, "who took brilliant advantage of the dot-com bubble...[and] was able to redeem himself as a high-profile Internet publisher."
Wolff talks down Business Insider's (BI) valuation: "The Street, with similar advertising revenues to BI, and almost $60 million in subscription fees, has a market cap of $75 million."
Wolff tries to estimate BI's ad revenues but he makes a mistake in his math, which is then corrected by Felix Salmon, a business reporter for Reuters. But that mistake by Wolff in his calculations is a red herring because it allowed him to share gossip that BI co-founder Kevin Ryans wants $100 million. That's a nice price anchor. Lets repeat it a few more times.
Henry Blodgett responded with a post in which he writes that USA Today Thinks We Should Sell Business Insider! and for $100m.
Mr. Wolff first said some nice things about me personally (thank you!). Then he did some back-of-the-envelope math and suggested that we should sell now for $100 million.
Interestingly, when we started Business Insider six years ago, I used to tell people that our goal was to build a great publication and then sell it to Rupert Murdoch for... $100 million.
In a recent interview with the FT Blodget said you can't call the tops of markets but he can certainly see the top for his business, which has had spectacular growth in recent years. But negative trends in online advertising are a problem unless it can grow even faster. It would be easier with a larger media partner. It's a perfect time to sell.
The Wolff post gave Blodget an opportunity to tell a much better story.
I have come to understand that great media brands take decades to build, not a few years. The other 8 big business publications, for example, have been around for a combined 737 years. CNN launched in 1981, and it was at least a decade before it really went mainstream.
Associating the six year-old BI with already becoming one of the "great media brands" is quite a stretch.
I remember in 2004 interviewing Shelby Bonnie, CEO of the then ten year old successful tech news site CNET. He surprised me by saying it would take another ten years to build the media brand.
"We just have to remember that building a media brand is a long process. The New York Times was not built in ten years."
Is BI worth $100m? It's a lot to pay at even half the price. But if Blodget stays on for a few years to meet performance goals then it'll be worth it to the right buyer. Wolff is closely associated with Rupert Murdoch, this could be a preliminary negotiation tactic, to talk down the BI valuation as much as possible before an offer is made.