Wolff: At 'Business Insider,' it's time to sell

Michael Wolff | USA TODAY

Henry Blodget is a savvy operator who took brilliant advantage of the dot-com bubble and who then, after having taken too much advantage and getting banned from the securities industry for life, was able to redeem himself as a high-profile Internet publisher.

Along the way, it turned out, he was also a smart observer of technology hype and business practices, with a stinging style and a gimlet eye.

So it probably makes sense to try to figure out what's on Henry's mind as he now attempts to sell Business Insider, the digital business tout and gossip sheet, and prodigious aggregator, started in 2009 by DoubleClick's Kevin Ryan with Blodget as its front man and editor.

Henry is in major drumbeat selling mode — in deal parlance "talking up his book" — greeted by a cluster of strategically admiring pieces in The New Yorker, The New York Times and the Financial Times.

Have I said, people really like Henry? His affability, charm, work ethic and low-key demeanor at nearly every industry cocktail party may have as much to do with his rehabilitation as the fact that he, as a publisher in a tit for tat world, now has considerable leverage with his critics.

As part of his sales initiative, Blodget was very publicly seen having a chat at Balthazar, the downtown restaurant in New York, with Gawker's owner Nick Denton, who is slightly higher up the scale of do-it-yourself Internet publishers — i.e., Gawker gets more traffic and more press. Together, they seemed to fan the flame of each other as potential acquirer and acquiree, although Denton, famous for his one-upmanship, quickly denied the deal he was, briefly, a party to helping make a market for.

Have I said, too, that there are, so far, no real buyers for Business Insider? Zip, nada, or at least that is what Kevin Ryan is sourly telling people. Oh, and they want $100 million. In cash. They insist.

Finding no buyers might indicate that it is the wrong time to sell. On the other hand, no buyers at the upper floor might indicate it is high time to sell at a lower one, and that $100 million in cash might be just setting the stage for a more attractive deal. Why else would Ryan be showing his hand?

Business Insider's product is, or it would like it to be, financial information, a premium category based on exclusive, must-have data. Reuters blogger Felix Salmon argued the other day that it was time for a merger of various financial sites, including, potentially, Forbes and The Street, along with Business Insider — with The Street known to have a big war chest and a stable paid newsletter business. A winner-take-all consolidation.

The problem with this scenario is that Business Insider hardly has any exclusive information. Blodget's game has been to hurriedly add a bit of point of view to lots of widely available business news.

His sweet spot is among high-flying digital publishers such as The Huffington Post, Gawker and BuzzFeed, aggregators and repurposers whose true added value is publicity and traffic (the more traffic, the more publicity, and vice versa).

It is that race, ultimately dependent on advertiser dollars, that may have reached, for Blodget as well as everyone else, a point of diminishing returns.

Blodget recently told the Financial Times that Business Insider's revenue will be "close to" $20 million this year, on, what the FT said was 10 million unique visitors per month as reported by comScore.

Let's assume that "close to" $20 million is more like $17 million and that a few million of that comes from conferences, its low-margin, hard-work new area of business that Business Insider has been recently bragging about. So figure perhaps $14 million from its core advertising base.

BI's 10 million uniques likely yield something near 40 million page views a month, which would be a $3 CPM (cost per thousand views), hardly setting even the abysmally low online CPM world on fire. In fact, comScore tends to undercount by almost half, so it could be more like 20 million uniques with 80 million page views and a CPM across the site of $1.50. (In the not-too-distant past, business magazines could easily do $30 or $40 CPMs.) It's digging in hard dirt.

It is a particular problem of high-volume, general interest digital publishers. Blodget, one might assume, got himself into the mass audience business because its content requirements are cheap, and bigger numbers get you faster notice, which, in a bubble market, is worth a lot. Business Insider is about a third the size of the The Huffington Post, which sold for $315 million almost 3 years ago — hence, BI's $100 million figure.

The bad news is that the valuations haven't gone up, and growth has become harder — that is, traffic more expensive. (The Street, with similar advertising revenues to BI, and almost $60 million in subscription fees, has a market cap of $75 million.)

On the other hand, if you're trying to show quick growth — BI has doubled in a year — and if you are in a low CPM rut, you have to keep adding traffic. The more traffic you add, the more random it is. This is a low-rent, catch-as-catch-can audience with, naturally, an ever-decreasing appeal to advertisers.

Of course, there are new advertising strategies, such as native advertising. But that's a general lowering of editorial look and feel and credibility, which, in turn, demands greater and greater traffic pumping, which, in the vicious circle, means ramped-up content production of inevitably lower value.

Then there is the rush to mobile with its sinking returns.

The digital traffic world, with techniques and sources and results that are ever-more dubious, is, as I'd guess the astute Henry Blodget has ascertained, not a sound long-term play.

It's exit time.