Henry Blodget, chairman and founder of Business Insider, is an acknowledged expert on the media business. And he says advertising is here to stay — with a few caveats.
A former journalist, he became a financial analyst during the dot-com boom, taking home millions. However, after the dot com bubble burst, he was barred from Wall Street forever for publicly touting stocks he referred to internally as dogs.
Not knowing what to do after his public disgrace, Blodget put together a small online publication called Silicon Alley Insider. Eight years later, he sold its expanded successor, Business Insider, to German publisher Axel Springer for $343 million. Axel Springer is a company that was built on journalism, really cares about it, and was making its entry into the American market with its acquisition of Business Insider.
That could have been a story with a totally happy ending, except that Blodget’s deal included staying around and running Business Insider, which after its sale in 2015 endured some of the toughest conditions in online media — the shift to programmatic by premium American publishers. The American digital advertising business shifted almost completely to programmatic during 2016, while Germany stayed about two years behind. Yet Axel Springer is a public company for which quarters count.
On a recent episode of Recode Media, Blodget was interviewed by host Peter Kafka, his former employee, and talked about the recent challenges in the industry and how he thinks things will come out. Blodget said 2016 was the year in which premium direct was replaced by “robots selling advertising to robots,” a change that also affected companies like Yahoo.
While he admitted that programmatic is efficient for both the advertiser and the publisher, Blodget said there was a huge difference in revenue for publishers, where $1 in revenue is now about 25 cents, cutting the top line faster than expected.
This was a shock to Axel Springer, which had to sit back and watch Business Insider miss its numbers in two quarters while changing its business model to accommodate these market changes.
“The market is bifurcating into what we call the barbell,” he added, meaning that Business Insider has two kinds of business now: programmatic advertising and high end custom work, or sponsored content. The part of the business that is growing fastest is the latter.
Blodget spoke about further changes to come: he plans a fully dual revenue stream split between advertising and subscription. Business Insider now offers what it refers to as “an ad-lite version,” which is very much faster and can take care of people who download ad blockers. That costs $9.99/mo and is still in the testing stages.