Decide Your Business(Insider)

By Avi Deitcher

I used to love BusinessInsider, the Internet (and to a lesser extent general business) news site run by Henry Blodget. I am also impressed with how Blodget has reinvented his life. In 2003, he was charged with securities fraud by the infamous Client 9, a.k.a. then-New York State Attorney General Eliot Spitzer. Blodget settled for 2+2 ($2MM fine, $2MM disgorgment of "ill-gotten proceeds") and a lifetime ban from the securities industry.

Blodget actually started with Silicon Alley Insider, a tech focused Web publication based in NYC (hence "Silicon Alley Insider"), which then merged with Kevin Ryan's Business Insider, where Blodget took over as CEO and Editor-in-Chief.

What do I like about it?

  • Short, but not-too-short, articles with some more in-depth pieces
  • Broad coverage of the tech sector
  • Decent analysis
  • Usually good writing (with some notable exceptions)
  • Multiple viewpoints - often on the same day, two pieces with completely conflicting views will be published. You, the reader, decide which you think is correct, if either.

In addition to the site, and of course a Twitter feed, BI has a daily newsletter. Each day, one lead article, 4-5 primary articles, and another 4 secondary articles are highlighted. Initially, the lead article and the primary articles were all important news and analyses of the day.

Where does BI make money? I have no inside information, but like most broad publications (NYTimes, Washington Post, Yahoo, Facebook), advertising is a major component. The very essence of a three-way business model is to offer free content to a large audience, and then sell access to that audience to a third-party, either via advertising (Google, Facebook, Yahoo), through lead-generation, or through aggregate data.

There are 2 different kinds of "free" business models:

  1. Three-way: Get 10MM free users, sell advertising, customer access or aggregate data to a third party.
  2. Freemium: Get 10MM free users, convert 2% of them to paying, say, $200 per year, and you have a $40MM revenue business.

A third kind is not really a "free" business model: giving away free samples or loss leaders to drive business. Gartner uses this, as do most companies that sell directly to their primary customers, from grocery stores to software firms.

In the last several months, BI has aggressively begun to tout its analysis capabilities, trying to sell its own reports on demographics, trends, Internet usage, mobile commerce... all of what you normally expect from a securities firm like Goldman Sachs or a market analysis firm like Gartner. In some ways, it is unsurprising. Blodget is a smart guy who made his money as an analyst. This is what he does and knows, and is used to getting paid directly for that analysis.

The challenge is that both "free" models depend heavily on engaging a large number of customers, and constantly keeping them engaged. You do not want to drive them away. Satisfying free customers needs to be built into the culture, the very DNA, of these kinds of businesses. This is why Facebook and Google have been so successful. They put almost all of their energy into what they believe is the best search or social experience. Making money is almost an afterthought. "Keep the users happy and the paying customers will come."

Selling analysis, on the other hand, fundamentally conflicts with free-based business models. In order to sell analysis, you have to market... precisely to those people who you enticed to join for free. With BI, it has started to show.

Their daily newsletters (and secondary daily charts) not only are overloaded with advertising for their paid products; the lead article has become a shill for a paid product! Thus, the headline appearing in your email alert and the subject line in your inbox (not to mention tweets) have become nothing more than spam. Sure, some people are willing to wade through the garbage to get to the jewels - I do so every few days, where I used to ready every article daily - but if your customers have to think twice or work hard, you have lost the game.

BI needs to decide if it is a paid market analysis firm or a news site with public analysis. It then needs to drive that into the culture of the company and direct every activity around it. I hope it succeeds. If not, it was great while it lasted.