In a March 2011 blog post, BusinessInsider.com Editor-in-Chief Henry Blodget gleefully announced that the startup tech and business news site had turned a net profit of $2,127 during fiscal year 2010 – just enough, in his words, “to buy a MacBook Pro.” While that may sound like chump change for most any business, in the rough-and-tumble world of startup media companies, it's almost like getting a six-figure salary. As Blodget puts it,
Making $2,127 feels about 2,127 times as good as losing money. And it makes us confident that, if we keep working hard, and we keep getting better, we'll be able to build a successful business and a truly great product someday.
In less than two years since its launch in February 2009, BusinessInsider.com had achieved what most other media startups only dream of: turning a profit. Blodget also pointed out that the company had taken in $4.8 million in revenue during 2010, almost all of which came from online advertising. Since then, executives from the company have yet to provide any further updates as to how the site fared financially in 2011. But a close look at the numbers shows that, assuming the company’s ad rates and inventory held steady, Business Insider nearly doubled its annual revenue to somewhere closer to $8.5 million in 2011. That makes it one of the most successful online media sites of its scale.
HOW I CAME UP WITH THIS FIGURE
First off, I tried as much as possible to rely upon BusinessInsider.com's internal traffic statistics provided by Google Analytics, rather than on numbers from outside services such as Quantcom or Alexa. For one thing, the internal numbers represent what's being used to balance the company's ledger books and set ad rates, and are by their very nature more accurate. The problem, however, is that those numbers aren't available to the public. But, drawing upon a snippet of information provided by Blodget in his full-monty inside look into the company, we can calculate a rough estimate of what those numbers would be for 2011.
According to the internal Google Analytics data cited by Blodget, BusinessInsider.com attracted 7.8 million unique visitors during March 2011. Quantcast, however, estimates that the site’s number of unique visitors during the same period was closer to 6.3 million, or about 20 percent less than the figure provided by Google Analytics. Given this disparity in analytics, if we take the average number of visitors per month provided by Quantcast for all of 2011 (7.55 million) and add 20 percent to that figure, we can reach a closer estimate of the site’s internal annual traffic in 2011 as monitored by Google Analytics.
Judged using this formula, BusinessInsider.com received somewhere on average of about 9 million global unique visitors per month in 2011, or about 110 million per year. Let’s compare that to the total annual visitorship for the site in 2010, which, according to the same calculations, comes out to be about 4.4 million per month and 52.8 million per year. That represents a stunning rate of growth of close to 100 percent year-on-year. See Chart A below to get an idea of how quickly BusinessInsider.com’s traffic skyrocketed in late 2010 and early 2011:
Now that we have a more accurate figure for BusinessInsider.com's actual number of unique visitors in 2011, we can use the ARPU (average revenue per user) formula to calculate backwards and determine the actual gross revenue generated. In 2010, Business Insider had an ARPU of about 94 cents, meaning that for each unique visitor the site received, the company received 94 cents. So, if in 2011 the site received 9 million unique visitors per month at the same ARPU, it stands to reason that the company raked in an estimated $8.5 million. That’s almost nearly double what it brought the year before. See Chart B for a side-by-side comparison of the disparity between unique visitors from 2010 to 2011:
But what caused such dramatic growth for Business Insider in such a short span of time? That’s where understanding the company’s business model comes into play.
BUSINESSINSIDER.COM'S BUSINESS MODEL
Citing the company’s healthy cash infusion from a group of venture capitalists in 2010, Blodget buffeted his celebratory March 2011 blog post by warning that the slim profit margins may not last for long, as the company planned to invest and expand its operations and spend every extra cent it brings in on growth. The company added 15 additional employees to its payroll shortly thereafter, reaching its current staff of around 60 people. In addition, it acquired a number of new verticals such as Silicon Alley Insider, a tech news blog, and Clusterstock, a popular market-analysis site. The company also began expanding its coverage areas from just tech and business into a wider range of topics, with sections such as ‘Life,’ ‘Politics’ and ‘Entertainment,’ although the general content of the site still remains primarily geared towards a male demographic Another way the site broadened its reach was by simply posting more content, much of it aggregated from other sites. Such expansions help explain the site’s immense jump in traffic during 2011, as well as its growing reputation as an “over-aggregator,” as many have derided The Huffington Post.
The site’s impressive statistics and growing Web presence attracted an additional $7 million in funding from investors in September 2011, thereby allowing BusinessInsider.com to expand its operations even more by posting more original content and aggregating more stories from outside news organizations. But its traffic began to stall and eventually dip in late 2011 and early 2012, suggesting that the site may possibly be encountering growing pains. After all, now that it’s expanded beyond its niche, it has to worry about growing competition from similar news aggregators with far vaster resources, such as The Huffington Post, Gawker and The Daily Beast. Not to mention, further along in the future, the growing use of social media as an aggregation tool threatens to hamper the added value Business Insider’s style of curation brings. With our social spheres becoming the primary method by which many of now curate and aggregate news online, will there be any need for "professional curation," such as that practiced by Business Insider?
WHY ANY OF THIS MATTERS
The case of BusinessInsider.com shows that digital news can indeed be a profitable business model, at least given certain economies of scale and at this point in time. But as the company roars on into 2012, Blodget and other top-level employees may want to think twice before taking any corporate six-figure salaries or extended holiday vacations and instead continue investing every spare resource they have on setting the site apart from the pack. If Business Insider is indeed seeking to establish itself as a viable competitor to Gawker and The Huffington Post, it may want to consider doing whatever it can to make its product a better alternative. For example, it could position itself as a “smarter” Huffington Post –– one that still takes full advantage of the networked, curated power of the Web to publish and aggregate, but without celebrity coverage*. Or it could present itself as a more “traditional” news organization than Gawker*, which posts its content in a more blog-like format geared toward a younger, web-savvier demographic. Whatever Business Insider does, however, one thing remains clear: BusinessInsider.com has no competitive advantage over the marketplace. Without significant barriers to entry into its business model, the company will need to find a way to retain its audience if it wants to succeed in the longterm.
*Disclaimer: I love both HuffPo and Gawker, so I'm not bashing them, just pointing out how BusinessInsider could capitalize on real or perceived differences by highlighting its contrasts.
 This methodology takes into account the ARPU (average revenue per user), which is calculated by dividing the total revenue per year by the number of unique visitors each month. Business Insider’s ARPU in 2010 was around 94 cents. Applying that same ARPU to 2011’s traffic, we can estimate that the site earned somewhere around $8.5 million in gross revenue in 2011.