Felix Salmon of Reuters writes about how Business Insider can improve itself in the wake of an investment from Amazon.com CEO Jeff Bezos.
Salmon writes, “The problem is that in the chase for revenue growth, Blodget is sacrificing a pleasant user experience. He installs ugly automatic links under certain phrases, for instance, which when you mouse over them start playing video ads. Or he sells a lot of interstitial ads which force you to click another time before reaching the story you want to read. Quartz points out that there’s a good chance Business Insider is worth less than the much younger BuzzFeed, where CEO Jonah Peretti is adamant that he’ll never run a BI-style slideshow, or even “crappy display ads”, just because readers clearly prefer everything on one page and don’t get value from those ads.
“The problem is that if Blodget decides to pare back on artificial revenue juicers which readers dislike, that hurts revenue growth as well as profits — even as BI is saying that it intends to accelerate revenues this year to something in the $15 million range. In order to keep revenues growing even as he re-engineers his site to make it sleeker and less optimized towards pageview maximization, Blodget would have to invest not only in technology, but also in sales — paying big money for expensive staffers to build relationships with brands. BI gets too much of its revenue from banner ads right now: it needs to diversify its ad revenue, and start finding more ways for brands to reach BI’s coveted readership. One of those new channels is conference sponsorship, and I expect that BI will use a bunch of its new money to invest aggressively in conferences. But one of the big hidden costs behind building a new kind of website is the fact that you need to build a new kind of sales team, too, selling the kind of products which are often referred to as ‘native,’ whatever that’s supposed to mean.
“Business Insider has always been run on something of a shoestring; it made the entirely understandable decision, for instance, to hold onto a large chunk of the capital it raised in the past, rather than blowing through it and then suddenly being forced to cut back for the sake of profitability. This new round allows BI to increase the amount it’s investing while still retaining a reassuring cushion. But $5 million is not remotely enough money to allow Blodget to pivot to a very different business model, even if he wanted to do so, which he probably doesn’t. For better or for worse, he’s stuck in a world of banner ads and CPMs, and although he’s done well in that world to date, the future of that world looks pretty bleak.”
Read more here.
