According to a number of recent news reports, German media conglomerate Axel Springer is considering either dramatically increasing its stake in or acquiring all of Business Insider, the scrappy upstart news operation co-founded by former Wall Street analyst Henry Blodget. The number being thrown around is 500 million Euros, or about $560 million — or more than twice what Amazon CEO Jeff Bezos paid for the Washington Post.
Reaction to this news from the media world has tended to fall somewhere between shock and ridicule — unless the person in question is an investor in or former employee of Business Insider, of course, in which case they seem ecstatic at the possibility of a massive windfall. As Peter Kafka at Re/code (a former BI staffer) has pointed out, such a deal would be the largest acquisition since AOL bought The Huffington Post in 2011 for $315 million.
It might be the largest outright acquisition in a while — if it happens — but it wouldn’t be out of line with some of the valuations that have been floated for other media entities. BuzzFeed, for example, is now worth more than $1.5 billion (theoretically at least) thanks to an investment of $200 million from NBC Universal, an arm of Comcast. And Vox Media is worth $1 billion or so as a result of a similar investment from NBC.
The grand-daddy of all new media valuations is Vice Media, which has a market value of more than $2.5 billion, thanks to investments from A+E Networks and Technology Crossover Ventures. Compared to that kind of value, Business Insider would be a relative pipsqueak.
That said, however, $560 million is still a lot of money to pay for what is still a relatively small media outlet — and it’s more than twice what Business Insider was valued at in January. There are few hard numbers available about Business Insider’s financial status, but its revenues are estimated to be about $50 million. According to its founder, who periodically makes announcements about his company’s financial health even though he isn’t required to do so, the company has been profitable in some quarters but prefers to reinvest in growth.
Despite all that, short-term profitability isn’t why Axel Springer would be interested in buying Business Insider (a company in which it already has a small stake, since it participated in the financing round earlier this year that valued the company at $200 million). The main reason it might be contemplating such a deal is the same reason NBC Universal has put $400 million into Vox and BuzzFeed, and A+E invested in Vice: It has to find growth somewhere.
Much like these other traditional media entities, the bulk of Axel Springer’s business is based on dying industries: Print newspapers, printed magazines, flyers, classified advertising, etc. The company owns several of Germany’s largest circulation papers and magazines, including Bild and Die Welt. It was founded by Axel Springer and his father in the 1960s, and is still controlled by Axel’s widow, Friede. It has annual revenues of about $3.3 billion.
Ever since he took over as CEO, former music critic Mathias Dopfner has pursued a single-minded strategy of using the cash flow from those dying print vehicles (and sales of regional titles and magazines) to fund an acquisition spree. Like a gambler in Vegas, he has been making small bets on a number of new-media entities like Business Insider, including Dutch micro-payment news startup Blendle, Politico, Ozy Media and others.
In addition to those smaller bets, Dopfner has made it clear that he is also willing to make large ones: Earlier this year, he tried hard to acquire the venerable Financial Times, only to be outflanked at the last minute by Nikkei. He also tried and failed to acquire AOL last year, according to some reports. Looked at from one point of view, he has $1 billion or so that he was planning to spend on the Financial Times that is now just sitting there, so he might as well invest it somewhere.
The big question is, what would he be getting for his $560 million? Business Insider has built up an impressive operation known for its speed and breadth of coverage — although it isn’t really just about business any more. But it’s also seen by many in the industry as the archetype of the fast-moving but ultimately shallow clickbait machine, driven by pageviews and willing to do almost anything to get them.
In terms of readership, Business Insider has an estimated 45 million or so unique visitors a month, which is substantially smaller than BuzzFeed’s 80 million, but roughly the same as Vox Media’s or Gawker’s estimated audience (depending on whose analytics you choose to believe) and not far from the New York Times. But from Axel Springer’s point of view, that readership is probably more valuable long term than the aging population of print readers it is saddled with.
More than anything else, Springer would get the same kind of thing from its investment that NBC Universal and others are getting from their investments in new media: Namely, a perception that they are not just slowly dying, but are looking for ways to grow in a new-media world. And that just might be worth a few hundred million, regardless of whether Business Insider is profitable or not.