As one of the most successful pure-play online publishers, Nick Denton’s business model for Gawker Media is worth close scrutiny. Ben McGrath’s piece in The New Yorker contains some interesting data about his financial results:
As it is, given the thin margins of online publishing, Denton’s cultural impact greatly exceeds his revenues, which are somewhere on the order of fifteen to twenty million dollars a year. His ownership stake in the company is around sixty to seventy per cent, and every so often he attempts to consolidate by buying back shares that he has given to current and former employees. The rate he offered earlier this year would have put the company’s value at only thirty million dollars, or a fraction of what most analysts have estimated.
Felix Salmon concludes from this that Gawker Media is obtaining relatively low advertising rates – about $5 per thousand page views. Although it gets a huge number of page views – more than most large US newspapers if all the Gawker blogs are counted together – it is not a high-margin business.
This may not trouble Nick too much (a disclosure: we are not only friends and old colleagues at the FT, but once wrote a book together) since Jeff Bercovici estimates Gawker Media’s value at $100m. This is similar to the back-of-an-envelope valuation of the Huffington Post.
But it does indicate the difficulty for media businesses in garnering significant revenues purely from online advertising, a subject I have written about before. If Gawker Media cannot make more from its advertising-only approach, what hope for newspapers and others?
