Last time we checked in with Bleacher Report they were quietly making some changes with a new CEO (who I predicted as a hire) and editorial policies aimed at improving content quality. At the time both moves made sense but it wasn’t clear what their impact would be. Fast forward a half year later and they’ve landed a very robust round of $10.5 million. The news broke early this morning and I was without a working computer for most of the day (bought one today) and was surprised by how many people reached out to me inquiring for more information on this development. Email, facebook, twitter, and text messages all with something like “Can you believe B/R got 10.5 ? Seriously?”
The first thing I’ll say its pretty interesting how limited coverage this got as it seems that Bleacher Report and their PR firm/contact really only pushed this story to certain publications. This mirrors the last major announcement about Brian Grey joining as again compared to other startups the news was a bit more muted considering the significance of the move. However on the few articles there are on this development, there are a lot of telling comments and if you’re a Twitter user I am sure you also got a heavy dose of candid reaction to the news. I think considering the elephant in the room (that many influential and well read content people take issue with Bleacher Report) you can probably see why the PR push wasn’t as aggressive as most announcements of this variety.
If you’re reading this and want to get a feel for how/why this funding happened, then I am going to ask you to do one thing for me. For just a moment, don’t attach any negative or positive stigma to the content of the site. It’s just content and we’ll get to that towards the end of the article.
Bleacher Report is a digital media company built around content. Their product is advertising and the more articles and page views they have then the more money they can make and guess what…….. Bleacher Report doesn’t pay for their content. They have overhead like any company but if they have 300 articles published in a day or 1000, there is really no increase in expense to them. While many have associations with their product, let’s take a look at their growth the last couple of years, measured directly from Quantcast.
Not to go on a tangent here, but don’t be one of those idiots who look at Compete.com numbers and then base a whole opinion or argument on those traffic numbers. If you can get Quantcast numbers, at least you’re in the ballpark or pretty damn close. Everything else is pretty much a random number unless they have a public stat counter.
Anyways looking at the charts above you’re looking at just ridiculous growth. Page-view growth and audience growth. I’m sure that this trajectory as well as having a advertiser friendly platform (segmented audiences, high impact sponsorships, etc) also led to a revenue chart that showed similar growth.
Another key thing to consider is that B/R has over 1 million email newsletter subscribers to help drive traffic to their site and that alone is a HUGE asset when it comes to valuing a company. Bleacher Report actually has a good presentation on their newsletter program, and its been one of the bigger yet under the radar success stories in this industry as users are getting very customized updates on their favorite teams which is a huge driver of traffic back to the site as well as other external sites that are linked in the newsletter.
When you start thinking about why a VC would invest in Bleacher Report think about the value of having access to the inboxes of a million people (newsletters can have ads in them too), having millions of users, thousands of contributors, a great platform and intellectual property, tons of content, and then that special sauce which is a nice recipe of:
– What Deadspin coined “Google Raping SEO”, an issue I touched on awhile back and an advantage that begrudges many big time sports bloggers but one that the folks at Bleacher Report are proud of and make no qualms about having.
– A lot of their content are slideshows. Kudos to them to coming up with a new interface for building them and displaying them. The advantage here being that visitors often are really only reading one article but they’ll go through 10 or so page-views with new ads each time.
– They’re also one of the few websites that have auto ad refreshing technology. It like charging for refills of soda…..Good for business.
– The before mentioned newsletter not only funnels page-views back to the site but also injects their branding to external content like you see below. Its good promotion for sites that get featured in the newsletter as they find a new audience but B/R also gets some benefit out of it as many people will just paste the newsletter URL (which appends their branded bar on top of the page) and send it to others or post on a message board. This helps get them more subscribers and users and its been suggested that their is tracking code in the bar that counts this as a pageview for Bleacher Report as well. Its a bit tricky but I think a lot of companies with newsletters or that aggregate content have or are doing this.
If you take a step back and think about it, Bleacher Report is a hell of a business. The metrics are growing, the technology is very attractive and valuable, the user-base is huge, online advertising is really picking up, the content is free and the site is on steroids in terms of displaying ads.
A lot of people I know (even some in the industry) were really surprised by the funding which I found kind of funny. There traffic numbers are on Quantcast and their employee head count is not hard to find out. You also know their prior funding history and how long ago their last round was along with the fact that they’ve grown quite a bit since then. They’ve articulated that they are the 5th biggest individual sports websites not counting rollups, so getting funding was not really going to be an issue. It was just a question of when and I thought with Grey (VC AND startup experience) coming in this summer it was probably pretty likely you’d see funding this quarter or next.
The real question was how much and at what valuation? 10.5 was higher than I expected. I would have had them pegged for maybe getting $6-9 million with a pre money valuation at around $30-45 million.
Whether this round closed before SB Nation’s round became public or it played a role in helping the valuation is something to consider. With a $10.5 round I’d probably set the valuation over under at $55 million which means now both SB Nation and Bleacher Report seem to be on track for potential 9 figure exits. Just like Fox’s acquisiton of Yardbarker, I think the front runner for acquiring Bleacher Report would be a current partner (they work closely with CBS) as the smart money also would peg Comcast as the likely acquisition partner for SB Nation (Maybe I could start a Sports 2.0 sportsbook?).
I think another thing people are just not getting is that digital media companies are pretty solid investments. Ad networks/rep firms are beginning to thin out/consolidate, CMS companies and content platforms continue to have issues with monetization and business models, and I am just not a fan of aggregators. If Digg isn’t going to make it really big, then you’re probably not going to make it at all even if you have some cool technology.
Content is king and I think we forget that here in Silicon Valley where people are making hardware, software, web applications, mobile apps and social networking apps, online advertising products and technologies and everything else under the sun. Media companies used to be sexy investments. Now certain investors and the tech press have put them at the bottom of the totem pole which is stupid. Content monetizes well, large media companies like buying audiences, and more media companies are looking to tap into more social and local types of content. There has been a strong revival on this front with SBN, Bleacher Report, Demand Media, Examiner.com, Buzz Media, Associated Content, Gawker, etc leading the way.
The thing about some of the companies I listed above is that some can be classified as “content farms” which you can Google for a more thorough explanation. At first being a content farm was preferred by investors and maybe even advertisers. After awhile a bit of stigma grew as people began harping on the content quality as well as just the editorial direction that content was headed in. Now companies will argue that the label doesn’t apply to them and you’d probably say that Bleacher Report’s decision to remove certain authors and move to an application process for writing on the site is part of that effort to move away from that categorization.
With over 500 articles a day the law of averages say the quality is going to vary drastically across the board for them and they’ve had a lot of public backlash in regards to some of their bad content. A lot of it is well warranted as there have been several incidents this past year where stories that fell through the cracks were either completely untrue, plagiarized, or incorrectly attributed to a major reporter as a prank.
Because Bleacher Report has such great technology and distribution methods, its drawn the scorn of many that a company that can at times proliferate low quality or illegitimate content can find such success especially through Google and others. Its a hot topic on Twitter, even with a fake Bleacher Report twitter account satirizing the company, and its a subject talked about in many inside circles within the sports 2.0 world. Still though there is enough good content or at least decent content to keep the site growing and in the end advertisers and investors trust eyeballs over a critical analysis of content. I mean if you weren’t following a lot of sports bloggers on Twitter and just stumbled upon Bleacher Report would you be able to draw the opinion you have of them now? That’s basically the boat that 95% of the population finds themselves in.
You may think there would be more diligence around content quality but I can tell you having a lot of relevant experience you’re just not going to find advertisers or investors who are going to thoroughly go around comparing apples to apples. They can certainly get excited for certain sites or content programs but they never really audit content as that is so far out of there expertise range that a quick once over is enough to get a thumbs up.
All of that said, Bleacher Report is growing. Its growing on all fronts and the site is a cash cow. Free content, refreshing ads, tons of page views per visit, great SEO, etc etc. You may be pissed as hell that what you deem as inferior content is getting rewarded and further promoted. I can understand your gripe. Like the coach’s kid getting to start over you while you ride the pine.
All I can say is that you’re not going to get an apology nor an explanation from Bleacher Report. Their investors or advertisers probably won’t/don’t care either as there are just still limited options in this Sports 2.0 space and B/R’s size, love or hate it makes sense economically at such a large scale.You may think it doesn’t make sense and it just blows your mind as that is the reaction that keeps coming back to me.
What I can tell you is this…
At the end of the day I’ve never been more bullish on Bloguin and sports blogs in general. There are some very big developments going on in the space right now that i’ll share at a later time. Blogs are going to get theirs (promotion, recognition, compensation) …The good ones are at the front of the line and I know you feel like Bleacher Report just cut the line and brought in a group of 50 frat dudes into the bar you’ve been waiting in the cold to get inside of for an hour (Analogies and over usage of parentheses are my blog writing guilty pleasures). Stay patient, stay hungry, try not to be bitter, and remember that no matter what you control your own website, brand, content strategy, etc. You’re building a personal brand and that’s much harder but oh so much more rewarding when you make it. In the end Bleacher Report’s model got validated in a big way today, but that certainly doesn’t mean that you won’t have your day either. Its coming and on that note, Happy holidays and always feel free to drop a comment on our soon to be replaced commenting platform before I kick it to the curb.