Major Blogs Can Lose 90% Of Their Value If Founders Go: Huffington, TechCrunch, Gawker, Drudge

The author was a member of the board of directors of TheStreet.com from 2000 to 2005. One of the major concerns of the board was what would happen if Jim Cramer left the company or became ill. TheStreet.com would have lost at least 50% of its value and probably much, much more.

Cramer’s fame was critical to TheStreet.com brand and was essential to bringing visitors to the site. He was the company’s star writer and many of the firm’s most successful newsletters carried Cramer’s name. Stockholders and potential acquirers for the company were always faced with a tremendous drop in value if Cramer was not part of the operation.

24/7 Wall St. did its second annual Twenty-Five Most Valuable Blogs analysis in February. Most of these operations are run by their founders. There are cases where the founders are merely managers like the Sugar sites and others where the success of the blog is almost totally associated with the participation of the founder. This has made many large blogs difficult investments for venture capital firms which are sometimes risking a large part of their investment on the presence of one person. Some sites with multiple founders like Boing Boing have been excluded because of the likelihood that of one of the original staff left, others could take his place.

24/7 has looked at ten of the most valuable companies from its list and made an estimate of how much the value of these is based on the presence of the founder. We took into account the editorial contributions of the founder, the person’s public presence as a part of the brand, and his or her relationships with businesses critical to the future prosperity of the companies. We have not updated the valuations of the companies although it is likely that many of them have risen as the economy has improved over the last seven months and in the next 24/7 most valuable blogs edition some of the business may have doubled their value, but that should not affect the analysis here.

1. Gawker Properties ($170 million). Nick Denton, the founder and primary owner of Gawker, is not one of the writers for any of the eight major sites.  Each has skilled editors of its own. Denton also has a business staff although the strategic management of the company is clearly done by him, but he does not push himself as the public face of the company. The content of the firm’s sites is Gawker’s star attraction. Denton has closed several of Gawker’s less successful sites, sold some, and added new ones. Gawker would miss the guiding hand, but presumably the company could get another skilled CEO. Gawker’s value would not drop any more than 15% if Denton disappeared.

2. Huffington Post ($90 million) Arianna Huffington has had professions business staff and editors running the company for a long time. Her business partner Ken Leher is a former senior executive at AOL.  Huffington’s CEO Eric Hippeau has been a senior executive in the media world for years. The company’s President Greg Coleman is one of the top online ad directors in the company. Huffington has a highly skilled editorial staff under Editor Roy Sekoff. Arianna Huffington is the face of the company. She writes regularly for her company almost every day. Her contacts in the political, media, and business worlds are important to the firm. She appears in the mainstream media almost every day. Arianna’s departure would knock down the value of The Huffington Post by at least 25%. Her star power and relationships are worth at least the much.
3. Drudge Report ($48 million) Matthew Drudge started breaking stories ahead of the mainstream media when he reported that Jack Kemp would be Robert Dole’s running mate in 1996. He also may have been the first person in the media to break the Monica Lewinsky story. Drudge obviously has editors working for him to gather the hundreds of links from other media but the scoops that run on the sites are almost certainly his. There is no replacement for Drudge at the company and he has not surrounded himself with other senior staff. Drudge’s absence would cut the value of the company by 90%.

4. Perez Hilton ($32 million) PerezHilton.com was launched in 2004. There must be other staff working at the company, but it is hard to figure out who they are or what they do. If Hilton went on a permanent vacation,  the brand might have some residual value to another media company, but the $32 million value of PerezHilton.com would go to under $2 million.
5. TechCrunch ($25 million). The tech and VC blog was started by Michael Arrington in 2005. He remains the company’s most prolific and well-connected writer. He is also the public face of TechCrunch. The firm now has nine blogs. It has a CEO. TechCrunch now has more than 20 senior writers, editors, and business staff and a number of more junior people and freelance authors. Arrington has built a group of star writers around him and they could certainly carry a great deal of the load if he was permanently absent. These include Erick Schonfeld, Jason Kincaid and MG Siegler. But, most of the ground breaking reporting is still from Arrington, who remains a controversial and polarizing figure, and that is part of the reason that he is so important. TechCrunch would lose half of his value without him.

6. MacRumors ($21 million) was founded by Arnold Kim in 2000. A physician, he began working at his own company full time last year. Eric Slivka and Jeff Longo work at the site as editors and MacRumors has other contributing writers. Kim may be the founder of the company, but most of his reporting for the site could probably be replaced by others. There are several other very good sites that cover Apple like AppleInsider, founded by Kasper Jade. That means that Kim may not be someone who can be entirely replaced, but much of his work can and MacRumors is not a company likely to rely on broad expansion under its founder to be a continued success. Kim is work about 20% of MacRumor’s value.

7. GigaOm ($9.5 million) Om Malik started GigaOm in 2001 and began working on the site full-time in 2006. He has done as well as almost any blog founder at building a professional staff, perhaps in part because he had a heart attack in late 2007. The GigaOm  Network is now made up of several websites, and events business, and a paid content operation. The company has a CEO and almost a dozen business staff. GigaOm also has at least twenty full-time and contributing editors and writers. Om’s loss would decrease the value of the business by 30%.

8. Mashable ($2.5 million), the Web 2.0 and social media industry blog was founded by Pete Cashmore in 2005. Cashmore had added an Editor-in-Chief, Managing Editor, COO, CTO, and several staff members since then. Aside from Mashable, which has a number of discrete editorial sections, the company has an events business. Cashmore still does a tremendous amount of the writing, as many as ten posts a day. Cashmore travels extensively and is the face of his company to the industry. Cashmore’s presence at Mashable is at least 50% of its value.

9. Alley Insider Sites/TheBusinessInsider ($2.25 million) This network of sites, started with SiliconAlleyInsider  and has added several new properties including Clusterstock and Greensheet. The main site is now called The Business Insider. The company was founded by Henry Blodget with an investment from former DoubleClick CEO Kevin Ryan. Blodget has brought in several well-regarded journalists lead by former Dealbreaker editor John Carney. The firm has also added Joe Weisenthal as Editor of Clusterstock. The Business Insider now has about a dozen writers and contributors, a publisher, a support staff, and its own ad sales operation. Blodget remains the face of the company, appears on the Tech Ticker videos on Yahoo! which are important to the company’s traffic flow, and writes the majority of the headline pieces at the sites. Without him, the value of the company would go down by two-thirds.

10. Daily Kos ($2 million) Markos Moulitsas started Daily Kos in 2002. The company now has several full-time editorial staff members and over a dozen contributing editors. A very large part of the website is content aggregated from other sites and put together fairly haphazardly. The founder does not have a significant public role in the site’s identity. The company’s two top editors, Susan Gardner and Barbara Morrill, could probably run the site very effectively. If Markos Moulitsas was no longer with Daily Kos it would lose about 85% of its value.

Douglas A. McIntyre