The Rise of Bloomberg Online

Bloomberg is hardly a household brand name in America, except for a constant stream of news about New York City Michael Bloomberg and his crusades against smoking in public and bans on large containers of sugary drinks. The company he founded, Bloomberg LLP, is the world’s leader in sales of data terminals that sit on the desks of traders, securities and economic analysts, and business executives. The cost of these terminals and the data they provide is well over $1,000 a month. Bloomberg employees more than 15,000 people whose primary job is to support this terminal business, which is immensely profitable. Why would Bloomberg want to do anything else?

Bloomberg does do other things. Among them is the creation of online news and data products that are available for free on the public Internet. Outsiders have questioned the value of this to Bloomberg. That question has grown as the audience for Bloomberg’s online businesses has multiplied. Every once in a while there is an extensive report in the media about Bloomberg’s incentive for this expansion. What these reports rarely cover is the extent to which Bloomberg erodes the profit prospects of its competition in the free online financial news sector.

Bloomberg online properties had, according to research firm Comscore, 11.2 million unique visitors in the United States in June. That puts the combined audience of its sites just behind those of Thomson Reuters Corp. (NYSE: TRI), and ahead of Time Warner Inc.’s (NYSE: TWX) CNN Money, which has always been a site for consumers only, and part of news machine CNN.

Bloomberg has been relentlessly building its online presence. It bought failed magazine BusinessWeek and in late 2009 for what was rumored to be an extremely small amount of money. Presumably Bloomberg took on substantial liabilities and losses. Because of Bloomberg’s terminal operations profitability, the losses likely meant very little to its bottom line.

The odd thing about Bloomberg’s effort to have an Internet presence, particularly one that offers information and editorial content for free, is that it is a business the goals of which run counter to the ones that make it a profit. The Bloomberg terminal business is walled off from anyone who will not pay thousands of dollars a year.

The conventional argument about why Bloomberg gives away so much of its valuable news for free is that Michael Bloomberg has decided to make his name as widely known as Reuters and CNN. That is a billionaire’s prerogative obviously, and Bloomberg is not the first person to do it. Richard Branson sails balloons to record heights and operates a space ship that will allow ordinary, but rich people the excitement of space travel. All Bloomberg wants to do is give away information online in exchange for the presence of his brand.

Many analysts believe that the financial news industry is a zero-sum game. There are only so many Americans who care about business and financial news, and that number has not grown recently. What Bloomberg picks up in audience he takes from competitors, which cannot earn an advantage because their market is not growing. Viewed that way, Bloomberg is a sort of spoiler that is in a war of attrition with other financial web operations. As such, Bloomberg does a great deal of harm to competing online financial operations without any clear advantage to his net worth, or primary business of providing data and news for high prices.

Douglas A. McIntyre