“Politico is putting the group of research staff in parliamentary groups out of work,” Christoph Keese once told me on the sidelines of an interview about the digitalisation of SMEs.
Politico is not about news, he explained, it’s about comprehensive research. For example, how every MP – even the biggest backbencher – will vote on every bill. Their editors and researchers sift through every speech by each MPs, their interviews, press releases and other publications.
Until then, this work had been done by speakers or political insiders – and for insider consumption. Now one could subscribe to this service. And the cost of this service was considerably less than that of a full-time position for a staff member.
The media world has been abuzz with news of a potential acquisition of Politico for $1 billion by Axel Springer. If concluded, it would follow on the heels of earlier expansion into the US market with purchases of Business Insider and a controlling stake in Morning Brew, the fast-growing newsletter publisher.
Much of the focus is understandably about Axel Springer’s push into the US, as well as riding the newsletter trend (Politico’s Playbook newsletter is an industry heavyweight). But there is also a deeper story here – one that centres on the power of utility and service journalism.
Keese has a long career at Springer behind him. He was Editor-in-Chief of Welt am Sonntag as well as Executive Vice President of Axel Springer SE. Before that, he was one of the founders and later editor-in-chief of the Financial Times Deutschland. He has written five books on tech, innovation and the new economy.
When we spoke, Keese had just moved into a new office 300 metres from the Springer high-rise in Berlin’s Rudi-Dutschke-Straße. He was going to establish “hy”, the Axel Springer consulting group. Not all the rooms were ready yet, I climbed over paint buckets and tools, it smelled like a building site. But what was already finished reminded me of a cool start-up loft.
He emphasized that Politico is more than a news service. Rather our conversation focused on utility and service journalism. Slowly the image began to form in my head that news alone is no longer enough to make media successful. Certainly not the kind of news that everyone else has and that is thrown at you everywhere.
The future of the media lies in services that deliver real benefits for their users or readers. Whether Keese said that or whether that was just my conclusion, I can’t really say today. I don’t want to put anything in anyone’s mouth. But that conversation makes it clear, at least for me, why the current talks are really going ahead.
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In 2020 alone, Politico grew by 20 percent, the New York Times estimates the turnover at around 200 million euros. “It’s easy to understand why Politico is an attractive target”, wrote Simon Owens in his Media newsletter this week and summed up the essential classical arguments well:
“Its main website is free and sells advertisers on access to DC’s influencer class, both through its publication and live events. It also publishes Politico PRO, a high cost subscription product that reports on the policy minutiae that’s pertinent to the work of lobbying groups, special interests, and Wall Street hedge funds. While Business Insider (also an acquisition of Axel Springer – note by OD) offers entry into the power centers of tech and business, Politico offers the same for the federal government.”
Edmund Lee’s take in the New York Times explored the financial dimension of the potential acquisition:
“Such a deal would amount to a hefty premium for Politico, which generates about $200 million a year in revenue, they said. That would make it one of the most expensive media mergers in recent memory. A $1 billion deal would amount to five times Politico’s yearly sales. BuzzFeed, one of the largest digital publishers in the country, recently announced a financial transaction that would take it public at a valuation of $1.5 billion, or about three times its annual revenue. The New York Times Company is valued at about four times annual revenue.” (…) The German publisher has been actively seeking media properties in the United States. The company acquired Business Insider for around $500 million in 2015, and last year it acquired a controlling stake in Morning Brew, a newsletter publisher.”
“If the deal goes through”, Simon Owens comments, “Axel Springer will suddenly find itself to be one of the most influential publishers in the U.S. – no easy feat considering that it had virtually no footprint here just a few years ago.”
These are all good reasons. But what makes Politico a “high-cost subscription product” in the first place is the absence of exaggerated storytelling and the quality of research in the product “Politico Pro”, that hardly markets itself as a classic media service. The prices for the European offshoot of the company, which Springer already operated in a joint venture with the Americans, start at 7,000 euros per year.
Politico thus positions itself in terms of content at the intersection of service journalism and market research. Functionally, they are moving in the direction of digital workspace software – providing a tool that integrates into one’s daily professional life.
It thus marks a new kind of editorial offer. If it works and succeeds it can lead to more added value, higher margins and greater unit revenues. Moreover, this approach, closer to the service-oriented market, experiences less volatility than the traditional reader market.
This also makes Politico a strategic investment in future innovative editorial formats. That matters in an industry that needs to abandon many old habits, products, and formats and reinvent itself. An investment that – if I had a billion to spare – I would make as well.