Audit Notes: WSJ Libor scoop, Business Insider, reader revenue

Deutsche Bank made big money betting on the rigged rate

The Wall Street Journal posts an interesting page-one report on Deutsche Bank and the big profits it made betting on Libor, the critical lending benchmark rate it was helping rig:

The documents from the former Deutsche Bank employee set out how traders in London and New York working for the German bank’s global-finance unit successfully bet that borrowing costs in euros, U.S. dollars and British pounds over three- and six-month periods would rise faster than one-month interest rates because of deepening stress throughout the global financial system.

The interest-rate bets included an estimated potential profit of €24 million for each hundredth of a percentage point that the three-month U.S. dollar Libor increased compared with the one-month U.S. dollar Libor, according to the documents.

The former employee has told regulators that some employees expressed concerns about the risks of the interest-rate bets, according to documents. He also said that Deutsche Bank officials dismissed those concerns because the bank could influence the rates they were betting on.

— With 23 million unique visitors a month, Business Insider’s numbers are truly impressive, as is Henry Blodget’s willingness to share details of them with everybody.

But as Mathew Ingram writes, it’s impossible to know what they really mean without two numbers Blodget left out of his presentation: revenue and profitability.

While that’s impressive, however, Blodget hasn’t provided us with some of the most important data a media company needs in order to prove its health: namely, revenue and/or profitability metrics. It’s probably safe to assume that revenues are higher than they were almost two years ago, or the site would have shut down by now — and they may even be dramatically higher, since pageviews and unique visitors are still popular measurements used by many advertisers to determine success.

But as Blodget himself notes in his presentation, the profitability of digital advertising has been plummeting over the past few years. The amount of advertising is still growing rapidly, and ad revenues are also increasing, but it’s a little like the Red Queen’s race in Alice in Wonderland: media companies are having to run faster and faster just to stay in the same place — every incremental pageview is worth less and less.

And if any business media outlet epitomizes the hamster wheel, it’s Business Insider.

— Ken Doctor writes about Andrew Sullivan’s bold move to a meter model and what it says about the overall state of the content business:

But as 2013 begins, we see a new twist: Now it’s digital-only news and magazine sites and journalists who are about to launch their own digital circulation strategies. Yes, it’s one of few times that old, tired legacy media — newspaper companies — are the leaders and digital-only media the followers…

It’s true that digital advertising passed print (newspapers + magazines) in the U.S., Brazil, Russia, and globally last year. So we’d expect publishers to be looking at a bonanza, with digital ad spending still rocket-propelled, growing about 15 percent a year. Instead, most are struggling to generate significant digital ad growth. The very short story: (1) Five companies (Google, Yahoo, Microsoft, Facebook, AOL) take 64 percent of that digital spending (Google alone takes 41.3 percent), leaving a smaller and smaller “other” slice for everyone else in digital publishing; and (2) The near-infinite inventory of ad opportunities creates downward pressure on pricing, especially for imperfectly targeted display ads, the main play of most publishers. For some, advertising is simply worth less effort — or none at all…

Reader revenue, on the other hand, is on the upswing. Newspaper publishers have seen double-digit and higher increases in circulation revenue if they’ve deployed paywalls well. More than 100 Press+ clients have added all-access (tablet/smartphone-plus) and increased their subscription prices an average of 20 percent, says Press+ cofounder Gordon Crovitz. They are seeing circulation revenue gains of 15 percent or more, even as they lose a couple of percentage points of subscribers and see 10-15 percent of the subscribers check that “opt-out” box, keeping the print coming at the old price. For some, then, circulation revenue (in the first year at least) will more than make up for ad revenue downturn.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,