Traditional media outlets are going to increasing lengths to gain a foothold in digital. German media giant Axel Springer announced today that it will buy 88% of Business Insider for $343 million, in addition to the 9% stake it already holds. This puts the company’s valuation at $442 million.

Axel Springer’s offer is nearly twice what Jeff Bezos paid for the Washington Post in 2013, and considerably higher than AOL’s 2011 final offer for the Huffington Post. While the bid may sound staggering, it confirms L2 predictions about the publication’s future – and the future of digital media.

When L2 ranked media outlets according to their digital competence earlier this year, Business Insider fell into the “Middle Class.” This category encompasses many of the digital media outlets that have proliferated in recent years, all of which lack the broad reach of platforms like Facebook or the premium content of The New York Times. Without either of those crucial assets, their dependence on advertising revenue often proves unsustainable.

To escape the Middle Class, the L2 study predicts that those media outlets will either find ways to earn revenue outside advertising or be purchased by larger organizations. Many have experimented with alternative business models – Vox licensed its content publishing platform, while Business Insider has expanded into research. However, most are ultimately opting for the latter. Similar to the Business Insider acquisition, NBC Universal recently invested $200 million in Vox.

Media middle class

These deals benefit both parties. With 76 million unique monthly visitors, Business Insider boosts Axel Springer’s digital audience to about 200 million, making it one of the six largest publishers globally. The acquisition also lets the German media giant reach a younger audience. One in four Business Insider readers are between 18 and 34; CEO Mathias Döpfner told journalists that those digitally attuned millennials were a major selling point.

The acquisition could raise Business Insider above the Middle Class. After all, Business Insider has been profitable and projected revenues of $50 million this year. Axel Springer can provide it with resources to scale.

 

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