Axios Sells for $525M | Hacker News Reader

Axios Sells for $525M

nytimes.com

140 pointsjbegley109 comments

Just a few years ago, Bezos bought the Post for half that. I don't understand how any of this stuff is valued.

The Axios newsletter first model is pretty good. They have direct access to subscribers without the baggage of actually printing anything. They’ve also done a good job of matching news content to attention spans. You get bullet points for the news with the ability to followup on what you want.

It does mean that it’s not as good for long-form journalism, but that’s not where the market is headed (for better or worse).

One of the other areas where Axios was moving (and where I think the valuation is coming from) is that they have expanded their DC insider model to more local sources. In an era where local news is struggling, having a setup for high quality local news without the overhead of a physical paper is great.

Is the reason for the value based the good usability, the user base or the content that is existing? I wonder as I am leading a content platform and was asked to think if we should sell it, but totally inexperienced in this.

I'd be interested in others take. However, I have to believe there are really only a few things that matter in deals like this.

1. Existing user base

2. Subscription price

3. Churn rate

4. Growth rate

Maybe the content ranks somewhere in there, but I doubt it. Primarily, because objectively you should be able to judge the content based on the metrics above.

The user base is the value. Every staffer on the shill, in the West Wing, on K street and Embassy row, and every non profit in D.C. is a subscriber. It’s the same reason Axel Springer bought Politico ostensibly for the Playbook newsletters, it’s all about influence with power.

So that if they check user base - would it matter the amount of active/engaged users? Because forcing people to signup for one arcticle or even for a voucher is simple, but I wouldn’t really think this user base is of any value.

What does Axel get out of lets say a couple 1000s or million user? Upselling other newspaper?

Everything is valued based on growth - because capital gains tax is so much lower than income tax.

Share buybacks make this a lesser issue for megacap stocks with massive profits and margins.

When you're talking about two companies with small profit margins and profits (or negative profits / losses) - if Company A is growing much faster than Company B - the valuation comparison might seem ridiculous.

Here's a spreadsheet that makes it clear why the multiple on growth is so high when you consider tax and inflation: https://docs.google.com/spreadsheets/d/1Q00Y8PEyQaiahEvJN0Aq...

It's obviously a flawed analysis, because stock prices are unpredictable (and, to a lesser extent, future revenues and margins). But it should make it clear why growth has such a high multiple.

Dividends and increased share value through buybacks are taxable as capital gains (usually).

Most dividends are ordinary / ordinary income.

> Dividends are the most common type of distribution from a corporation. They're paid out of the earnings and profits of the corporation. Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.

https://www.irs.gov/taxtopics/tc404#:~:text=They're%20paid%2....

When are dividends qualified (capital gains)?

> For a dividend to be qualified, there are certain criteria that must be met, according to the IRS. For stocks, the criteria is: The stock must be held for at least 61 continuous days, unhedged, out of the 121-day period, beginning 60 days before the ex-dividend date.

This covers most passively managed funds (most 401k funds these days), but still eliminates nearly all actively managed funds (the majority of capital invested).

That's the whole point of share buybacks - it's a way to transfer value to shareholders that definitely isn't considered income.

> That's the whole point of share buybacks - it's a way to transfer value to shareholders that isn't considered income.

If the presumption is that share buybacks increase stock prices more than simply in the short term, then, sure, that'll work out in practice. A pitfall to share buybacks is that many executive compensation packages are tied to stock price performance which can be juiced by billions in share buybacks. What we can observe is that short term stock buybacks are pushed in favor of financial resilience, maintenance, and necessary investments that ultimately leads to the company needing few-strings attached government bailouts. One of the most recent examples is the airline industry in the US. I do appreciate the discussion around qualified and unqualified dividends and their relative tax treatments. As a short term shareholder, I'd prefer stock buybacks. As a long-term shareholder, I'd prefer more investment and financial resilience.

> A pitfall to share buybacks is that many executive compensation packages are tied to stock price performance which can be juiced by billions in share buybacks.

You're assuming that shareholders don't want this, too.

There's a reason executive pay is tied to stock price performance - that's all investors care about - because all they want is capital gains.

Friendly reminder that the US government turned a profit from the 2008 bailout. People often hear the word bailout and think it was free money when it actually was a loan.

> That's the whole point of share buybacks - it's a way to transfer value to shareholders that definitely isn't considered income.

I thought the point of buybacks was "This company doesn't have growth ideas--invest elsewhere"

Not unless you think every company that returns money to shareholders is out of ideas - at which point - if you're never going to get money back, why invest in the first place?

> if you're never going to get money back, why invest in the first place?

That's a question for tomorrow's (hopefully larger) bag-holders, not today's.

Believe it or not, the S&P 500 returns something like 90%+ of net income to shareholders.

That’s because net income is after R&D spend etc. is accounted for.

The argument for retaining net income is that you have future capital expenses that you want to save for (like factories or servers), but that’s an increasingly less pressing need for modern companies.

Given the above, companies can choose to return that net income as cash, but then shareholders have to redeploy immediately (and potentially in competitors’ stocks/bonds) OR companies can choose to buy back and burn their own shares, allowing shareholders to defer any decisions and keeping all capital locked up in the company’s stock.

> but that’s an increasingly less pressing need for modern companies.

Maybe in the US and EU.

We exported factories and manufacturing to the developing world, where CapEx is very important.

Considering that China grew at 2x the rate of the US and >3x the rate of the EU - CapEx seems to still be worth considering...

If you have a lot of cash, and ultimately decide you can't deploy it all quickly and efficiently, you can return it to shareholders and avoid losing 9% a year sitting on cash in this inflation environment.

Shareholders will be happy and feel taken care of and are more likely to buy your stock next time you have an offering when you are ready to spend that money

> If you have a lot of cash, and ultimately decide you can't deploy it all quickly and efficiently

Exactly, when you don't know what to do with cash, send it back to the investors in hopes someone else has an idea.

Yeah, just clarifying because what you said was "this company doesn't have growth ideas" which is highly negative, makes it sound like it's a tired dinosaur like AT&T.

It can also just be a prudent decision not to flush money down the toilet on expansions or ideas that aren't investable yet because of a misplaced need to show that that company is not "out of ideas"

Right that’s why companies return money to shareholders. The question is “should we do buybacks or dividends?” and companies are now leaning toward buyback because of the tax advantage.

Why you decide to pay out to shareholders rather than keeping the capital is a complex question with many schools of thought. But once you've decided that you're going to pay out the money, doing it as a buyback rather than a dividend is almost entirely about the tax treatment.

The capital gains / income tax rates have only a minor impact on the weight of growth in valuation models. One way to see this without getting to technical: there are a number of (very large) institutional investors that pay no tax at all (university endowments, charities, etc). If what you're saying is true, untaxed investors would have radically different allocations than similar taxed investors. That's not the case.

> If what you're saying is true, untaxed investors would have radically different allocations than similar taxed investors. That's not the case.

Except it is the case for endowments and charities. They both have much lower risk tolerance than HNWI (~33% of capital).

The bottom ~50% of capital is in R/E and is mostly about living, and less about taxes.

A couple of data points of relevance:

* Axios revenue for 2022 projected to be $100 million, up from $85M in 2021

* WP revenue in 2012, last year before its sale was $4.01 billion, down from $4.13B of prior year. However, this includes all WP Co. properties, not just the newspaper.

* Axios staff: ~60. WP staff: ~3,000

Those staff numbers look good, until you realize how many more people will be required to grow their revenue to where WP is.

The investors (generally, abstracting here) in mature-ish assets want a 20%+ gross IRR they can transact on and actually exit so they can return $ to their LPs and therefore get their fat bonuses. Aspiring to reach some arbitrary milestone is likely not on their radar; just doubling revenue might get them there.

sorry but no way was the relevant revenue number $4b when the asset sold for $250m. unless it was bleeding money, that fails the sniff test.

https://www.vox.com/2016/6/28/12050416/jeff-bezos-saving-was...

> . The last time total operating revenue for the paper was published, in 2012, it was $580 million; one former executive estimates today it’s probably closer to $350 million. Another Post veteran told me that Bezos said in a meeting that the company’s annual budget, currently around $500 million, will have to be cut by 50 percent over the next three years.

there. better.

---

edit: jeez, the axios numbers are way off too. they had 60 people in 2018.

now it stands between 380 (https://www.comparably.com/companies/axios-media/headquarter...) and 520 (https://craft.co/axios)

Revenue is just one metric among many others like net income, debt, free cash flow…

You can have massive more revenues than your competitors but if you lose a lot of money it’s still not a good business.

oh wow, you have blown my mind with your incisive financial analysis

You know there is no need to be rude out of nowhere. From your own "incisive financial analysis" you showed me that you don't know how to evaluate the market cap of a company. There is not even anything related to DCF analysis in what you said which is basic, but just revenues and headcounts... And all this is fine I am not assuming (like you) that everybody here on HN should know these things. But unless like you I am not here to be rude and show off about stuff I don't know about, but to help people and to give a few clues about the subject if they want to dig deeper.

I think all this makes HN a whole better place...

The broad money supply increased 2x since he bought it in 2013. That could explain a lot of it. Today it would take $500M to have the same purchasing power as $250M did then?

https://fred.stlouisfed.org/series/M2SL

I think it’s simply that the Post was saddled with high legacy overhead costs and slow digital growth at that time. Whereas Axios today is basically the opposite: strong digital growth with zero legacy overhead.

For whatever reason, until I started reading the article, the first thing that came to my mind was "why did axios (the http library) sell?"

I won't lie, I'd sell an HTTP library for half a billion and change.

but then it wouldn't be much of a library anymore right?

people buy in and work on open source projects because they're open source. that's the only reason I contribute to projects, because it's for the community

I know of a few projects that are closed source but on npm, one of which is syncfusion, they make frontend components, I only found them when I was searching for a tree map component.

But then I found echarts's tree map component by Apache, and it was like a completely next level compared to syncfusion, was 10x easier to integrate and had 1 million times more users it felt like. The github repo was like night and day in activity

> but then it wouldn't be much of a library anymore right?

For that much money, I could start a foundation and fund a lot of new libraries if I wanted. I'd sell out for that.

Not being much of a library is a problem for the new guys. And, if the new owners screw the pooch, the inevitable Librixos fork would probably just take over anyway.

when I worked at a web development company a few years back, they used axios (http library) and I just assumed it was related to Axios (website), like it was made for the website's use and open-sourced. I honestly had no idea they were wholly unrelated.

I feel like axios the http lib is worth more.

525M is way inflated for some publication that may become worthless at the whim of viewers and journalists

aren't investors getting ripped off?

they have $100M in revenue up from $85M in 2021 and three profitable years before 2022, so no, no one is getting ripped off.

Axios on Axios:

https://www.axios.com/2022/08/08/axios-agrees-to-sell-to-cox...

Refreshing to see this much transparency.

Looking at a previous article on NYT at the comments section there are alot of people not really wanting to read axios:

https://www.nytimes.com/2022/03/07/business/media/axios-loca...

Not wanting personalization algorithms or not liking bullet points.

Overhere at HN the commenters are very positive.

Anyone has an idea if this based on demographics or interests that there is such a discrepancy?

Over here at HN, users would burn the NYT in effigy if they could, for no other reason because they force you to call them to cancel your subscription.

BTW, I have successfully unsubscribed by just paying w/ Paypal and disabling the automatic payment from the Paypal UI. No, I don't live in CA and do not have any unsub-friendly laws applicable to me.

Congrats on working around their dark-patterns, but that doesn't mean their dark-pattern business model isn't deserving of critique and warning others to avoid.

How would others avoid them? This is standard practice for every major newspaper.

Thanks for enlightening me. I live in Europe and just rarely get a NYT article recommended. I was curious to see axios beeing successful in such a different media business, also on how they focus on the local news.

Axios had serious reporting in many areas, and managed to build a following without resorting to clickbait. They managed a great exit for a media company. They are the anti-buzzfeed. Hopefully this inspires more of the same.

> managed to build a following without resorting to clickbait

Jonathan Swan's reporting during the Trump era and Sara Fischer's coverage of the media and Big Tech kept Axios relevant. No doubt bigger organizations like The New York Times, CNN, or The Washington Post tried to poach them. I'd love to know how much the company is paying to keep them from leaving.

Really interesting to me. I built an AI news summarization service around three years ago and discovered Axios as a potential competitor. At the time they were still defining themselves; I still have a (no longer functional) TestPilot version of their app on my phone.

With the polish of their services and the big money behind them, they seemed like an obvious win. It felt like they understood the same thing I did - Bottom Line Up Front is the key to capturing the next generation of young professionals reading the news. But it's interesting to see that they've sold at less than a billion dollars - it seems like their experiments were running out of steam, and it makes sense too with the tech industry downturn that they must be facing pressure to cash out.

I hope they don't change the way Axios is structured today. No overwhelming ads, simple layout, fast reading texts, good summary, etc. I used it as a "role model" for a local news website that I built in 2018. Took inspiration from Axios and tagesschau (https://tagesschau.de).

Someone just spent big money on it, and they're going to want to make that back. Advertising is the obvious way, so enjoy current Axios while you can.

>and tagesschau

for English speakers there's https://www.dw.com as well which explicitly writes for an international audience.

Dangit, I really liked Axios, and I worry the quality will go down afte this. Wished they'd remain independent.

I don't have any particular thoughts on Axios' credibility, but I love their presentation style. It's really the news style guide that I always wanted

Don't get too used to it. The ads and upsells are about to increase 10 fold now that they've been acquired.

> Cox Enterprises is not buying out HQ, which Axios is spinning out into a separate company. Mr. Schwartz will be chief executive of that company and Cox will take a minority stake, with Mr. VandeHei serving as chairman, one of the people with knowledge of the deal said.

Interesting. HQ probably has more upside than the media business long-term. Think Grammarly crossed with Mailchimp.

RIP. Was good while it lasted.

I really liked it at first, especially when I was able to just expand the news item with a single click. Then they changed the UI so that you had to open a new page for each item and it basically ruined it for me, after that I pretty much stopped reading them.

Weird to phrase it as "Axios agrees to sell itself" rather than "Cox buys Axios"; I guess NYT thinks no one has heard of Cox.

I actually don't think it's common knowledge that Cox is a conglomerate with multiple unrelated businesses. Most people would know them as their ISP, and that's not even necessarily a huge portion of the country.

This is honestly the first I've heard they're more than a cable company.

Reorg Research has been targeting 3X this amount.

https://newspub.live/news/warburg-backed-news-group-reorg-re...

Very interesting. No one talks about news startups, but there's endless talk about SaaS startups doing glorified log parsing.

Another one to watch is Semafor.

There's been plenty of discussion here about Vice, Buzzfeed, Substack and all the other 'new media' startups.

Well, for better or for worse, $500mm wouldn't even be worth mentioning as a tech exit (unless it came as a fire sale after a unicorn fundraising round).

Another article not behind a paywall https://nypost.com/2022/08/08/axios-sold-to-cox-enterprises-...

And the WSJ's take on it, which is behind a paywall but is probably the best one I've seen https://www.wsj.com/articles/axios-to-be-acquired-by-cox-ent...

The news site, not the JavaScript package.

thought this was the npm axios lib and thinking why it would cost that much

I always wonder if they are related or not?

I don’t see the value Axios provides, personally. It’s another Politico, made by Politico alums. Good for them that they get rich I guess but I can’t say I feel richer for Axios existing.

I'd imagine they provide access to an even higher income audience. So, bigger CPMs for investors, for example.

Politico aint got s..t on this

https://www.axios.com/2022/08/08/trump-toilet-photos-maggie-...

Politico and The Hill are focused on Washington-relevant gossip. Axios is general news coverage in bullet points and not just for policy wonks. They also had high profile live interviews.

What are they paying for here? The Axios “brand” is not well known enough to justify that much money. The “tech” is your standard CMS, anyone can build that. The “talent” is just average writers, in fact I can’t name a single one. How is this worth half a billion?

Ads

2.4 million subscribers according to a Google search. Anyone can build a simple news site and hire journalists. Can anyone get that many readers?

How many of those are engaged subscribers? If you subscribe in January, but haven't opened an email since March, you are still counted in subscriber rolls. But you are unlikely to be monetizable.

Anyone can get that many subscribers by spending a fraction of 500mm USD on ads.

Even if you did get "subscribers", monetizing subscribers is hard. Currently Axios generates $100M in revenue a year.

> 2.4 million subscribers according to a Google search

Which is on par with a moderately successful YouTube channel - which likely has far more reach than Axios.

people are just gonna switch to native fetch

Can we get a quick rundown on native fetch?

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