Anyone telling you that Federated Media, the online ad network which reps Boing Boing, GigaOm, TechCrunch and other blogs, has raised $50 million from investors is dead wrong. It's true, Oak Investment Partners and others paid $50 million for shares of Federated. But only half of that went to the company, we're told; the rest went to founder John Battelle and other employees. According to our source, Battelle's take was roughly 90 percent of the insider shares sold, or about $22 million.
I'd long thought that Battelle's flip-the-bird photo, used here, was a reflection of his charmingly combative personality. As a founding editor of Wired, which set the tech world on fire in the '90s and helped inflate the bubble, Battelle failed to stack up the tall dollars. He founded The Industry Standard, which sold more pages of advertising than any other magazine in American in 2000 and then went bankrupt in 2001. Battelle, in short, has been adept at chronicling booms, but not profiting from them. Until now.
Battelle is just the latest entrepreneur to cash out before his company goes public, a practice once frowned upon in Silicon Valley. But Federated Media turned profitable last fall, we're told. Being cash-flow positive means never having to say you're sorry. And it also gives entrepreneurs leverage with investors that they never had in the '90s, when building Web companies was much more expensive.
So at last he's earned what they call in the Valley "fuck-you money" — enough money to simply walk away, should a job turn unpleasant. In fact, we hear that's what Battelle is planning to do, albeit temporarily. He's told investors in Federated that he plans to take a leave from the business to work on his next book, The Conversation.
Where Battelle's profane wealth may get him in trouble is with the bloggers he represents. Unlike him, most of them have yet to cash out, or even turn a profit. Federated Media's take of their advertising — typically 40 percent — strikes many as too high, though most have yet to try their hands at hiring and managing their own salespeople.
But they shouldn't worry. Having enriched himself, Battelle is now thinking of them. After hearing rumors that one of Federated's blogs was in merger talks, he approached the blogger and encouraged him to come talk to Federated first before taking an offer.
In other words, Battelle is now contemplating a blog rollup. Rather than see his customers picked off one by one, with their ad inventory walking out the door, Battelle may use some of the money he's raised to buy blogs himself. It only makes sense. He knows his customers' businesses well, since he organizes conferences, orchestrates redesigns, and performs other services besides for them, in addition to the mundanities of selling advertising.
Battelle likes to think of himself as more than just a business partner to his bloggers. He's their buddy. He's their pal! This bubble has everyone frothy, and the valuations may be making some of the bloggers under his care unduly giddy. While Battelle may enjoy a tipple now and then, friends don't let friends sell drunk.