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Full transcript: Bleacher Report CEO Dave Finocchio on Recode Media

He’s not worried about Facebook’s News Feed changes.

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A Philadelphia Eagles football player in the set position Hannah Foslien / Getty

On this episode of Recode Media with Peter Kafka, Bleacher Report CEO Dave Finocchio talks about founding a sports media site, selling it to Turner and leaving — and why he came back to lead the company again.

You can read some of the highlights from the interview here, or listen to it in full in the audio player above. Below, we’ve provided a lightly edited complete transcript of their conversations.

If you like this, be sure to subscribe to Recode Media on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.


Peter Kafka: This is Recode Media with Peter Kafka. That is me. I am part of the Vox Media Podcast Network. I am here at Vox Media Headquarters in New York City. It’s nearly February. Doesn’t look miserable, but it’s not warm. You know what’s going to be warm? Southern California mid-February. That’s where we’re having the Code Media Conference. Me and Kara Swisher are going to host it. We’re going to have amazing guests: Maggie Haberman, Susan Wojcicki, Tim Armstrong. By the time you hear this, you’ll know that we’re adding Janice Min from the Hollywood Reporter, the founders of TheSkimm, Brit Morin. There’s a really cool person that I probably can’t tell you about yet, but they run a company everyone’s very interested in, and they’re going to be there. It’s all February 12th and 13th in Huntington Beach, California. You can learn more about it at Recode.net/events.

Okay, Dave is very quiet there. He thought he couldn’t speak. I was trying to encourage him to speak.

Dave Finocchio: No, I went last year. It was great.

You did go.

Yeah.

That is an authentic, organic endorsement.

Yeah. They had great surf outside of the hotel too. I didn’t go surfing, but ...

Different location this year. Better surfing.

Better surfing.

Better surfing. The voice you hear, the surfing-endorsing guest at Recode Media today, keep that in there. It’s authentic. It’s Dave Finocchio. He is the CEO of Bleacher Report. Welcome, Dave.

Thanks for having me, Peter.

How much should I pay you for that Code Media endorsement?

I don’t know.

Nothing. You paid me to attend.

That’s right.

How good is this business?

Oh, it’s a great business.

It’s fantastic.

That’s what we’re going to talk about, right?

You want to get in the events business? Do you guys do any events?

We’re dabbling.

You’re dabbling.

I don’t know if it’ll be a staple.

Your core business is ...

Advertising.

About? In case someone has not seen Bleacher Report.

Bleacher Report is, I would say at this point, the leading millennial destination for sports culture news. It’s gotten pretty big.

Can you feel the vibes from SB Nation? They’re literally on the other side of that wall.

Yeah.

Actually, it’s a server room there.

We send those guys a lot of traffic. We’ve always tried to be good do them, but yeah. If we’re talking a reach game, yeah, we’re pretty big.

You guys are a big, honking sports, digital sports producer.

Digital social.

My mouth is not working today.

Yeah.

You’re big. I think of the sports media universe as ESPN, the big guys. Then Sports Illustrated used to be the big guys. Then you folks.

Yep.

And SB Nation over the last decade showed up, became a big force in digital. Now you’re the established sort of medium/old guard.

Yeah. No, it’s crazy what’s happening.

Because there’s Barstool, right?

I know we’re having to ...

There’s guys on Instagram.

House of Highlights. We’re having to buy stuff and build it to make sure that we don’t get disrupted. It’s a different position to be in, having ... I started this company in 2005. Yeah, we’ve been at it a while.

Yeah, so 2005, that’s web 2.0. We’re a whole different world.

Totally. I still know all those buzzwords.

I think the reason, and I’m not at full capacity right now, as I’m in mourning for the Minnesota Vikings.

Sad.

Sad but expected, if you’re a Vikings fan.

I thought they were going to win.

Yeah, I didn’t, because that would be too much joy. If they won, they would get killed in their own home stadium by the Patriots in two weeks.

Here’s a dumb question. I’ll have a bunch of these for you. Does your site sort of track general interest sport, in terms of activity, interest, traffic, engagement? Yesterday’s a giant NFL day. I assume you guys see a huge spike there. Does it ever divert from whatever the mainstream sports is happening, in terms of user interest? Is there ever a vein where you say, “Oh, our website’s going nuts over this. You can’t read about it at all on ESPN. No one’s paying attention to it”?

I would say that we’re pretty good at data. That’s kind of how we came up in this business. You had all these old media companies that were trusting really talented and experienced editors’ guts, and then we did all of this math and figured out that they were covering the wrong topics. SB Nation did some of the same work at the same time.

In terms of that happening today where all kinds of people are interested in this and mainstream’s over here, I will say that I think traditionally you think of sports as being a bit jocky, and it can be kind of exclusive. Or there’s a segment of the population that’s really into sports, and they care about wins and losses and they care about stats and they care about whatever. Then there are people over here that aren’t sports fans.

For us, what’s really changed over the past few years with the total disruption that’s happened in the sports world because of mobile and social platforms, is I think sports culture has become way more inclusive, where you now have people who don’t care about wins and losses, but they like Russell Westbrook Highlights, or they don’t care ...

Are they like seeing what Russell Westbrook wore, right?

Totally. They like seeing what he wore. They like seeing the ... Sports is this wonderful soap opera, right? It’s maybe the White House is the best, most compelling soap opera that’s going on in this country right now, but I’d say maybe the NBA is the second-best soap opera. You’ve got all these characters. It’s basically an ensemble cast. You’ve got mainstays like LeBron and you’ve got these other guys that ...

Your premise is that in the past, you would have only seen that if you went to ESPN, if you were at a bar or someone’s house who had an NBA game on. Now it’s the internet. It sort of permeates. It comes to you whether ... You didn’t even seek it out, but you might be aware that Russell Westbrook wore something crazy before the game.

I think in the past you found out about sports through your connection to your local newspaper or SportsCenter or your connection to your family, but it was more of a ... For the most part, it was more top-down.

Because people consume ... most of the content they consume now is accounts they follow or sharing, they’re getting all of this content from their peer group that they wouldn’t normally consume if they sought it out themselves. Sports content amongst men, men don’t really share content outside of sports, if you look at the numbers. That’s where I say that sports has just become more inclusive, because people end up being influenced by the culture of sports way more without necessarily caring about the games.

Besides the Vikings losing last night, the big news in media the last couple days, last couple weeks, is Facebook making a couple different announcements about the way they’re going to change the News Feed, what they care about. It’s a Monday. Who knows what they’ll announce by Thursday. I think there’s more stuff coming. But they’re signaling both in public and privately saying, “We’re going to change the way we deal with content here.”

I know that you guys have pushed for a while and say, “Look, a big part of what we do is we do distributed media,” which is a fancy way of saying, “We’re publishing on lots of other properties besides our own website.”

It is.

What do the Facebook changes mean for your site, for your business? You guys have pushed into Facebook and social broadly for a while.

Facebook’s interesting, right? I give Facebook a lot of credit, going back to when they first started publishing or really pushing publisher content, which I think of as the 2013, 2014 era.

Way back in 2013, ’14.

Yeah, but I really liked what they did then, because they made it ... The previous era was really a Google-driven era if you were a new publisher. That meant that for people who were in the business, it was more of a volume and frequency game. Google incentivized you to create a lot of content, but not necessarily the highest quality content. When Facebook came into the market, because you could create one great piece of content that then could be shared to a seemingly unlimited audience, I thought for a while it incentivized better quality content.

I think since then ... I actually have this long email that I’ve drafted to Mark Zuckerberg. It’ll probably never send, but there’s so many things about how they’ve managed these thousands of publishers over the years that are so analogous to what we did in our early days where we built this large pool of writers who were unpaid contributors when we were a startup company that had no money. I think initially you kind of make a lot of promises to those people about what’s going to come and stick with us.

Well-meaning, you believe those promises.

Well-meaning promises. We’re really excited about this program and this program, and we’re going to get the monetization part later. I think that over the years, I would just say that I think they’ve been a little bit callous about some of the programs they’ve rolled out and some of the decisions that they’ve made and just some of the incentives that they have ended up creating for the people on their team where it seems like sometimes the people who are the media partners end up with volume goals. “We need you to create this much video content and this many minutes, this many this.”

I just think sometimes the incentives have maybe been either a little bit too driven by their sales team or whatever it might be. I just think that things have gotten to the point where they are now where a lot of publishers are unhappy, and a lot of the promises that have been made through the years haven’t ended up coming to fruition.

There are also a bunch of wonderful things that Facebook’s done, and I think Instagram is the best platform to publish your content right now. Facebook in general, though, these changes ... They’re trying to incentivize sharing again. They’re trying to incentivize comments. It seems like “Liking” posts is going to mean less. I don’t know. What’ll happen is what always happens where publishers will scramble, and we’ll probably change how we create content for Facebook.

You guys specifically, did you see this coming?

We know. This leaked in the circle. Yeah, I knew months ago that something like this was coming.

Right, so they sort of let some of the air out in advance, intentionally or unintentionally.

Yeah, that usually happens, I would say.

I think a lot of publishers, even if they hadn’t been given the high sign by Facebook, could see what was happening, in terms of the traffic. You could also see that they had yet to make money at Facebook. Were you already making changes, though?

Our traffic from Facebook, in terms of referrals back to Bleacher Report, peaked in, I think, January of 2015. Our traffic today from Facebook is, even though Bleacher Report is much, much larger than it was in January of 2015 overall, our traffic from Facebook is a fraction of what it was at its peak. I’m talking 15, 20 percent of what it was. We did ... When Facebook started to push third-party content companies to create native video for Facebook, we went along with that, and we built up a very large video presence on the platform. That also has come way down. We’re not unique. The same things have basically happened to everyone.

On the flip side, our Instagram audience has just blown up to a proportion that we never imagined possible. But Facebook specifically, I’m rooting for them. I hope that they can get more users sharing content on their platform again.

Just tactically, you’ve hired a bunch of people to make a bunch of stuff over the last year or so. You’ve sort of come to the conclusion, “Oh, that’s not going to work for us.” Now it’s sort of an official statement from Facebook saying that’s not going to work. Do those people go away? Do you find other jobs for them? Are you able to move people around?

We honestly have worked towards this for a while where we have very few people who create content specifically for Facebook. That’s not to say that we’re no longer going to publish content on Facebook. We’re going to try to figure this out. If it works, great. If it doesn’t work, then we’ll move more resources elsewhere. We’ve grown enough where I can’t think of any hard decisions we’ve had to make personnel-wise because of something like this yet. We’ve made decisions because they’ve been in the best interests of the company for other reasons.

I’m going to ask you a little bit more about Facebook. I’m going to ask about Instagram, Snapchat, all the platforms.

All the platforms.

First, I want to stop the conversation for just a second so we can hear from a fine sponsor. Be right back.

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Back here with Bleacher Report CEO Dave Finocchio. Got it all out there correctly this time. Welcome back, Dave. You mentioned Facebook. You sort of love-hate.

It’s tough. Yeah.

Instagram you love, owned by Facebook.

Yeah.

I’m curious, in all of the announcements Facebook’s been making about the News Feed, none of it relates to Instagram, in terms of turning down the dial on commercial content. You guys are huge on Instagram. How many followers?

House of Highlights has eight million followers. Bleacher Report has six million.

House of Highlights is you guys?

Yeah. House of Highlights is us.

How did I not know that? Sneaky.

I don’t know. Yeah, we have two of the largest Instagram accounts in the world. From a follower standpoint no, but from a video consumption standpoint, they’re both two of the top 10 largest accounts in the world.

I saw one on House of Highlights today, because I followed it before, and it doesn’t have any SB Nation branding on there, or even Bleacher Report branding there.

Yeah, it’s ours.

They just gave me a funny look. That’s intentional that you guys don’t want your brand attached to that?

Yeah, I mean what’s ...

I thought it was a dude. I thought it was a guy pulling clips.

It is a dude, but what’s happened with that brand has been ... Bleacher Report’s been an amazing thing, and it’s taken a really long time to build. Very proud of it, but what’s happened with House of Highlights has been something extraordinary.

If you don’t know what House of Highlights is, go follow it. It’s fairly straightforward.

It’s fairly straightforward.

It’s highlight clips.

Go to Instagram and follow House of Highlights if you don’t already.

It’s mostly right now NBA games. Here’s the end of the Nets-Cavaliers game.

It’s basically everything you need to see in sports.

Here’s the inside of the Eagle’s locker room. Here’s a guy trying to get on the Philadelphia subway but running into a pole. Did you watch that one?

Sure.

Painful, but a little more pleasant.

Yeah, the thing that happened with House of Highlights is that athletes and musicians, like the most famous ones in the world, started to really embrace it.

It’s become like the ESPN Top 10 SportsCenter.

Yeah, some people have made that analogy that it’s the new SportsCenter Top 10. I think what’s a little bit different about it is because LeBron or Drake or whoever else you want to list, literally it’s seemingly every famous person follows this account, they all talk to each other on it. I think that’s ...

Did you guys incubate that? Where did it come from?

We bought it.

You bought it?

We bought it before it was ...

Someone was making it when it ran.

Yes, and so Omar Raja, who’s now 23, was attending Central Florida University, who had a great football season this year. They went undefeated. He had something that was clearly ... We look at a lot of stuff, right? We probably look at hundreds of different startup ideas a year, as you do when you’re a bigger media company. Not to use cliché words, but the authenticity of his voice and also how people were engaging with it was just ... We’d never seen anything like it.

How big was it when you bought it?

Maybe around a million followers or a little bit less.

Around a million followers. Now you said it’s eight?

Yeah, now it’s eight.

That seems like the kind of thing where you guys would go, “All right, well, that’s a really cool Instagram following that guy has, but that’s what we do for a living. Let’s just do that ourselves.”

I would say most of the time when we look at things, that’s the conclusion. This time the brand resonated clearly with an audience in a way that ... It was just clearly special. He starts movements just over and over and over again. He blew up the Running Man Challenge, the Drive-by Dunk Challenge that came this summer was from him, just over and over and over again. The Steph Curry Challenge. These things that become movements, not just on Instagram but find their way in other parts of culture and society, a lot of them have started on House of Highlights.

What is it about Instagram that makes it work there? Again, there’s clips on the internet, right? This could work anywhere. Technically it can work anywhere.

Sure.

Why does it work on Instagram more than YouTube or Facebook or Twitter or Snap?

I think it’s the audience. I don’t think we’re unique in this regard, but say House of Highlights engagement rate on Instagram is between 3 and 4 percent.

Meaning?

3 to 4 percent of people who see his posts choose to engage with it. They either “Like” it or they leave a comment. A much higher percentage obviously watch the content, but 3 to 4 percent. Bleacher Reports is about 3 percent. House of Highlights is a little bit higher, but those are pretty high for industry standards. On Facebook, our engagement rate will be like two tenths of 1 percent. That’s above the industry standard. You’re talking about a user base that’s 15 to 20 times more engaged on Instagram than Facebook. That’s not ...

They subscribe to it, right? It’s not showing up on your Instagram feed because someone put it there. They have to go get it, for starters.

Yeah. Yeah. That’s one difference between Instagram and Facebook.

Right.

It sounds like Instagram might be doing more of ... show you stuff that you haven’t subscribed to in the future, but to date, yeah. It’s been ...

That’s a good way to wreck the platform is show me stuff I didn’t ask for.

It might be. I don’t know. I think one of the great things about Instagram is they’ve just left it alone. They’re not telling you what to create and what not to create, and it’s working.

Right. So you guys have this huge success there. Seems like anyone could do it, but clearly not everyone can. Hard to make money from being incredibly successful on Instagram.

Yeah. Yeah, everyone definitely can’t do it. It does seem simple, but it turns out the way you ... This’ll happen fairly frequently that we’ll post the same highlight as ESPN, because we’re the two people who have NBA rights. The same highlight on House of Highlights will outperform the highlight on ESPN by 5 or 10 x.

Oh, so when I’m seeing an NBA clip, it looks like you pulled it from a TV screen, right? The way I’m used to looking on Vine or Twitter — Vine R.I.P. — that’s actually a cleared clip?

Totally. Yeah, we don’t do anything ... We’re too big to do anything illegal.

Even though it looks like someone was holding it in front of a TV, because it’s cropped funnily.

Yeah, yeah, yeah. There’s certain things you do that increase the odds of a piece of content being shared more.

You don’t mind that people think that you pulled it from a TV, but it’s actually a cleared clip.

Yeah, whatever works.

Fascinating.

Yeah, so we have the legal rights to do that, obviously, but the magic is in how the content’s framed up. The magic is how you connect that piece of content through the text and through things that Omar points out to something in culture, because everybody’s seen a highlight eight bazillion times, right? If it’s funny or if it ties to something that’s, again, going on in the culture right now, that’s where people get excited about it.

Oh, so the money part. Are you making money from Instagram?

Yeah.

How do you do that?

Advertising.

But where do you run ... Is it a sponsored ... I didn’t see any obvious ads there.

There are three things that we do today. We’ll partner with brands and make truly branded content. Branded content to me means the advertiser has an opportunity to actually collaborate with us on the content. There’s a sponsorship model, which means ... An example of that would be our “Gridiron Heights” show on Bleacher Report, which is a 60-second animated show that runs on Tuesdays. PlayStation sponsored that this season, but they don’t have any input over the content.

Its video runs on Instagram, has a “brought to you by PlayStation.”

You got it. Integration into the content as well, but they’re not actually shaping the content. The content isn’t about using PlayStation devices. Then the third thing we’ll do for a very select group of brands is we will run commercial spots for ... We’ve done it for Jordan brand and for Adidas and for endemic sports brands that make awesome, awesome content.

You run their ad.

We will take their money and run their ad. Yeah.

Again, that shows up in my feed. That’ll be a House of Highlights.

Yeah, but with a handshake where it’s disclosed that they’re paying us to do it.

Handshake’s a technical social media word.

It’s super technical, yeah.

Snap, you guys were early on Discover there.

Internationally we were.

Internationally. Now domestic as well?

Yeah, since the beginning of ’17.

It’s constant back and forth about what’s going on with Snap, what’s going on with Discover. A lot of people periodically write a story saying, It turns out that most of the activity on Snapchat is actually messaging, not Discover.”

That shocked me. I couldn’t believe that.

People are consistently rediscovering this, but Discover doesn’t seem to be going away. They keep moving it around. They keep sort of rethinking how they want to display it. What does that mean for you as a business?

Snap’s been interesting. We like to be a fast follower onto whatever platforms that work. Whether it’s Snap or Facebook or Twitter, Apple News, I can’t think of one example where we pushed chips in super early, but once it starts working, then we kind of run our playbook and muscle our way in. That’s what we did with Snap.

What I like about — and they obviously they are in the process of figuring themselves out and we’ll all wait and see what ends up happening to it, if it’s a messaging service for high school kids. Be it if he turns it into something else, we’re incentivized to root for their success. What I like about it from a business standpoint is it’s a highly concentrated audience of teenagers and teenagers’ sports interests, like the stories that they care about don’t always come through on the data lessons we learn on our own website or on Instagram or on other platforms where the audiences are more diluted. We learn a lot about what younger sports fans care about, just by publishing to Snap. For us, that’s been hugely valuable, and I think that’s kind of an underrated part of the platform.

You use that as an R&D lab in some ways?

Yeah, sure.

You know your audience there is teenagers. That’s the Snap audience.

For the most part, yeah.

They’re responding to that. Then are you taking cues from that when you’re programming Instagram and your other platforms?

Totally. One example was from last summer. We’d not planned to go that big on the Mayweather-McGregor fight, but on Snap, every time we did something about it, it was just blowing up.

If you’re a 15-year-old boy, that seemed like a really cool event.

Yeah. It was like my cousins who were in high school thought it was the biggest thing that had ever happened. The data just came back showing that over and over and over again. We ended up greenlighting a bunch of really creative projects, animated projects, claymation projects. We did a bunch of really cool stuff for that fight. It crushed, but we would not ...

It crushed outside of Snap as well.

It did especially well on Snap. It did well outside of Snap too.

That’s stuff you wouldn’t have seen if you were ... Again, the origins, and we could talk about this later in the interview, but the origins of ... I have to keep saying this carefully, Bleacher Report as well as SB Nation is a lot of Google mining, right?

Yeah.

Here’s what people are searching for. Let’s make content based on what the Google searches tell us. For Mayweather, you wouldn’t have been able to see that right away.

We would have gotten totally different data in the past versus ... This was a different data stream. That’s valuable.

Twitter.

Yeah, we’re huge on Twitter.

You’re huge on Twitter.

Yeah.

That means what?

That means that we’re huge on Twitter.

Their big push right now, at least under the current COO, who may no longer be the current COO by the time this comes out, is video, live video in particular.

Interesting, the first part at least.

Yeah, the first part. Yeah, yeah, over the weekend the story broke that the COO, Anthony Noto, may become the CEO of SoFi.

Oh really?

Yeah.

Oh, I missed that.

Yeah, yeah. We’re a non-breaking news ...

Still in San Francisco, though.

Yeah, he’ll still be around.

I like SoFi’s office better. It’s in a more beautiful part of town.

I like SoFi’s advertising when they advertise with us. They’re great.

Yes, they have budgets.

Yeah, God bless. Anyway, they’re pushing video and live video. Is that part of your plan there? Are you doing something else?

I think we’ll look at it. We just have incredible engagement around our brand on Twitter. We’re consistently a Top 10 Twitter account in the world. From an engagement standpoint, we beat Hillary Clinton in November of 2016.

Who didn’t beat Hillary Clinton?

Well, at least two of us beat Hillary Clinton. It’s another demographic. The demographic in Twitter for us skews more African American. There are lessons that we’ve learned there too. Whether or not we do live content, my general thesis is that there are not that many people who love or care about live sports content. I think people value on-demand sports content a lot. We try to be relatively true to our North Star and not chase ...

Spell it out, because the truism of media is “live is the biggest, best. Live sports is the best of the best.”

Yeah.

Has the biggest audiences.

Live sports — games — certainly have big audiences.

You’re saying everything that’s not that.

Yeah. Everything that’s not that. It’s going to be really interesting to see what happens to live sports in this-

Guys talking about sports live, not terribly interesting on-demand.

To most young people, there are very few examples of programming. Barstool’s got a couple of examples, but of programming that’s emerged in this era that’s been, and most of the consumption is on-demand anyway, but that’s people sitting around talking about sports. You don’t need that anymore. You have Instagram.

Yeah. The live chat show or even any kind of sports chat show I think has got to be kind of a dinosaur.

I think there are a lot of older people who still like it, but younger people ... Yeah, I don’t honestly see it working again.

Do you feel like ... I keep hearing that younger people in general are less interested ... Well, I hear anecdotally the younger people are less interested in live sports period. They’ll watch the end of a Game Seven, but for the first three-and-a-half quarters, they’re on Instagram, they’re doing whatever else. Do you guys see that with data, or that’s also anecdotal for you?

Yeah, we see it with data. I think people multitask way, way more than marketers give credit for. It’s not an either/or. They’re doing a lot of different stuff at once. The game might be on in the background, but lord knows what an individual is paying attention to at any moment in time. They’re probably on their phones a lot more than you might think that they are.

I do think, though, if you think about the history of live sports in this country, whether it’s radio or then on the TV, live sports came up in a world where there was far less entertainment competition. I think it’s inevitable that we’ve probably hit a peak with live sports, because I just don’t understand how it could possibly get bigger. People can substitute just so many other things.

Last year the NFL ratings were down, and the arguments were ... there’s a lot of different reasons. Tom Brady was out. There’s this problem.

So many reasons. So many reasons.

There was the election. I didn’t understand it at all. This year the ratings are down, well, it’s Trump. It’s Aaron Rodgers is out. Do you imagine that next year NFL ratings are down and we’re going to hear another set of excuses?

It seems to me that the correlation between cable subscribers going down and NFL ratings going down is pretty tight. I think you can overthink this a lot.

It seems crazy to imagine that the reason that overall TV reach and ratings are down or ratings are down would not affect live sports, and that every other argument against it is just people just wishing that was not the case.

Yeah.

Okay, so we agree.

That’s pretty close to my perspective. Yes, if I had to guess will they be down next year, it seems like that’s where this is going, right?

I will join you out on the limb.

Yeah.

Okay. I’m now the CEO of Bleacher Report, but I still want to talk to you, Finocchio. We’re going to hear one more time from our sponsors who pay our bills. We’ll be right back.

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We’re back here with Dave Finocchio, still CEO of Bleacher Report, not SB Nation.

I haven’t checked my phone, but ...

Should we go by afterwards and go see the SB Nation guys?

Yeah, sure.

They kicked us out of my floor, so I’m less loving than I used to be towards those guys.

Uh-oh. Yeah, no, they used to be from the 2008 to 2010 era, they were our mortal enemy. We’d come to work every day and try to kick their asses.

I remember writing something about one of you guys and mentioned the other one, and I got just a huge volume of hate mail compared to ...

Really?

Yeah, there’s just a lot of animus about you guys.

Yeah, they didn’t like us. They didn’t like us.

I think probably vice versa.

Yeah.

Let’s talk about the beginning of your company. That’s a good segue. You started in 2005.

Yeah.

You, Bryan Goldberg, who’s been on this podcast before.

Yeah.

Now CEO of Bustle. Two other guys?

Dave Nemetz and then had a fourth guy, Zander Freund, who joined a year later.

At the time, you were doing what when you started everything?

I was in college. I basically came up with the idea. I had a couple observations about why sports fans were being underserved through digital ...

You were an undergraduate?

Undergraduate, yeah.

You didn’t have your hands full doing undergraduate things? You wanted to start a website?

I was incredibly busy and working incredibly hard, but somehow I thought ... No, I was a second semester senior in South Bend, Indiana, and it was cold as hell. I just probably wanted to be more sober than I was at the time and move on with my life.

That’s enough with the day drinking.

Yeah, yeah. Exactly. Yeah. No, Bryan and I were good friends in high school. He and I made a documentary together in high school at one point, so we’d actually done something of substance. I said, “Hey, I’ve got this idea. I think I might actually do something with it.”

2005, the internet is Myspace.

And YouTube is just ...

Doesn’t even exist, right? It barely exists. It technically exists.

Yeah, it’s starting to ... People are debating whether or not there’s going to be enough broadband for YouTube to scale.

Yeah, it’s like a year before Lazy Sunday.

Yeah. Facebook hit my junior year of college. We’re like a year and a half into Facebook at this point. Yeah, so we start cranking on it. Bryan’s cousin was one of the founders of College Humor.

Was your thought ... Wait, before we get to that, I didn’t realize that.

I like that angle.

That’s a good connection.

It is.

Was your thought, “I want to make a website. What should I make? Let’s do sports.”? Or was it, “I want a sports website. Let’s make that.”?

I always thought about it in terms of two observations. One, sports was not entertaining enough for younger fans. You had too many mostly older journalists who were taking themselves too seriously, and they were so out of touch with ... Like, I’m on this college campus with thousands of people, and they’re so out of touch with their demographic. Sports content, it’s very wordy. It’s very oriented around the games. They’re just off in left field. I was an economics major, and I felt like I could go prove some of this and that just resource allocation by newspapers and by other content companies was wildly out of whack with data.

This wasn’t you sitting in a room saying, “What would make for a good, interesting internet company? What are the various asymmetries I can exploit? Ah, sports.” Was there an earlier version of this that wasn’t sports?

No, no. You got it. You got it. I’m the other way around. I was a huge sports fan, and I really wanted ... My driving passion has always been to create something that makes sports fans happier. Yeah, I was trying to solve that problem.

You guys start building this thing. It is heavily, almost entirely based around search, right?

We built a funnel business, if you’ll bear with me on this for a second. We built a lot of search traffic. We basically figured out how to data mine everything that people wanted to see against every single sport, every single team, on a 365-day basis. Then we do it one year, and then the next year we’d figure out how we could have done it better. We got really, really good at that, but what happens is you have all this audience that ... Somebody who’s a Philadelphia Eagles fan clicks on an article about Nick Foles. He comes to a web page, he stays on it for anywhere from five seconds to seven minutes, and then he bounces.

We figured out, “Hey, if we’re going to build a business here, we need to convert this random dude into a loyal user.” When I say funnel, we started to get people to sign up for newsletters. We were really early on at doing this. We were quite good at it, so we created newsletters for hundreds of different teams and leagues. We sank a ton of energy into making sure that if you did sign up for a newsletter, it was awesome. Our newsletter engagement rates were incredible. For SEC football teams, we had 40, 50,000 fans per some of the biggest teams. The open rates on the newsletters were over 70 percent. The value proposition of the newsletter, which was basically if there was anything relevant, anything entertaining about your team, whether it was from us or any other source on the web ...

You were going to hoover it all up.

We’re going to hoover it all up. We’re going to send it to you three times a week. It was just a winning product, and it was our first winning product. All we did was when mobile apps happened, we basically converted that audience into a better version of the newsletters, which became our mobile app. We got really, really good at curating content and programming content in the mobile app. Then when the social platforms happened, we were just better at framing content up than others were. We just went and built ... We’ve just kind of gone step by step.

My perception of you guys, both from what I’ve read and also what I remember talking to various folks about, was that early on, you guys were really exploiting Google, figuring out, “Oh, Google is telling us that people want more of this sort of stuff.” This is around the same time Demand Media was a big thing.

Yeah, different strategy, but yeah.

But similar, right? You’re getting people to ...

We were news oriented. They were organic search.

Right, but to do all that, to make a lot of that, to make a variant of that, you have to pay people not a lot of money or nothing. You guys got dinged for ... I think somebody had memos sort of explaining your content creation strategies that got out there. It didn’t look great. Over time, you get better at that. Also, other people are doing it, so you do less of that. You also sort of, as you get bigger and have more resources, start hiring more journalists to do real stories. Eventually you hire name-brand journalists from New York Times, etc.

Say from 2005 through 2009, 2010, everyone was unpaid. I think 2010 we start paying. That was when we had gone from raising a couple million dollars to having some real money. We started paying some of the staff, and then by 2013, I think the last unpaid contribution on Bleacher Report was 2013. It could have been early 2014.

Was the model always, “We’re going to sort of work our way up the value chain, and eventually everyone gets paid, and we move out of this,” or did that sort of happen organically, because you sort of exploited Google as much as you could and sort of doing that super-high-velocity stuff didn’t pay off as much?

That’s an interesting way of phrasing that. Did we plan to pay people from the beginning? I don’t know if we ever thought that far ahead. I think it happened organically. We didn’t ...

Because model-wise, especially in terms of VCs and funding, they’d say, “Oh, I see how you can make content for free or next to nothing. That’s great. That business scales.”

That was totally what VCs were interested in.

If you went to them and said, “Eventually we’re going to pay them living wage,” they’d say, “Oh no, we can’t do that.”

Yes. Yes. You are exactly correct. That is exactly what the VCs told us. They also told us that in the sports space it was so crowded with ESPN, NBC, CBS, AOL at the time, Sports Illustrated, on and on and on. There was no way you could ever build a big enough audience to sell advertising. We had a really hard time raising money from traditional VCs until we were reasonably far along, just because they didn’t think it was possible to build an audience that big.

You didn’t know any better.

We didn’t know any better, and so we were ... In retrospect, there are probably some things I would have done differently on the audience growth standpoint, just in terms of the way we treated some writers. There are things I’d do differently for sure, but we just totally homed in on audience growth, because we thought that was the only way we could build a sustainable business.

Sold the company to Turner in 2010? Is that right?

2012.

2012.

Yeah.

Couple hundred million dollars. I’m assuming you got some of that.

Yeah.

You left how soon after that?

I stayed on through the end of 2014.

So the sort of sell the company, stay on for two years, probably vesting attached to that, leave. That’s the standard route for a startup founder, but you’re back. Still owned by Turner/Time Warner/maybe AT&T.

Yeah.

Why’d you come back? How’d that happen?

At the end of ’14, I’d always planned to leave. I’ve been doing it for nine-and-a-half years, and I wanted to just think about something else. I started another company with Bleacher Report’s former CTO. We worked on it for a year.

What was that?

It was called Binge. We were working on content discovery. It wasn’t really a content company. I say it was content discovery, not a content company. It was more a play to help people find their favorite podcasts, movies, TV shows, books that they’d love if they only knew it existed.

I want to build another company. I don’t want to build the same company, but I know some stuff about media. Let’s go do this.

Yeah, so my other co-founders went and did other media plays. I had no interest in doing that. I will never start another content company. I won’t. I’m not doing it. While we were building that, I started to see what was going on in this industry that we’re in, where it sure seemed like Facebook and Google were starting to eat publisher’s lunches around display advertising especially. Bleacher Report’s part of a bigger company, and the marriage of Bleacher Report and Turner has been well-documented, has gone extraordinarily well. There are a lot of people who deserve a lot of credit for that on both sides, but still, it’s a big company, and pivoting is really, really hard inside of big companies. It just is.

I started to see the signs that I thought my baby — and that’s the way I view it — was not super well set up for success. We needed to make some big sweeping changes to our strategy, and then we’d have to execute it. I don’t know, one thing led to another, and I told them that if they put $100 million into the company, that I’d come back.

Wait, wait, wait. Back to the one thing, because I understand why they would want you to come back, theoretically. We’ll come back to that. Usually people who build a company sell it to a bigger company, even if they really want to stay on with the big company. It turns out it doesn’t really work.

Yeah, that’s what usually happens.

Usually the people who can build a company from zero aren’t well set up to be in a giant conglomerate. It just sort of organically doesn’t happen. Did they come to you and say, “Would you please come back, Dave?”

I stayed on as kind of an adviser. We kind of created a pseudo board structure. I was the chairman of that board. I remember we had a board meeting at some point in late 2015. Doug Bernstein — who was the guy who lead the House of Highlights acquisition on our end, brilliant dude — stepped up in a room, gave a presentation about how we needed to go all-in on native content, and basically said, “This is going to be hard, but if we don’t do this, we’re dead. This is where the audience is going. We’ll have to figure out the monetization piece, but we got to go do it.”

I agreed with him. For the way our business was set up, the way our sales team was set up, we were just in no position to do that without a lot of really, really hard work. More hard work than I’ll go into detail on, but rebuild a lot of different teams type of hard work, a lot of different personnel type of hard work. I just felt like ... I’ve been very close with a guy named Matt Hong at Turner who’s the COO of Turner Sports. We just started talking about it. I just kind of came to the conclusion that if they put real money into the business where we had a chance to go in and invest and grow, and maybe it was a little bit of a contrarian play at a time when VCs are starting to pull back and are not funding content companies as much, that we could go build something that could be relevant for decades.

They make it interesting for you financially.

Yeah. They pay me. I’m not doing it for free. Sure.

Yeah, but it’s not like Jack Dorsey coming back to Twitter, and he’s got a lot of equity there.

No, no. Totally different.

He’s incentived to sort of fix it.

Totally different situation. Yeah, I’m not making $100 million by doing this. No, they pay me well. It’s all good, but I do it because I love the brand and I want it to be something that matters to millions and millions of people for decades to come.

Obviously you have resources.

Yeah.

You put $100 million into this.

Yeah, we have great resources.

You’ve got NBA rights. You don’t have to worry about getting sued.

We’ve got a lot of rights.

What are the constraints of being part of Turner/Time Warner/maybe AT&T? What are the things you can’t do that you could have done when you were solo?

There are a lot of things that take longer, because there’s more process and red tape, though to their credit, this wasn’t the case initially, but after the first couple years of owning the business, they let us pull back a lot of stuff. We’re pretty integrated from a finance standpoint and an HR standpoint, which is what you would expect, but sales-wise, we’re really good partners with the Turner Sports sales team, but I have my own sales team that sells in a way that’s very, very custom to BR. They sell House of Highlights too, but they don’t have to sell all the other stuff that’s in the Turner Sports bag. It’s a little easier. No, I shouldn’t say it that way.

If you have a chance to sell TV commercials to someone for millions and millions of dollars, that’s probably a smarter thing to do than to sell an arduous $600,000 branded content campaign, right? I still need people to focus on selling the $600,000 branded content campaign. To their credit, they’ve just really believed in the business. A lot of the other sports players that used to be in this space have kind of bowed out. There aren’t many of us left at this scale. The attitude is, “Eh, maybe these guys kind of know what they’re doing. Let’s keep funding the thing. It’s not that expensive in the grand scheme of things for Time Warner. Let’s look up in five years and see where it is.”

You guys do any thinking about what AT&T would mean if that deal goes through?

I certainly think about it. I don’t see how for us it could be anything but a good thing. However many phones there are in the United States, we’re pretty aligned with mobile-first strategies. I don’t know anything.

The Snap conventional wisdom is Time Warner, even though it seems like a bunch of suits, that’s a free-wheeling bunch of liberal dudes in New York City. AT&T is a very stodgy company based in Dallas. How is that ever going to work? I’m not sure about that. I think they are smart enough to let that company do its own thing.

Yeah. I have no idea what’s going to happen, but ...

I like how I asked my own question and then answered my own question.

Yeah.

It’s cool.

It’s great. You should just do that all day. I could just watch it.

We’ve mentioned them at least once, Barstool. They’re the new kids.

Yeah.

What do you think of them?

I honestly mostly root for them. I think they’re one of the few examples of kind of a brand-first company that’s emerged in this space. Most of us were kind of audience-first, and then we built our brands on the backside of that.

That means what? What does being brand-first mean?

Brand-first means that their audience isn’t that big, but their users are incredibly passionate about the brand, so the brand out-punches its weight relative to how many people actually consume their content.

People who love Barstool love Barstool.

People who love Barstool really, really love Barstool. I’m interested to see what they do. I think the setup, I met with Erica pretty recently.

The CEO?

The CEO. I just think their setup is great. They have these crazy content people over here, and then they brought in a very professional business development leader who has credibility everywhere.

And is not a dude, which helps.

Yeah. I thought that was brilliant. She seems like a great person.

To spell this out, because the idea is ... They’re edgy, is the professional way we describe this type of content, right?

Yeah, like you wouldn’t say misogynistic or whatever other words we could call them. It’ll be interesting to see. I’m curious if they decide to push more chips into the advertising business. I think they need to clean the content up. If they do that, they might risk losing some of the attachment they have to their audience.

They have an audience who loves them particularly because they’re not ESPN, but also because they’re not you guys, or they’re not SB Nation.

Yeah, they’re not politically correct by any ... They’re definitely more ... It feels to me like white males who want to join a country club, right? They’re never going to be as big as we are, because we work very hard to be inclusive and we don’t offend people. They purposefully offend people, and that’s what they do, but a lot of people love that. Whatever.

I’m curious if they decide to go down more of a Howard Stern-type of route where they just say, “We don’t care. We’re going to monetize our audience through other means. People love us so much that they’ll eventually pay us some sort of subscription fee. Somewhere, someway we’ll get people to show up for events. We’ll do e-commerce at a pretty decent scale.”

I’m not sure. To say Barstool Sports, it’s not really sports, right? It’s more fraternity content. It’s sometimes ... It’s around the culture of sports, but they’re not covering sports news the same way that ESPN or Bleacher Report covers sports news.

They’re in the sports universe.

They’re in the sports universe, but I don’t know, it’s something different.

You mentioned subscriptions. Are you paying attention to the Athletic, what they’re doing?

Yeah.

It’s traditional journalism selling $10 monthly subscriptions.

Yeah, I met with the founders a couple weeks ago. Smart dudes.

Any play for you there, or you think your kind of reach, your social, that’s working, keep doing more of that?

We’ll certainly keep going with social. We’ve got some other tricks up our sleeve that will roll out later this year that I think have more scale potential from a business standpoint. They’re another company that I’m rooting for them. They recognize the white space, that there are all of these great sports writers who are out there who are some form of unemployed or not making as much money as they used to. They’re kind of gobbling them all up. What I said to those guys is I’m a bit skeptical about how many people are actually willing to pay that subscription, but they have a chance to prove me wrong, and we’ll see.

Yeah, I think we’ll have them in here too. Their argument is, “We have the math. We know what it costs to fund a reporter. If we can sell this many Minnesota Wild subscriptions, we can hire that beat reporter.”

Totally. We’ll see.

It doesn’t need to be that many people at $10.

Yeah. For us, though, we view ourselves ... We mean different things to different people, but I think if you ask any sports company in this space, we’re usually after Facebook and Google. We’re their third-largest referral source. We point them out. I would guess we’re ESPN’s third-largest referral source. We’re probably SB Nation’s third-largest referral source. We point a ton of traffic to the Athletic. If our users want to subscribe to the Athletic, that’s all good, great, and fine. That’s up to them. People are going to use different sports products, but as long as they’re still coming to us and using us as a portal or a platform someday, I think we’re deriving as much value as ... At least, it’s enough for me.

We had David Carey in here. Director of ... What’s his title? He runs Hearst Magazines. He had lots of smack talk for digital. People have been responding to that one for a while, along the lines of, “It’s very easy to run a money-losing digital operation.”

Yeah, that’s fair.

“I’m going to buy a lot of them,” or, “A lot of them are going to go out of business this year.” One, are you making money?

Yeah.

Revenue? And earnings?

I’m not allowed to comment on specifically, because I will say that our revenue ramped really quickly from basically when we started making money in 2010 through 2015, in 2016 when I came back, the revenue year was relatively flat. We had to do a lot of hard things. Then in 2017, we killed it. We had a great year last year. I think this year we’ll have another really, really good year. I not allowed to go into any details, because I’m part of a big company.

You can just wink at me.

Yeah. We had a good year.

Your comms person is shaking her head.

Uh-oh. Is she nervous?

Yeah.

Yeah.

I don’t know. She’s looking at someone’s Instagram instead. Then are there acquisition plays for you guys?

Yeah.

Are there smaller properties?

100 percent.

Are there other folks you can buy as things get tougher this year?

Yeah. That’s exactly the way we’re looking at things. I think a lot of others will be, too. We looked at a couple of deals that were bigger than, say, House of Highlights that we really liked last year, decided not to pull the trigger on either of them, but we were close.

This year, I think the approach will be the same for the reasons you listed. There are a lot of good companies out there that could probably benefit from being a part of our distribution channels and being a part of our brand that we might be able to turn into decent businesses.

Okay. I will watch. Deal. Are you coming to Code Media this year?

No.

No idea. Probably. Maybe.

Maybe. No, I’m not going.

Dave went last year. He loved it. You should go.

No, it was great. No, it was a really good event. I had fun.

It was a really good event. He had fun. He paid full freight. I don’t remember giving a discount, right?

I think we paid, yeah.

This article originally appeared on Recode.net.