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Nieman Journalism Lab
Pushing to the future of journalism — A project of the Nieman Foundation at Harvard

Creating a new brand for financial news, in Michigan of all places

Four-year-old startup Benzinga is growing thanks to a free consumer site, a paid news wire, and online financial service marketplace.

SOUTHFIELD, Mich. — Carl Icahn is not pleased. On this Monday morning in early March the activist investor is taking to CNBC to respond to eBay after it rejected his bid to remove some members of its board.

This is a big news event for Benzinga, a network of financial news and information sites, and a handful of staffers have crowded around the news desk to watch the interview unfold.

“Good answer, good answer,” Benzinga CEO and founder Jason Raznick says to nobody in particular as Icahn avoids a leading question from the anchor.

Benzinga_Logo_2Raznick started the company in his basement in 2010, and it’s grown to include three separate platforms: Benzinga, a free site featuring news-you-can-use investment tips, both aggregated and original content; Benzinga Pro, a subscription service that has a constantly updated feed of financial news; and Marketfy, an online marketplace where investors can solicit products and trading advice from experts called “mavens.”

Within the first two minutes Icahn is on the air, a Benzinga Pro analyst, who sits before a bank of eight computer monitors, sends out four alerts to subscribers. That afternoon, a news story covering Icahn’s comments was posted to Benzinga.com.

“Anytime they do an interview [with Icahn] there could be something big,” says Jake L’Ecuyer, who oversees Benzinga Pro.

But unlike other media organizations covering the Icahn-eBay brouhaha and finance in general, Benzinga is not headquartered in a skyscraper high above Wall Street or Midtown Manhattan. Instead, Benzinga is run out of a squat one-story building in an office park just north of Detroit. It also maintains a small space in Chicago and a one-person office in Delaware.

Raznick initially bootstrapped the company, later securing investments including a $1.5 million investment in 2011 from Lightbank, the venture fund started by the founders of Groupon.

The company breaks even — or is slightly cash-flow positive — on a month-to-month basis, Raznick said. Benzinga is in the process of securing additional investors though Raznick said he could not disclose who he was meeting with since negotiations are ongoing.

But attracting additional investment has not been a top priority for Benzinga since the company is able to support itself in its current iteration, said COO Fernando Prieto, who joined last November with a mandate to “put metrics and data in the company.”

“If you ask a venture capital fund, they would probably not want you to focus on profit and just to focus on growth, but I think there’s a conflict of interest there because they have 20 companies in their portfolio,” Prieto said. “If you go bust, another company may make up for you if they get extra return on their investment. But for us, having the option to raise more money or just keep doing what we’re doing — you know, sign a few more deals and licensing deals, and then hire more people as soon as we can actually afford them — that gives us options.”

Benzinga has about 40 employees, in addition to a network of contributors, and it’s looking to grow. Still, the company prides itself on its startup mentality. “You can eat what you kill here,” Raznick told me.

And despite its drab exterior, even Benzinga’s spacious open-plan office and work culture look and feel like a stereotypical startup with brightly painted blue and orange walls and gaudy orange couches as well as ping pong, air hockey, and foosball tables. Recently, when I called the number listed on the Benzinga Pro website to inquire about a subscription, Raznick was the one to answer the phone.

A native of metro Detroit, Raznick says he’s committed to the area, and the company is now looking at moving into Detroit itself or to Ann Arbor, home of the University of Michigan, which is about 40 miles west of Detroit.

“We could be in Chicago or New York and recruiting would be a little easier, doing interviews would be easier, but we really want to impact the outcome here,” Raznick said.

In addition to looking to hire a number additional developers to continue to build out its products, Benzinga is also looking to expand its editorial staff by hiring up to 10 people this year, including an executive editor, Raznick said. (As a metro Detroit native myself, he even asked me several times if I knew anyone who may be interested in working for Benzinga.)

Benzinga gets about 1 million unique visitors per month to its free site, Raznick said, but the company also has licensing deals for its content with CNN Money, Yahoo Finance, MSN Money, and others. With all its partnerships, he says Benzinga content is seen by about 10 million users monthly.

The content partnerships all link back to Benzinga’s site — Prieto said he expects Benzinga’s traffic to continue to grow as the company plans to ink more partnership deals.

“That gives us the ability to take that traffic, monetize it with advertising revenue or create free leads for Benzinga Pro or our Marketfy products,” Prieto said, noting that they will use the products to promote one another. For instance, many of the Marketfy Mavens write columns on Benzinga.com that are available for free.

The site was initially focused on covering only smaller companies with market caps of $300 million to $2 billion or so. But Benzinga has expanded its coverage to include investment tips and more as the sites it partnered with wanted additional content.

“We’re trying to bring that knowledge to the average investor,” Raznick said. “It’s not easy because people only have so much time in the day. So are people going to go read the Wall Street Journal and then come read Benzinga? How do we impact the people on the first 20 seconds of reading our articles or reading our data? That’s what we have to think about.”

The company also licenses use of its Benzinga Pro newswire, which it launched in 2011, to about 10 different brokerages including TD Ameritrade, Trade Station, and Lightspeed. Individuals can purchase a subscription to Benzinga Pro starting at $39 per month. That’s a fraction of the $2,000 monthly price for a Bloomberg Terminal. But the company says it’s not aiming to compete with financial data heavyweights like Bloomberg or Thomson Reuters. Raznick declined to offer concrete subscription data on Benzinga Pro, but said the number of subscriptions is “in the thousands.”

On an average day, about 2,000 updates are sent across Benzinga Pro’s wire, but during earnings season that total can reach up to 10,000, said L’Ecuyer. Benzinga Pro includes some original reporting, but also focuses on press releases and alerts on events like earning reports and interviews like the one Icahn gave with CNBC.

“You can get any of this information pretty much for free online if you dig enough, but the amount of time it would take you to build a Google News aggregator with alerts and all that and then a really well curated Twitter account and really solid set of chats, you’re talking a couple years to do that because you have to vet everything,” L’Ecuyer said. “It’s a lot of wasted time, but we’ve already done that and put it in this feed.”

Benzinga Pro focuses on U.S. equities, and Prieto admits the company hasn’t spent much time or resources doing additional development or marketing of Benzinga Pro, noting that “it’s a good product, but it’s kind of limited in terms of technology [and] needs to be improved dramatically.”

“We need to pick our battles, and we are choosing to spend a lot of time on Marketfy,” he said.

Marketfy, meanwhile, launched in early 2013. Each Maven contracts with Benzinga to sell their product or service on the marketplace. The professional investors and their products are all approved by Benzinga in an attempt to give consumers confidence about the products.

When it started there were about 45 mavens and 100 different products on Marketfy. Only recently has Marketfly began to add to the product, because Benzinga wanted to slowly develop without overloading it, Prieto said.

“They take care of all the technology and administrative garbage,” said Tim Melvin, a Marketfy Maven who focuses on value investing and offers several products on the platform. “I just do good research and focus good stocks”

                                   
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