How is JackThreads so cheap

This is perhaps the most influential family in new digital publishing

Kenneth Lerer is a new generation media mogul: He co-founded the Huffington Post, sits on the board of Buzzfeed, and has invested in almost all relevant young digital publishers. His son Ben established “Thrillist” as a successful media brand. Father and son have close ties to Axel Springer. Daughter Izzie Lerer is practicing publishing with “The Dodo”. We show how the Lerers pull the strings in the digital media industry and develop new revenue models.

In 2005, Kenneth Lerer founded the Huffington Post together with Arianna Huffington, Andrew Breitbart and Jonah Peretti. He is investing a little less than $ 40 million in the project, and six years later the US blog is sold for $ 315 million to AOL - where Lerer was previously Executive Vice President. Lerer Senior has known the young Jonah Peretti well since then and immediately invests in his new Buzzfeed project. Today Ken Lerer sits there on the board.

The senior knows where the money is

"Timing is the key to life," says Ken Lerer in an interview with New York Magazine. "Timing is luck and brain and gut feeling". And he proves it several times: Since 2010 he and his VC company Lerer Hippeau Ventures have invested in 215 companies - including the GIF network Giphy, the mattress start-up Casper and the 3D printer manufacturer Maker Bot. The latter the investors are said to have received twelve times their investment when they were sold to Stratasys - three years after the investment. Lerer Hippeau Ventures had already invested in Casper during the seed financing in 2014. Today the mattress startup is valued at over $ 500 million. But he mainly invests in publishers like Buzzfeed and helps make them big. Lerer has invested in big names such as Refinery29, Mic and Business Insider.

In addition to his investments, Lerer also regularly takes time for operational activities in the media industry. Together with his partner at “Lerer Hippeau Ventures” Eric Hippeau and his friends at the investment firms Oak Investment and Bedrocket, he founded the publishing startup NowThis. The old hand Lerer knows how to generate hype and how to make a company more valuable than it might be in the end. From the start NowThis positions itself explicitly as a publisher who does not need a website and is therefore one of the first representatives of "Distributed Content". NowThis mostly publishes short videos that are perfectly tailored for Facebook.

The connection to Axel Springer Verlag

Axel Springer Verlag also noticed that. He put over 16 million US dollars into NowThis and is taking over its video content for the German market. In September 2015, Business Insider was purchased for over $ 340 million. Founder Henry Blodget is a good friend of Ken Lerer, who privately invested millions in Business Insider back in 2011.

In the course of the acquisition by Springer, Lerer moved up to the supervisory board of the business publisher. In addition, Springer is investing several million in Mic (part of a 17 million round that Lerer Hippeau is also involved in) and acted as the lead investor in a 54 million round for Thrillist. The male publisher has a special bond with Ken Lerer - it was founded by his son Ben.

The son invests and is looking for new revenue models

“The main reason we invested in Thrillist is its founder, Ben Lerer. He convinced us and we are very focused on people when we make our decisions, ”said Springer CEO Mathias Döpfner at the announcement of the investment round in September 2015. Ben Lerer is also Managing Director at Lerer Hippeau Ventures and so on many deals his father directly involved. But he devotes most of his attention to thrillist, which he started in 2006 with Adam Rich as a newsletter with tips for going out in New York. The portal is aimed at young men with its lifestyle topics relating to travel, food, fashion and news. Typical topics revolve around the best beer or the coolest party location in a country. According to Similar Web, the website has almost 18 million visits a month.

Thrillist's monthly visits (Source: Similar Web)

Lerer caused a stir when he bought the e-commerce company JackThreads in 2010 and integrated it into the Thrillist group. Back then, JackThreads relied on flash sales, i.e. cheap flash offers that are mainly advertised via e-mail newsletters. The media-commerce hybrid of Thrillist and JackThreads generated sales of around 100 million US dollars in 2014 - 80 percent of which came from the e-commerce division. At that time, Lerer sets a goal of $ 1 billion in sales in the next few years.

The content and commerce model

Ben Lerer is still a staunch advocate of the “content and commerce” model. The idea behind it: Support e-commerce with editorial content in order to attract more loyal buyers who then spend more money. Thrillist even goes so far as to build a native shopping solution into their own CMS. Editors were able to select suitable articles for their contributions and insert them into the text together with the buy button.

But the model doesn't really take off and in the end, Thrillist and JackThreads only do mutual banner advertising. When looking for new investors, Ben Lerer then has to realize that they are interested in either one or the other division of the Thrillist group. "Both businesses grew, but one element of one division grew very strongly and we put the entire focus on that and neglected the other business," Ben Lerer told Digiday.

The split from thrillist

The 54 million round that Axel Springer led in 2015 then sealed the split of the company. “We're ahead of our time, at least for the people who write big checks. Where I had hoped that we would have a situation where one plus one equals three, investors only saw what the two divisions are worth separately, ”Lerer told Recode. He said Thrillist's valuation on this investment was higher than it was in 2013, when the company raised $ 13 million on a valuation of $ 150 million. The $ 54 million is being split between the two divisions at the time, although it is not clear how much goes into content and commerce. What is certain is that Springer's money goes exclusively to the media group.

Oak Investment Partners and SBNY, a SoftBank investor specializing in New York, are investing in JackThreads. Ben Lerer remains CEO of Thrillist and becomes Chairman of the Board of Directors at JackThreads - his father moves to the board of directors of the Thrillist Media Group as a guardian. The development shows that advertising-marketed publishers can now count on higher ratings - Business Insider brought in over 340 million US dollars, Refinery29 gave up its commerce business in 2013 to concentrate on ads.

The return to classic advertising

In the end, Ben Lerer had to accept that too. He is now completely dedicated to the content part of Thrillist. “The split doesn't contradict the content commerce model, you just have to look at the current investment. […] There are more interesting things you can do in advertising today than there were three years ago, ”Ben Lerer told Fortune shortly after the split. The problem: precisely because the focus had been on the higher-revenue JackThreads for so long, the publisher division was criminally neglected. Ben Lerer has to catch up with the competition.

The concept of Thrillist is now very close to that of Buzzfeed, Refinery29, Business Insider & Co. The publisher tries to gain new readers and viewers via platforms such as Facebook - and to benefit from the network's video hype with food videos. Thrillist has over 1.9 million fans on Facebook. Thrillist markets the reach in the classic way via Adsense and native advertising - with some of the banners being embedded in a larger campaign with advertising partners. Lerer explains to Digiday that he is now more oriented towards Vice and wants to take over the tasks of advertising agencies with Thrillist.

Most recently, his team created a viral video for a cider brand that has now generated over 87 million views on Facebook. To this end, he has set up a 50-man team in the so-called “CoLab” department, which works with partners in the shadow of the editorial team. In the near future, Lerer also wants to make the leap to television in order to increase awareness of the brand. Whether on a traditional channel or on Netflix.

The sister has her own baby

So Ben Lerer can make his experiences with Thrillist and has built a very successful publishing product overall - not everyone gets a 54 million US dollar investment. So it's no wonder that his sister Isabel "Izzie" Lerer also wants to run a company. So in January 2014, her daddy Ken Lerer funded an initial seed round of over two million US dollars so that Izzie's project The Dodo can take off. Izzie Lerer loves animals and so it is only logical that The Dodo concentrates completely on this topic and, according to Similar Web, now attracts over eight million visits per month with animal stories.

Monthly visits from The Dodo (Source: Similar Web)

The Dodo is much more of a platform project. Unlike Thrillist, the publisher has not built a reliable readership through a newsletter, but is heavily dependent on Facebook. The Dodo has over 4.4 million fans here. Sweet videos but also cruel pictures of abused animals attract many users who then want to read the story behind the photos and videos at The Dodo. Animal content is damn viral: A story about a 103-year-old killer whale reached seven million readers in 2014.

When the company was founded, Izzie Lerer wasn't even finished with her studies. In 2014 she is still working on her doctoral thesis with a focus on the human-animal relationship. "I wanted to do something that was related to my research and at the same time had a real impact on the world," she told Business Insider. While she is finishing her studies, President Jonathan Trichter and her father will lead The Dodo as Editorial Chief. When Izzie Lerer took over as CEO after graduating, it was her first job ever - a nice gift from her father.

No turnover and complete dependence on platforms

Nevertheless, with the help of Dad, Izzie manages to build a successful social media business with The Dodo. The virality of the stories leads the team to focus entirely on platforms such as Facebook, Instagram, Snapchat, Twitter and Pinterest and to neglect the actual website. You can see that at Thedodo.com, the reach is marketed with content recommendations via the traffic exchange network PubExchance to partners such as Huffington Post - above all, readers are fired at with references to social networks and asked to share the story.

The Dodo pays a lot of attention to videos. These usually have between 200,000 and 500,000 views on Facebook - some come to well over a million. This is of course pretty good in terms of range - but so far it has not brought any sales. A Gawker article sucks against Izzie's project and the founder: The company doesn't earn a cent, the employee turnover is huge, Izzie shows no leadership qualities and a large part of Facebook's reach is bought with the money of her father and other investors. The Dodo is said to have spent large amounts of money on sponsored posts on the platform, especially at the beginning, simulating a reach that should attract new investors.

Overall, however, it cannot be denied that The Dodo has extremely strong engagement figures on Facebook. In April 2016, 12.5 million interactions on the platform made it the seventh most engaging Facebook page - worldwide. That put the page in front of Buzzfeed.

At the end of 2015, The Dodo collected another 11.5 million US dollars. The Japanese investment giant SoftBank (also invested in NowThis and, for example, Alibaba) put money into the project - and of course Lerer Hippeau Ventures.