Gawker Media

• 1. Introduction

  ›

  Gawker Media began not in a gleaming office tower but in Nick Denton's personal apartment in the New York City neighborhood of SoHo. From those modest quarters, Denton built a blog network that would eventually generate $45 million in annual revenue, spark a copyright lawsuit from Quentin Tarantino, and end in one of the most dramatic courtroom collapses in the history of digital media. The company he incorporated in 2002 would be undone not by a competitor but by a billionaire's long-planned revenge. Before it was over, a jury would hand down a judgment of $140 million against Gawker, forcing the sale of its brands and the permanent shutdown of its flagship site. But the road to that endpoint began, quietly, with a man who once said he doubted whether blogs could ever be good businesses.

• 2. The Network Takes Shape

  ›

  Denton launched the company in October 2003 under the name Blogwire before renaming it Gawker Media the following year. The earliest operations ran out of his SoHo residence, where low overhead kept the company alive while its audience grew. By 2012 Gawker Media had become the parent company for seven distinct weblogs, each covering a different beat: Gawker.com for New York media gossip, Deadspin for sports, Lifehacker for productivity, Gizmodo for gadgets and technology, Kotaku for video games, Jalopnik for cars, and Jezebel for celebrity and fashion. The company was incorporated in the Cayman Islands, and all articles published across its network carried a Creative Commons attribution-noncommercial license.

  In 2008 Denton shifted the company's headquarters to a new base in Nolita, Manhattan. That same year he made a series of hard financial calls in response to the credit crisis, laying off nineteen editorial positions at several sites, including Valleywag and Fleshbot, while simultaneously hiring ten new employees for the properties he considered commercially strongest. He also suspended a bonus scheme that had been paying staff roughly $50,000 a month in aggregate based on pageview targets, pivoting instead toward advertising revenue. The sites he sold that year included Idolator, Gridskipper, and Wonkette. By September 2008 the remaining network was recording 274 million pageviews a month.

  Valleywag folded into Gawker.com in November 2008, and Consumerist was sold to Consumers Union, which took over the site on the 1st of January 2009. Defamer followed a similar path in 2009, merging back into Gawker.com. Each consolidation reflected a philosophy Denton had articulated publicly: concentrate resources on the sites that could generate advertising revenue, and shed those that could not.

• 3. Money and Doubt

  ›

  David Hauslaib, the founder of Jossip, estimated in the 20th of February 2006 issue of New York Magazine that Gawker.com's annual advertising revenue was at least $1 million and possibly above $2 million. Those figures looked significant against the company's lean cost structure, which consisted mostly of web hosting fees and writer salaries. The perception of health was matched by Denton's own skepticism: in 2005 he had written on his personal site that blogs were probably better for readers than for investors, and that he doubted their long-term value as businesses.

  In 2015 the company released five years of audited financials. Revenue in 2010 had been $20 million, with an operating income of $2.6 million. By 2014 those figures had grown to $45 million in revenue and $6.5 million in operating income. Business Insider valued the company at $250 million on the basis of that 2014 revenue figure. In early 2015 Denton announced plans to raise $15 million in debt financing from banks rather than accept venture capital, a move designed to protect his equity stake.

  The picture that emerged from court filings in June 2016 told a different story. At the time of the bankruptcy filing, the company's total assets were $33.8 million, broken down as $5.3 million in cash, $11.9 million in accounts receivable, and $12.5 million in fixed assets. Its total current liabilities stood at $27.7 million, with long-term liabilities of another $22.8 million. A bond broker stated in a court affidavit that the company's book value was $10 million. Denton personally held a 29.52% stake in Gawker Media Group at that point, with additional holdings through a family trust.

• 4. The Redesign Disaster

  ›

  On the 1st of February 2011, Gawker began rolling out a sweeping redesign across its network of sites. The new look removed Twitter and StumbleUpon sharing buttons, which Denton defended by arguing that Facebook was by far the biggest source of traffic and the other buttons simply cluttered the interface. The remaining sites were switched over on the 7th of February, and the launch promptly stumbled: Kotaku.com and io9.com failed to load properly, displaying links without main content, and opening multiple posts in separate tabs stopped working.

  The redesign replaced the traditional reverse-chronological blog layout with a two-panel format: one large featured story alongside a column of headlines. Gawker framed it as an effort to make the user experience more like television, increasing engagement rather than raw pageviews. The move also introduced Kinja, a platform that let users create their own discussion pages.

  Rex Sorgatz, designer of Mediaite and chief marketing officer of Vyou, publicly bet Denton that the redesign would fail to grow traffic. The measure they agreed on was Quantcast pageview data by October. He turned out to be right. Traffic fell by 80% immediately after the change, and remained down 50% two weeks later. Many users switched to international versions of the site, which had not yet adopted the new layout. On the 28th of February 2011, the company allowed visitors to toggle between the old and new designs. By the end of September 2011 Gawker had 500 million monthly views against the 510 million it had recorded before the redesign. By the 5th of October 2011, traffic had recovered to its pre-redesign level, and as of February 2012, Quantcast data showed the network had added 10 million views above that baseline.

• 5. Hacking, Lawsuits, and Controversy

  ›

  On the 11th of December 2010, a hacker group called Gnosis released the data from 1.3 million Gawker commenter accounts along with the entire source code of the company's content management system. Gawker's advisory to users acknowledged that passwords had been encrypted but warned that simple passwords might fall to a brute-force attack. Security researchers found that the company had been using DES-based crypt(3) password hashes with only 12 bits of salt, and that the password-cracking tool John the Ripper was able to crack more than 50% of the crackable hashes. Twitter accounts linked to compromised email addresses were subsequently used to send spam advertisements to their followers.

  In January 2014 Quentin Tarantino filed a copyright lawsuit against Gawker for posting his 146-page script for The Hateful Eight. Tarantino said he had shared the script with six trusted colleagues, including actors Bruce Dern, Tim Roth, and Michael Madsen, and that its circulation had caused him to consider abandoning the film. He quoted in his complaint that Gawker had made "a business of predatory journalism" and had "crossed the journalistic line by promoting itself to the public as the first source to read the entire Screenplay illegally."

  In June 2015 Gawker editorial staff voted to join the Writers Guild of America, East, with roughly three-quarters of eligible employees voting in favor. The staff had announced the vote on the 28th of May 2015. That same July, a staff writer published an article attempting to out a married Conde Nast executive over alleged text correspondence with a gay porn performer. The post drew intense criticism inside and outside the company, and Denton removed it the next day after Gawker Media's managing partnership voted 4-2 to pull the piece. The company's executive editor and editor-in-chief both resigned after the story was dropped, an episode that marked the first time Gawker had removed a significant news story for any reason other than factual error or legal settlement. According to a source quoted by The Daily Beast, Gawker ultimately paid the subject of the article an undisclosed sum to prevent further litigation.

• 6. Peter Thiel and the Hogan Verdict

  ›

  On the 4th of October 2012, Gawker editor A.J. Daulerio posted a short clip of Hulk Hogan, whose legal name is Terry Gene Bollea, having sex with Heather Clem, the estranged wife of radio personality Bubba the Love Sponge. Bollea sent a cease-and-desist order demanding the clip be taken down. Denton refused, invoking the First Amendment and arguing the accompanying commentary had news value. Judge Pamela Campbell issued an injunction ordering Gawker to remove it. In April 2013 the company published a statement declaring it would not comply with the circuit court's order.

  In May 2016 billionaire Peter Thiel confirmed in an interview that he had paid $10 million in legal expenses to fund multiple lawsuits against Gawker, including Bollea's privacy case. Thiel described the financial backing as one of his greater philanthropic acts. He was reportedly motivated by a 2007 Gawker article that had outed him as gay. During the trial, Daulerio testified that he would consider a celebrity sex tape non-newsworthy only if the subject were under four years old; he later told the court he had been speaking flippantly.

  On the 18th of March 2016 the jury awarded Bollea $115 million in compensatory damages. Three days later, on the 21st of March, the jury added $25 million in punitive damages, including $10 million assessed personally against Denton. Gawker filed its appeal on the 5th of April. In January 2016, just before the verdict, Gawker had received its first outside investment by selling a minority stake to Columbus Nova Technology Partners, a move Denton said was in part a financial buffer against the Hogan case. On the 2nd of November, Gawker reached a $31 million settlement with Bollea and abandoned its appeal.

  The court proceedings revealed an uncomfortable detail about Denton's conduct during the bankruptcy phase. At a the 29th of July 2016 meeting, a judge chastised Denton for telling the court his stock was valued at $81 million when it was actually worth $30 million. The court found he had not acted in good faith and authorized Bollea to begin seizing assets.

• 7. Shutdown and Aftermath

  ›

  On the 10th of June 2016, Gawker filed for Chapter 11 bankruptcy protection, citing its inability to pay the $140.1 million judgment or post a $50 million appeal bond. Reports at the time suggested Ziff Davis had made a stalking horse offer of under $100 million for the company's assets.

  On the 16th of August 2016, Univision Communications paid $135 million at auction to acquire all of Gawker Media's brands and assets, with the exception of Gawker.com itself. The purchase ended fourteen years of independent operation for the company. Two days later, on the 18th of August, Gawker.com announced it would cease operations the following week. At 22:33 GMT on the 22nd of August 2016, Denton published the site's final article. Gawker's article archive remained accessible online, and employees transferred to the six continuing sites or to other Univision properties.

  On the 21st of September 2016, Univision moved all of the acquired properties into a newly formed entity called Gizmodo Media Group. On the 10th of September, Univision had already removed six posts from various sites, each accompanied by the note that the story was no longer available because it was the subject of pending litigation against the prior owners. Gizmodo Media Group was later acquired by Great Hill Partners alongside The Onion in 2019, operating under the G/O Media Inc. umbrella for a price reported to be under $50 million.