Email From Stratfor, called “the business of stratfor” leaked from wikileaks sent from one vice president to the rest of the companyPosted: February 27, 2012
The Business of STRATFOR
After fifteen years in business it surprises me sometimes how many people wonder about who we are, who funds us, and what we do. The media refers to us as a think tank, a political risk consultancy, a security company and worse–academics. The Russian media calls us part of the CIA. Arab countries say we are Israelis. It’s wild. The only things we haven’t been called is a hardware store or Druids. Given this confusion, I thought it might be useful to occasionally write to our members about the business of STRATFOR, on topics ranging from our business model to how we gather intelligence.
Let me start with basics. STRATFOR is a publishing company and it publishes one product—our online intelligence service. STRATFOR focuses on one subject, international relations. It uses intelligence rather than journalistic methods to collect information (a topic for a later discussion) and geopolitics as an analytic method for understanding the world.
Stratfor currently has about 292,000 paying subscribers, divided between individual subscribers and institutional ones. This inflates our subscriber base. There are many organizations that buy site licenses for all or many of their employees. We know that most of them never read us. From a strictly factual point of view, 292,000 paid readers is the number. Practically it is less but we don’t know how much less. On the other hand, our free material, two weekly pieces that are sent to our free list and then circulates virally as they say, has been estimated to reach about 2.2 million readers each week. Where our paid subscription is certainly increased by an unknown degree, this is probably and accurate number.
The reason that I can be so casual about these numbers is that we do not allow advertising in Stratfor. If we did, we would be obsessed by the accuracy. But we don’t for two reasons, one of which is not that we are concerned about advertisers skewing our objectivity. We are too ornery for that. The reason is business. We are in the business of gathering intelligence and delivering it to readers. Being in another business, selling our readership to advertisers is too complicated for my simple brain. Plus we would wind up not only depending on my dubious business acumen, but on the acumen of our advertisers. Second, advertising on the internet doesn’t come close to paying for the cost of content production. Content aggregators like Google take free content from others and advertise against that. That’s great business. But when you are actually producing content, advertising simply won’t cover the costs.
We are therefore one of the few original content producers to be making money by simply selling subscriptions on the web without advertising. I’m pretty proud of that, in a world where experts say it can’t be done, and I wish I could take credit for that, but it actually is something our Chairman, Don Kuykendall, came up with in 2000. His view was simple: if you can’t sell at a profit, you don’t have a business. So we asked people to pay and to my stunned surprise, they did. So we had a business.
Until that point we were a consultancy. Only we weren’t a consultancy because a consultant is an expert drawing on long experience to give answers. Its nice work if you can get it. But we never were a consultancy really. We were a service provider—we would find out things in foreign countries for our corporate clients, usually expensive work in unpleasant countries. The problem here was profit margin. It costs a lot to gather information in foreign countries, so the nice fat contracts looked very skinny by the time we were done. We do some intelligence for companies who have been clients of ours for a long time, but at this point about 90 percent of our revenue comes from publishing—you subscription. That supports over 100 employees in the U.S. and sources around the world.
So think of us as a publishing company that produces news using intelligence rather than journalistic methods. That means that we have people in the field collecting information that they pass on the analysts who understand the information who pass it to writers who write up the information, with any number of steps. This division of labor allows us the efficiency to produce the product you pay for. And it has to be a quality product to earn your continued subscription get you to continue to pay. Still gets the point across but sounds less cavalier about it…
The nice part of all of this is that we really aren’t beholden to anyone except our readers, who are satisfied by what we produce, since we have one of the highest renewal rates in the business. Our goal is simple—to make the complexity of the world understandable to an intelligent but non-professional readership, without ideology or national bias. Dispassionate is what we strive for, in content and in tone. In a world filled with loud noise, speaking in a subdued voice draws attention. With over one-quarter of our readers coming from outside the U.S. and Canada, and that percentage growing, these are essential things what are?.
We are more aware than our readers of our shortcomings—everything we do comes under scrutiny from whoever wants to take a shot—including everything I write. Knowing our shortcomings (I will not tell you about them until we fixed them in the event you missed it) is the key to our success. Fixing it is our challenge. We are now in a six month surge focused on increasing quality and staff. The two seem contradictory but that’s our challenge.
Hopefully this gives you some sense of the business of Stratfor that will help you understand us. I’ll be doing these very few weeks (I don’t want to be tied down on a schedule since I travel a lot—heading to Indonesia at the end of this month). But its probably time to make sure we aren’t thought of as a think tank—a term I really hate. When you think of it, think tank is a really bizarre term.