As the election approached in November 2008, Harris and VandeHei took stock. Many aspects of their business looked positive. Politico was fortunate that, as a deep global recession in the fall of 2008 bit painfully into the budgets of retail merchants—the backbone of newspaper advertising—its advertiser base of lobbyists and others who sought to influence lawmakers was relatively insulated from the business cycle. In some months, Politico broke even or even turned a small profit (ad revenues were noticeably higher during months when Congress was in session). [1] It was on track to earn online ad revenues of some $300,500 a month, or about $3.6 million for the year—not shabby for a start-up. [2] Average monthly overall revenue in 2008 grew by 105 percent over 2007. [3]

Moreover, Politico had benefited from the presidential campaign. All the major candidates took out ads. But the greater benefit was in readers: “We knew we’d ridden a great wave in the election. It was great for readership; traffic was off the charts several times,” recalls Harris. “The election was an opportunity to build our profile and be seen by a national audience.” [4] By the end of October 2008, Politico had locked in an average of 3 million unique visitors a month—an improvement of 132 percent over the previous year. [5] In September alone, it reported 7 million unique visitors. [6] Among websites affiliated with newspapers, Politico ranked 12th in terms of average monthly unique visitors. [7]

But it wasn’t beating the competition on the Web side. The Washington Post website still far outranked Politico . The Post came in third in average monthly unique visitors to newspaper websites, with 10.3 million, up 19 percent from the previous year. Then-Executive Editor Len Downie says, “Our growth in page views for our political coverage during the campaign exceeded the page views for Politico , despite all the publicity Politico has gotten.” [8] (The New York Times , ranked number one, had almost twice as many average monthly unique visitors as the Washington Post , with 19.5 million, an increase of 33 percent from 2007.)

On the newspaper side, the situation was more heartening. Circulation by 2008 was a respectable 27,000, on a par with two other Capitol Hill-only broadsheets. [9] Politico was less reliant on its paper product than established national newspapers, which often got over 90 percent of their revenue from print advertising. Nonetheless, in 2008 the Politico newspaper accounted for some 60 percent of the organization’s ad revenue. That was something of a surprise for a news organization whose website was its flagship product. Observed one blogger:

That means only 40 percent of their revenues are derived from their huge online audience… In revenue terms, that means a print reader is worth about 200 times what a unique visitor is online. Print is by no means residual… It’s still the chief revenue source. [10]

Another noted in the same vein:

Politico got the online readership it dreamed of, but it hasn't come even close to figuring out how to monetize it. So they're reliant on the Congress-section of their print paper, which can extract huge rates from lobbying organizations and pressure groups. Were they actually web only, they'd be losing catastrophic amounts of money. [11]

Even with that newspaper income, the news organization was on track for a net operating loss of $3 million, with expenses around $14 million on revenues of about $11 million. [12] While these results were well within expected parameters, they were still cause for concern. The editors were bullish on financial prospects for 2009, but a lot rode on fulfilling those expectations. Not only did it have to satisfy Allbritton (as its owner and backer); Politico also needed strong earnings to retain—both with salaries and reputation—the talented journalists Harris and VandeHei had attracted with promises that Politico would be the authoritative political news site.

Harris and VandeHei worried about the transition from the election to covering daily politics on Capitol Hill. “Our plan was very ambitious to cover the Obama White House,” says Harris. “We’d have to demonstrate that we could do it as a newcomer… We were nervous.” [13] The two men recognized that readership—and ads—would level off after the election as public interest in national politics waned. How could the entrepreneurs ensure that Politico would continue to occupy a unique, influential—and profitable—niche?

On November 3, 2008—the eve of the election—Harris and VandeHei issued a memo to reassure their staff that Politico would remain viable into 2009. In a scant 21 months, the memo said, Politico had had frequent months when it was profitable. The goal for 2009, they wrote, “one we fully expect to achieve—is profitability on an annual basis.” It continued:

For all our satisfaction with these numbers, it is important to be realistic about traffic. We have no doubt that traffic will dip—how much, we don't know—following the election. When it does, this won't be cause for alarm. The reason is that Politico's business success—what will sustain our editorial success over the long haul—is not primarily dependent on a mass audience. The main part of our revenue, in print and online, comes from advertisers who want to reach our audience of Washington influentials—and know that the best way to do it is to buy space next to coverage that has impact and that people are actually reading. [14]

That was what Harris and VandeHei put out for public consumption. Privately, they fully appreciated how much would have to go right for those words to prove prescient. Two years into their experiment, while their prototype had been road-tested, it had yet to earn the highest accolade of a successful business model: imitation.