The Secrets of Drudge Inc. How to set up a round-the-clock news site on a shoestring, bring in $3,500 a day, and still have time to lounge on the beach.
By Geoff Keighley

(Business 2.0) – Pound for pound, who's the biggest, richest media mogul on the Web? Terry Semel? Nope. Sumner Redstone? Not exactly. Try Matt Drudge. Years after his big "scoop"--leaking that Newsweek was sitting on a story about the tryst between President Clinton and Monica Lewinsky--Drudge's website is bigger than ever. Run on a shoestring, the Drudge Report, a plain-Jane page of news links and occasional scoops, clears, by our back-of-the-envelope estimate, a cool $800,000 a year.

While other news sites make money, they don't mint it Drudge-style. New York Times Digital scored an operating profit of $8.3 million last year. But it has 237 full-time employees, meaning that each worker accounts for about $35,000 in profit. (And that doesn't take into consideration the fact that the site's reports are actually generated by the newspaper staff, a cost allocated to the paper side only.) By any calculus, Drudge's site might be the most efficiently run on the Web; it makes the Times site look bloated. Drudge's is a two-person operation (although he never mentions his right-hand man); that means it makes $400,000 per employee. And he never has to leave the comfort of his Miami condo.

Drudge's minimalist approach dates to 1995, when he noticed that people posting on Usenet often scooped the networks. "Matt and I spent hours talking about how slow the big boys were in breaking news," recalls Harry Knowles, the founder of movie site Ain't It Cool News. "I remember Matt saying to me, 'The Internet is going to be the thing that knocks off CNN.'"

To take on the network Goliaths, Drudge, who declined to be interviewed for this story, figured that all he needed was an e-mail address, a website, and a flashy persona. He cast himself as a fedora-wearing newshound working for the people, not the Man. His audience would double as his reporting staff: "Matt and I realized that every one of our readers was also a potential source," Knowles says. So Drudge amassed a vast network of independent sources.

That network of instant-messaging buddies is heavy with media insiders who use Drudgereport.com as an industry echo chamber. Drudge's network has helped him routinely beat the big boys to the punch. In just the last few months, he broke the news of celebrity photographer Herb Ritts's death and even scooped CNN when Walter Isaacson resigned as that broadcaster's CEO.

"There is always this feeling that Drudge is about to break something," says Phil Boyce, program director at WABC radio in New York. That leads many loyal readers to check the site 10 to 15 times a day.

That drawing power has turned Drudge into one of the Net's biggest traffic generators. "Besides being on the front page of Yahoo or getting some major placement on AOL, Drudge Report is the place to be," says Bill Bastone, editor of the Smoking Gun website. "The second he links to us, our traffic triples." Conversely, getting your link removed from Drudge's homepage can be catastrophic. Just ask the New York Press. Last summer the alternative weekly ran a column that criticized Drudge. In retaliation, Drudge dropped the Press from his list of newspaper links. Overnight, traffic to the paper's site plummeted by a third.

Along with that power comes profit. "If we've been going through an ad recession, I'll take more!" marvels Kevin Lucido, CEO of Intermarkets, who handles Drudge's advertising. Lucido says ad space on Drudge's site sells out months in advance. (The Drudge Report ranks 29th on the Web in advertising impressions.) Such advertisers as DirecTV, Paramount Pictures, and even the New York Times pay as much as $2 for every 1,000 impressions. Even with discounting on the ad rate, Drudge's flood of traffic means he can still bring in almost $5,000 in revenue on a good day. Back out a few expenses--such as server costs, his employee's salary, and Lucido's commission--and the rest is gravy.

You'd expect a no-frills operation like this to exact a price. "It seems like he's awake 24 hours a day," Bastone says. "We're not sure when he sleeps." But there's more to the Drudge Report than meets the eye. In fact, Drudge does sleep. And he isn't exactly chained to his keyboard. "He swims on the beach every day and goes and has a burrito for lunch," according to friend Lucianne Goldberg, a conservative talk-radio host. How can he pull this off? Well, don't forget that anonymous second fiddle in this one-man band, a Los Angeles-based reporter who's always on call, keeping the news flowing 24/7. It's all part of what WABC's Boyce calls Drudge's "theater of the mind."

"Matt's whole mantra has been that he's this lone individual against the world," says Christopher Ruddy, editor of the website NewsMax. Drudge has resisted the temptation to sell the site to the highest bidder. (He did, however, extend his brand by launching a radio talk show, writing a book, and hosting a now-canceled TV talk show.) Michael Kinsley, founding editor of Slate, who once tried, unsuccessfully, to do business with Drudge, says the go-it-alone persona is just a mask. "Matt's very different from his public image. He thinks he's this incredibly powerful, ruthless avenger," Kinsley says. "But he's actually sort of an innocent, Walter Mitty type--except that his fantasies are more or less true." In fact, he's written the book on building an online media business. --GEOFF KEIGHLEY