Archive for the ‘mergers’ Category

Yay! A useful post on techcrunch!

As a friend of mine said:

Consumer magazines, on the other hand, sold for only 1.5 times revenues and 8 times EBITDA.

That’s a bigger stat than it might appear.

But we already knew that.

What isn’t so obvious in all this madness is that digital properties are far harder to defend than well established offline.  Sure the world has changed, but no acquiring company should ignore defensibility as people go digital.  Though the multiples are high now eventually very real difficulty of maintaining audience for the long term will start to bring these multiples down.

For instance, CNET is not a good buy at that valuation.  They are built mostly on SEO and some older properties.  {traffic profile} They will be hit badly by this ad recession AND they have very little staked out in social media (they have some minor efforts).  It’s certainly a beachhead for CBS, but the SEO game will collapse eventually – it already is for a lot of people.

Think about that insane investment!  1.8 billion for maybe 10-12 million UUs.  I’ve spent probably 10 million of investor/corporate money in 3 years and generated upwards of 20 million UUs across various properties which reeled in 35 million or more in revenue (at a 21x multiple this would be 735 million valuation).  I’m not saying that i’m worth more or have found a magic formula.  What I am saying is that 1.8 billion could have been spent far more strategically.  i.e. a bunch of micro acquisitions that have huge upside.

Getty Images wasn’t a great acquisition either at that price.  I mean with citizen journalism, exclusives on photography are just not going to matter as much.  Getty has some nice services, but it isn’t a growth company at all.

Sometimes the mass of these media operations gets in the way of good financial sense.  That’s the one bad part of old media going digital.  They haven’t learned from Google, Yahoo, WordPress.com… you just don’t need the same resources when the computers and users take over.  Old media has been acquiring with their pre 2009 excess money and their fear of extinction.  Unfortunately, there’s a lot of lame M and A out there which isn’t going to help old media much.

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You probably already heard the news, the Trib is in Chapter 11.

This comes on the heels of the news that newspapers lost 18% in Q3, the worst drop on record.  You probably heard that too.

These numbers and their related news seem so benign when we’ve spent the last 3 months talking about hundreds of billions and trillions of dollars.  While the financial and auto companies falter quickly, the advertising based business parasites who live off those big advertising clients are following into the grave.

Interactive companies will survive, print media, probably not.  Will it completely fail?  No.  Print will become basic arbitrage plays.  Bottom of the barrel, low profit margin businesses.  They live off the laggard customers who by choice or circumstance stay in the old way of doing things.  This has been the fate of many industry segments that once were the king but never quite die off.  (Think of Amtrak, dial up ISPs, land line phones, most radio networks, music stores,

Having trouble believing it’s happening?

Consider these stories:

TV Guide magazine sold for 1 dollar, only 9 years ago it was worth 9.2 billion.

Maxim Magazine, once king of men’s magazine, had $28 million in EBITA in 2007, and this year was only $8 million

PC Magazine, a 27 year old publication, put a stake in print last month,admitting 2009 in print would have been at a loss

… Christian Science Monitor all digital, Men’s Vogue Folded into Vogue… and so on.

Print Yellow Pages are heading the same way.

This probably isn’t news to anyone reading this blog.  Perhaps the numbers are surprising or the speed at which it is happening makes you wonder.

Many consultants and veterans want to paint a rosy picture and claim there are opportunities and silver linings (usually because they depend on this delusion to pay their own bills).  There is no stop gap solution for straight print companies nor anyone that maintains homages to that glorious past.

These businesses aren’t just losing ground with readers, they aren’t making money any more – not just making less money, they are LOSING money.  There’s no vintage business here.  No retro glory days thing.  No way to suck it dry before it dies.

Why?  There’s no money to support this old ecology.  New media makes WAY LESS profit than print and print no longer provides an on ramp for digital users.  You aren’t trading ad dollar for ad dollar, reader for user.  I’ve talked about it before.  The issue is that new media has data behind it and the data destroys a lot of the promised pitches of the past.  The biggest failed promise was that “impressions” equal sales.  They don’t.  They didn’t in print and they don’t online.

Clicks and transactions.  That’s what people are counting and most sites produce less than a .5% Click Through Rate on those impressions.  It’s not uplifting and media buyers can’t stand to see their budgets flushing down the drain with non-transactional impressions.

The other promise that fails under data analysis is demographics/audience composition.  Magazines used to get to claim they were “women’s” or “men’s” and 18-34 year olds (people with money! and time!) and agencies and advertisers sort of believe them (there was no data to refute!).  Now you have data that says a “women’s site” is luckily to be 65% women.  No advertiser who sells a woman’s only product wants to blow cash on 35% male audience.  So they don’t.  They lower the price they are willing to pay or force you to cut the inventory way down.

There are 1400 or so magazines and maybe a couple of 100 newspapers.  There are 20,000 websites (at least) that are taking ad dollars from those advertisers who used to spend their money in newspapers.  There are at least 30 large classified sites, 100s of travel sites, 1000s of local information sites that take all the other print revenue.  Point is, the average campaign size for any online publisher is MUCH LOWER than for the print equivalents.  There’s an obvious spreading of the wealth.

And to put it all together… writing, filming, and creating good content is not any cheaper.  (and no, user generated content doesn’t count yet because it’s quality still sucks for the most part).

Spreading less high margin wealth means the old model is dead.  It died a long time ago, we’re just rolling in the bodies now.

Well, dude, what’s the answer?  how do we save it?

We don’t. We can’t.

Think about it.  Look at the election coverage.  Did you read a paper to get results? get your facts? listen to the candidates? get a verified opinion?

Probably not.

Did campaigns blow a wad of money on print ads? no.

The election killed whatever life was left in print.  CNN’s coverage literally choked its last breath.  Obama’s campaign made sure that you’re going to go direct to the source online.

So what should old skool media companies do?

Other stuff.  Maintaining any substantial competence in print operations or print audience development is a waste.  Get programmers and interactive designers on staff now.

Sponsor open source projects.

Buy some cheap blogs.

Experiment with mashups.

Copy CNN.

Try everything you can.  The whole bit is in transition.

Buy transactional businesses.

Learn about Video Games and Social Networks and Second Life.

Hell, I don’t know, and no one else does.

Just get crackin.

or hop on board an Amtrak train with your local paper with your am radio (they need all the customers they can get).

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Yeah, yeah, by now you have the news. Microsoft wants to spend $44bn to buy Yahoo!

Personally, I want this to happen.  Professionally, I think it will drive search, online media, and social networking to new vistas (hahahaha, good pun!).

I’m not going to talk about the business case for this.  Everyone and their mother will do that.

I owe any success I have to 4 things: Yahoo!, Microsoft, Google, and Britney Spears. No really.

I have no Microsoft stock.  I have no Yahoo! stock.  I don’t work at Yahoo! nor Microsoft.  I have worked at Yahoo!, consulted for a division.  Most of the “investors” in companies I’ve been at made their fortunes at Yahoo! I’ve attempted to sell businesses to Microsoft.  I’ve partnered with Microsoft on media and advertising efforts.  Microsoft software powers most of my daily tasks and has consumed 75% or more of any IT budget I owned. (i know, I know… linux is cheaper….)

Sites’ SEO and usability I was responsible for accounts for well over 2% of the Google Index.  Most of the businesses in my experience make a substantial revenue line from Google ads and get most of their traffic from Google directly or indirectly.

In 5 companies I’ve worked at or consulted “Britney Spears” has been the largest source of traffic and best example of how to be “findable”.  Yes, inevitably all pop culture and music sites must devolve into “What is Britney Doing Now?” More advertising money is earned against Britney Spears than any other term on the internet, at these 5 companies and net wide.  (Britney’s handlers should trademark her name and likeness aggressively and attempt to collect royalties.  I mean, she really has made a lot of people very rich and most have no grasp of how much traffic and clicks she drives)

Putting all that together… literally 98% of my income and assets are tied to those 4 entities.  Microsoft and Yahoo! make up at least 60% of of that 98%.  This is the truth.

So yeah, I’d rather owe less people than more.  Combine Yahoo! and Microsoft and I only owe 3 entities.  Google should buy Britney Spears (they make enough money and get enough traffic from her in search, youtube and blogger!).  Man, that’d be great.  Just 2 entities.  that’s not so bad.  it’s kinda like parents.  I can handle that.


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