Allen & Company invested in a mobile product-search company called GPShopper LLC.
Any other investor could have made the investment and it might not have been news, but when it’s an investment made by Allen & Company, people notice. I did.
That’s normal, because Allen & Company is the gold standard for private boutique M&A investment banks.
In fact, I had the honor of having a meeting at their office once and I must say, much like going in for a meeting at Yahoo!, Google, Goldman Sachs, GE, P&G, etc., such meetings are the business equivalent of being an athlete and playing at a legendary arena or an entertainer performing at a renowned stadium.
Point is, the gig - or in GPShopper LLC’s case, the investment - is secondary to the rite of passage.
Of course, Allen & Company is notoriously hands off when they make investments. My gut says that one of the bank’s key employees knows someone at GPShopper LLC pretty well, or they’ve worked in the past with a founder and made a tidy sum on the relationship.
But what caught my attention was the following:
While the influential bank declined to discuss the terms of the deal, Executive Vice President Paul Gould said Allen & Co. does not intend to take an active role in GPShopper’s operations and has not stipulated how the funds should be used.
“We have a lot of faith in them being able to implement the business,” Gould said.
Indeed, that is commonplace for Allen & Company, where an investment yields a lot of cachet and potentially, some connections. But clearly, you are not getting a hands-on operator type of partner. That’s not bad, and in many cases, it’s welcome.
But it did make me think, what would the opposite of an Allen & Company investment be?
Not a VC. Not an angel either. I guess the pure opposite would be landing an investment from an entrepreneur who’s cashed out and looking to invest and join a startup.
If that is the case, then this begs the question:
If you are an entrepreneur, would you rather:
- take an investment from Allen & Company
or
- take money from the successful entrepreneur looking to invest and join your team?
Clearly, there are pros and cons to both options. And, of course, they’re not mutually exclusive.
That’s a pretty good question all entrepreneurs should be asking themselves.
Why am I asking the question? No reason.
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WatchMojo Newsletter“You should never commit to something that you can’t deliver. Never.”
Prince Alwaleed bin Talal bin Abdul Aziz al Saud, who owns 3.6% of Citigroup, explaining why he sought Chuck Prince’s resignation from the world’s largest financial company. Good read.
It’s always very easy to knock on established, successful media moguls, but I must say, as a media guy myself and content producer, Sumner Redstone’s staunch defense of content and copyright is a breath of fresh air.
He said a lot of things today that were true (“It seems fairly clear that advertising will for the most part pay the way on the internet, just as it has on traditional media platforms. …I think in all the public clamor in all the doomed fortunes of traditional media, people miss the greater trends at work”), one thing that certainly stuck out was the following:
“Professionally produced content only increases in value as digital platforms multiply.”
I agree 200%. We see this day in, day out. We’ll produce content and publish it on WatchMojo.com, simultaneously we’ll syndicate it across the Web to places like YouTube, Veoh, Revver, MySpace, etc.
But then, we’ll also branch off into wireless and out of home digital networks. The web is still a pretty young place, and web video much younger. Wireless and out of home are embryonic at best… but the beauty of broadband content is that it can spread like crazy. I’ve given up trying to track where our videos pop up.
Regardless, the statement that professional content rises in value as distribution rises is very true. In fact, when you start a business, you’re always looking at scaling, but scale is a function of content production and distribution. I have yet to figure the right balance and mix of production vs. distribution in the scale equation, but we’re getting there.
Not the first time I find myself agreeing with Redstone. I thought there was nothing crazy about CBS working with YouTube while Viacom was suing YouTube (he’s Chairman of both). It’s odd, had one deal gone the other way, Redstone would have been my boss, indirectly, of course (turned out Rupert Murdoch got that title, albeit briefly). Funny how life has a way of unfolding.
Read more on Forbes and Paid Content.
CNET paid $20.5M for FindArticles last week and bought it from Looksmart, who made it official today.
CNET has about $50M in cash and has set up a $250M credit facility to buy more assets I presume. They also just sold Webshots to American Greetings from some $45M.
I like CNET. They’re a great mid-sized web giant. With a market cap of $1.1B, there’s good room to grow. I used to own the stock but don’t now.
Anyway, I was going to email them and ask them this, but I doubt they would have answered, so here goes:
CNET owns a lot of good URLs, namely TV.com and Search.com. They’re doing a lot with TV.com, not that much with Search.com. In fact, Search.com is a meta search and their video search is powered by Truveo (disclaimer: Mojo Supreme has search products which include the MetaMojo.com vertical search and video meta search). The problem with search is you need distribution. You can have a great product but unless you have eyeballs conducting searches, no one cares.
So when CNET bought FindArticles, I asked: why not buy all of Looksmart for a dime more? A look at the numbers further reinforces this question.
Looksmart has $54.85M in revenues in 2006, but its entire market cap is $54.99M.
Wait, it gets better: it has some $38.25M in cash and a whopping $89,000 in debt.
Bottom line: its enterprise value sits at a paltry $14.31M.
Mind you, Looksmart is not going to take over the world, but if CNET is going to pay $20.5M for FindArticles.com, why not just outright buy Looksmart and use it as your search unit proxy which right now is restricted to a great URL but a largely outsourced strategy?
So short of emailing CNET about this, I decided to inquire and guesstimate the answer to that question.
Sure, as a publicly traded company, I guess the market would have wanted more, but Looksmart has undertaken a very vertical search strategy. This year Microsoft showed that vertical search has a place in the broad landscape by buying Medstory. Thus, I ask, would Search.com’s meta search nature not complimented Looksmart quite well? Or better yet, would Looksmart’s vertical focus not have fit well with Search.com’s meta search?
Furthermore, to the best of my knowledge, CNET lacks proprietary search, right? Did Looksmart not acquire Wisenut? Wisenut, just a few years ago, was being spoken of in the same vein as Teoma, bought by Ask.com. Teoma and Wisenut were actually referred to occasionally as Google killers (yes, I know, crazy now, and frankly, then, even though Google was a shadow of what it is today).
So, as I was writing in a stream of consciousness manner, I decided to actually check Wisenut.com before pressing publish. Good thing I did. Wisenut.com has ceased to exist. Or, maybe the search technology now powers Looksmart. So I went to Looksmart. Good thing I did. Nothing but 10 sponsored results. Great.
Maybe the market is being generous with Looksmart? To quote Henry Blodget: “Looksmart is frantically looking for a business.”
I think I know why CNET balked. Looksmart is no more. Here’s their business summary description:
LookSmart, Ltd. operates as an online advertising and technology company in the United States. It provides content, advertising, and technology solutions to consumers, advertisers, and publishers. The company offers advertisers pay-per-click search advertising and banners through a monitored ad distribution network. Its ad distribution network includes proprietary Web sites, syndicated publishers, other ad networks, and search partners. The company also offers a suite of tools and solutions that help publishers improve their audience, control advertiser relationships, and enhance the monetization of their sites. It operates various consumer sites, which include FindArticles.com, a Web site that enables consumers to search a database of content from various articles; vertical search sites that select appropriate resources by category and deliver relevant search results, including health, finance, entertainment, and auto; and Furl.net, an online social bookmarking service, which enables members to securely save Web pages. LookSmart was founded in 1996 and is headquartered in San Francisco, California.
The company has fully thrown in the towel on being a destination and has branched off into hundreds (thousands/millions) or really vertical search services.
Will the strategy pay off? Well, their entreprise value is $14M. I doubt the market thinks it will.
Yes, I’m speculating here, but I suspect that CNET in fact looked at buying all of Looksmart but probably passed. But this begs the question: wouldn’t you buy $54M in annual revenues for an enterprise value of $14M?
Henry Blodget suggests that Time Warner should sell AOL to Yahoo!
It’s a good idea, he values AOL at $15B or so, tops.
The problem, however, is that Google paid $1B for 5% of AOL, valuing it at $20B. That deal supposedly made sense then but I never understood it because that $20B paper value was sure to come under pressure as AOL’s business strategy and model grew increasingly unclear.
Moreover, what is especially daunting for Time Warner is that any time it will try to sell AOL, Google will come knocking and showing interest, driving up the price, which then scares away other takers, such as Yahoo!
Frankly, Google is a technology company, AOL is not. Yes, AOL has some interesting technology under its hood, Truveo of note is a fantastic video search technology. The company bought Netscape, so it has the DNA, too. But at its core, AOL is a media company and it is a better fit with Yahoo!
Too bad it sold a 5% stake to Google though. I covered this aplenty last year in Yahoo/AOL/MSFT Menage a Trois? Don’t Count on it…
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