Paid Content refers to a NYT article on CBS which calls for the company that Bill Paley built to make digital acquisitions, which begs the question: should they go for a big purchase or make small moves?
Of course, answering that question alone without addressing the backdrop to that question yields an incomplete picture.
CBS has hit some rough patches, according to Paid Content:
The parent company is under a mini-siege of sorts about
a) its performance,
b) Leslie Mooves’ salary,
c) Katie Couric’s disastrous tenure at the company,
d) layoffs (even on the digital side, as others are ramping up) and other issues (…)
e) CBS’s need for an acquisition is becoming apparent. Some CBS executives privately agree.
All right. I want to dive in and comment on e) but let’s run through this list quickly.
a) Its Performance
We’re not sure if they are referring to its financial performance or its stock’s, either way:
As per the NYT:
“Without the cushion of Viacom’s other properties, CBS has been more exposed to the struggles of the advertising market. In 2007, it earned $1.25 billion, down from $1.66 billion the year before. CBS stock closed at $21.40 on Friday, compared with $30.99 a year earlier.”
While no company or manager can control what happens to the stock price, I think big media will see a lot of revenue loss over the next few years. Print-centric media companies shrank, why would TV or radio-centric media companies be any different in the next wave of the Web’s growth?
After all, 1994-2003 saw text-based media explode online, 2003 is about audio/video-heavy media.
CBS is seeing this sooner and faster due to its exposure to TV and radio. However, they are strong in outdoors, the challenge there is the upside there won’t account for the downside in more traditional media.
So all hope signals point to online… which explains why:
“On Monday, the company’s interactive unit will officially open a fully staffed office in Menlo Park, Calif., in Silicon Valley, to stir innovation and content development.”
Ironically, the CBS Interactive brass gets the Web quite a bit, but it’s true that they have been overly cautious, too. Being cautious is a bad thing in booming times and a great thing in corrections. The problem for CBS is that the correction is coming offline and online continues to charge ahead… so indeed, CBS does need to make some bold moves. But what are those moves?
Last year, we suggested an outright merger with Yahoo! With MSFT’s $45B gamble, those bets are off (hmm… are they?).
b) Leslie Moonves’ Salary
Last week Henry Blodget wrote: “CBS CEO Moonves Gets 29% Raise, Just Reward For Job Well Done“.
Clicking through, I realized he was being sarcastic by pointing to the seemingly inverse relationship between Mr. Moonves salary and CBS’ performance. While I appreciate Henry’s position, the truth is that CEO pay is determined on a number of things, frankly.
It’s also about the demand and supply for talent. As the CEO of CBS, Mr. Moonves could probably command a much larger salary elsewhere, if CBS’s Board wants to pay him $100M because that is what it takes to retain him, I am not sure CBS or Moonves should be blamed. For the record, he did not make $100M but rather $37M. Is that a lot of money? Yes. But the company made well over a billion dollars in profit and $14B in revenues. Of course, I’m an executive so my perspective is going to be different than that of an analyst or journalist.
But my point is: running a shrinking business in a mature market is not something most executives would embrace, to lure the best (or retain them), guess what? It takes a generous compensation program.
c) Katie Couric
Don’t care personally, but indeed, this is becoming an albatross and if indeed she is that horrific (I don’t watch TV), it’s time to try something else. I recognize she might not be best suited for news, but surely there is plenty of things she can be doing for CBS in other capacties (infotainment, mainly).
d) Layoffs
Layoffs are always demoralizing, especially when a company is making over $14B in revenue and remains profitable. But what about a case - like this one - when the company is shrinking? This is a tough question.
My gut says Jack Welch’s “the lowest 10% should leave” is not a bad thing… so while I don’t want to dehumanize the layoff dynamics and their effect, I think it’s unfair to question the layoffs.
Of course, I do wonder why layoffs are taking place in online areas… which is what both Paid Content and NYT refer to. But just bear one thing in mind: many traditional media companies are not necessarily well structured in new media; divisions and structures are sometimes borne out of legacy organizational systems and sooner or later a correction or adjustment is called for. If this is the case, then I don’t think it’s fair to bash CBS on this point.
e) Acquisitions
The question remains: should CBS make one big hairy and ambition acquisition or should it buy a number of smallish companies and roll them up and/or foster their growth?
For the record, CBS has done both. In fact, it’s done everything including investments in Spotrunner, Joost and many others. In terms of acquisitions: Last.fm was a mid-sized / big one; Wallstrip was a small one.
What would you do if you were Quincy Smith and company? Buy? Merge? Sell?
ACQUISITIONS:
You know what, I admit a small acquisition won’t move the needle, but a major acquisition won’t either. Who would they have bought?
- Bebo? Is a company that marketers love really well-served by serving advertisers social networking inventory? Nope.
- Facebook? Too expensive to buy. Nothing to see, here (perhaps a merger? See below).
- Gawker Media? That might be an interesting addition. But I think Gawker Media founder Nick Denton wants to become CBS, and not sell to CBS. Anywa, Gawker Media lags in video, CBS needs to look ahead and not look back.
- Speaking of video, one company that might position it for future growth is Blip.tv, but Blip.tv does not own any content… so that is a risky move because CBS might buy a great video platform with amazing bells and whistles but then lose all of the content therein. [Disclaimer: Blip.tv is a partner of WatchMojo.com]. In the same broad category as Blip.tv are Brightcove and Video Egg. Bright Cove also does not own any content and is way too expensive, having raised $80M in funding. Video Egg ain’t cheap either, with $40M of funding in the tilt.
- Then there’s all of the YouTube/MySpaceTV competitors: Revver, Veoh, Metacafe, DailyMotion, Break, etc. Mind you, CBS invested in Joost… so what message would that send? As well, Revver was on the auction block and I presume CBS looked at it and then balked. Again, none of those companies own any content, CBS needs to be stronger in web content. That would be the hedge for CBS going forward, of course, it also needs better distribution. I see CBS works closely with Veoh… but is Veoh big enough as a distribution source? [Disclaimer: WatchMojo.com syndicates video to all of the sites listed here]
- Craigslist.org? Not sure Craig Newmark would sell, no matter how progressive Quincy’s team might be. This is Big Media after all… but Craigslist.org would not unleash CBS’ digital revenues.
- Glam Media? That would be a shot in the arm with regards to bolstering its female audience online… but here’s the problem: female audiences still watch TV… what CBS might be better suited for is getting access to a men’s audience. [Disclaimer: Glam Media is one of WatchMojo.com’s syndication partners, too]
- Digg? Not a fan of this one, frankly. Maybe a combo Revision3 / Digg? Even less of a fan of that. Revision 3 is way too niche: it’s too tech-oriented and relies on two hosts, largely. Given how Kevin Rose’s interest waned from Digg to Revision3, then to Pownce, I am not sure he’s buyable because he’s the main asset of Revision 3. [Disclaimer: if you look very broadly at all video content, then WatchMojo.com is more or less competitive to Revision 3, though I view them as rather complementary to our programming].
- Federated Media? Too tech-focused and they don’t own any of the content on the blogs they rep. Big media needs to own content to make it worth their while. Sorry, but that’s just the way media works.
- Gorilla Nation Media’s audience might be a better fit, but as an advertising representation firm, it faces the same challenges: You are buying a stack of contracts that at any point could be severed. Unless you own the underlying content, those contracts are not worth the paper they are printed on.
- Heavy.com? They have a men’s audience, for sure. But if CBS is to buy a destination, it needs to be an enormous destination, I am not sure Heavy.com would move the proverbial needle. In fact, in 2005, News Corp. bought IGN Entertainment, but IGN was doing over $70M in revenues on the strength of its Media Properties (IGN.com, RottenTomatoes.com, etc.), had a lot of technology (in-game advertising + digital distribution of movies, music and games). Moreover, IGN Entertainment was far and away the leader in terms of men’s 18-34 audiences.
However, if Fox Interactive Media has become a new media behemoth, it has more to do with MySpace’s burgenoning audience than with IGN’s properties. That being said: IGN Entertainment does give a lot of content and audiences that marketers look for. The challenge for IGN is that a major chunk of their inventory comes from their message boards, which are notoriously hard to sell and monetize.
This being said, when one looks at how instrumental MySpace and IGN’s acquisitions were, it’s fair to say that the ROI has hitherto been higher on the MySpace deal. I am surprised at this, I won’t lie. But this lesson would encourage CBS to look for a MySpace and not an IGN.
I am not that familiar with Heavy.com’s business, frankly, but I am not even sure if Heavy is an IGN.
- IAC is way too e-commerce oriented. Its search engine Ask.com does not really fit with CBS, either. So pass.
- There’s Meebo, but at $250M or more in value… I am not sure if CBS would even know what to do with it. And, who are we kidding: do marketers really even want to advertise in instant messaging communications? That one makes sense in theory but in practice? Not sure.
- There’s the barrage of search video tools: Blinkx, Pixcy, etc., but CBS remains a media company; it should be technology-centric, I think. What I mean by that is that its content should be compatible with all tech platforms to make it was widely available as possible.
- There are a number of ad networks: Tribal Fusion, Specific Media, Casale Media, Adconion etc. I think the obsession over ad networks will pass. Moreover, a lot of media companies will build and launch their own, which is a mistake as well. I am not sure if CBS should plunk down $100-$500M on an ad network. Advertising.com rescued AOL’s butt because AOL was transitioning from a walled garden to a normal website but the fact remains, that says more about how poorly AOL was doing than how great Advertising.com has done (for the record: it has done great).
Valueclick is publicly traded, but expensive.
If it was interested in ad networks, it might as well skip over display ad-based ones and dive into video networks such as Tremor Media or Broadband Enterprises. Again, I am not sure being in the ad network business is the best capital allocation move.
- It could - much like how NYT invested $29.5M in Wordpress - make a bid for Six Apart (makers of Movable Type) or even Wordpress. But, again, I am not convinced it makes sense for a media company to own a platform without the underlying content. News Corp. buying MySpace made sense because the content on those sites become News Corp. property, or at the very least, MySpace gets a license to profit from it…
- Slide? At the company’s last $500M pre-money valuation, I think CBS would gain street cred in one block on SF by buying Slide but see Wall Street punish it. Hey, just being honest here folks: that is one expensive widget company with moutain-fulls of unsellable inventory!
- There’s TheStreet.com, though I am not sure if it’s big enough or whether CBS really wants to get that deep into finance and investments. Bear in mind Wallstrip was all about investing… so this would be a doubling down on one category. Moreover, at a market cap of $250M, it would eat a lot of money the company could spend elsewhere.
- CNET remains very tech-oriented but it has embraced a lot of lifestyle properties, too. In fact, CNET would be a good fit with 100M uniques, $400M in revenues etc. In fact, trading at $1.2B, it’s not that expensive. CNET would give CBS some web DNA and CBS would open up swarms of traditional advertisers to CNET. This could be the best move yet: unlike most other options, CNET owns a lot of content. It also owns a lot of URLs such as TV.com that with CBS’ help could come to life.
Updated: Oh, wow, they listened to me: it’s official.
MERGERS
- CBS could in fact merge with Yahoo! I wrote about this and frankly, this remains an option.
- It could merge with Facebook; won’t happen. At a market cap of $14B technically Facebook is worth roughly the same as CBS. This would be a bizzarro world deal where Facebook trades in growth for CBS’ $14B in revenue… but this one is so loopy.
- As crazy as it sounds, it could undo the merger with Viacom; won’t happen.
SALE
What about a sale to News Corp.? News Corp. owns FOX, it would love to own CBS. But for this to happen, it would mean Sumner Redstone and my old boss Rupert Murdoch would have to come to terms; won’t happen.
Incidentally, last Friday, GE lost 12% of its value, or $40B. It could have bought two CBS’s. By buying CBS, GE’s NBC Universal would own two of the three main networks, making this an impossibility.
That same obstacle is present in a sale to Disney, who owns ABC.
CONCLUSION
As you run down the list… you realize that all CBS is actually a great media company that just needs some tweaking. Yes, indeed: “Nobody likes negative growth, from the guy who shines shoes to the C.E.O. Everybody feels the pain” the truth is no one wants to blow something up either.
My two recommendations for CBS:
- Buy CNET for $1.5B - $2B (that would be a 25% to 66% premium), which would take its digital revenues from “$200M” to $600M. Combining CNET with Last.fm would also yield a lot of upside in digital music and video tie-in’s. But even then: for a company with $14B in annual revenues, does $600M mean much? Many analysts only give credit to a media company’s stock if digital revenues account for 10% of total sales. Even News Corp. or Disney do not claim that.
CNET remains one of biggest acquisition targets that represent meaningful revenue opportunities, and even that won’t move the needle. So what other options are there?
OR
- Merge with Yahoo!
Actually, there’s also one more option:
GO PRIVATE?
One way that no one will care about a) Performance or b) Les Moonves salary is if it were not publicly traded. Moreover, Wall Street is being unreasonable: yes the company is shrinking, but it will take time for digital revenues to grow, anyway. However, if someone came along and took CBS out at $20B, I think a lot of shareholders would buy that (or I guess, sell for that).
It then allows CBS to d) clean house if they so choose to (and will have to). Kate Couric becomes moot in the grand scheme of things… but most importantly, it will allow CBS to roll up a number of smaller web properties, content producers and tech applications to bolster its overall portfolio. In 4 years - when video advertising will be $7.1B in the US (up from $1B) and all online advertising will be nearly $100B in annual expenditure - it can then be go public again…
This might very well be the best course of action. The question remains: does private equity have the stomach for a $20B debt purchase? With $16B in annual revenues… I think so.
All righty, that was a great use of 40 minutes of my time. Back to work.
Pardon the over-simplifying in the first paragraph, bear with me… you will see why.
Assets, liabilities and shareholder equity. Any financial transaction boils down to that: Leverage assets to obtain resources (which usually creates a liability of some kind) in order to create value.
Assets can be:
- Talent/People
- Content
- Audience
- Rights
- Technology
These are usually reflected on a company’s balance sheet, and help generate Sales and Profits, after Costs are subtracted, which are captured on a company’s income statement.
Revisionist History
This week I heard that John Battelle had turned down a $100M buyout offer for Federated Media to instead consider raising money. He hired Savvian, an investment bank with ties to old media buyers and sellers. As many noted, recently, Battelle came out and criticized his former boss for not selling the Industry Standard at the height of the boom. From Battelle’s own site (which offers some great insights into the industry):
I tried for all of 2000 to get Mr. McGovern to let us sell the company to a stronger buyer, one who believed in our vision of the Internet Economy. He refused, and pushed us to go public instead. It was this very conflict that led to our differences and, partially, to our demise. I had three very real offers on the table that I took to McGovern, and three times he refused them, telling me that instead, we’d make more taking the company public or, at the very least, telling the potential buyer to double the price. Given that the price was between $250mm and $750mm, such a response was, to my mind, nonsensical. But he owned the majority of the shares, and his word was what mattered.
It was thus odd that Battelle was turning down a cool $100,000,000.00 offer (just thought I should spell out all the zeros in case Battelle was reading this), especially with the start of 2008 thrashing securities’ value. Mind you, just last week, former Paypal co-founder Max Levchin raised $50M on a pre-money $500M deal… that was important, for Levchin spins Slide’s story as a glorified ad network for social networking sites. I am not sure that is a fair assessment, but that is for another post. The point is: in one week, the mood of the markets had changed.
This does not mean that this change is permanent, in fact, it was a needed dose of reality given the steady climb of asset prices throughout 2007.
But if Battelle passed on a $100M buyout offer, you have to ask: is he crazy for passing on the deal or was he crazy to consider it.
Battelle is smart and accomplished. But it’s one thing to chronicle the history of the search engine industry (as he did in his book The Search) and it’s another thing to have predicted. I, for example, am man enough to admit that I left the search engine market just before it took off (in 2000). I did that because I found a great job in online publishing… but if I were driven by money alone, then let’s face it: I misjudged the opportunity. In all fairness, I knew search would explode, but I found search boring. So all things being equal, if the decision were to be based on money alone (and with me it’s not, has not been and never will be alone) I should have stayed in search until about 2003 or 2004 and then gone into publishing then. But as I said, revisionist history is not good for the mind, body and soul. Why is this important? Because if Battelle is refusing to sell his ad network for $100M, it is because he considers the opportunity to be far greater than people are giving him credit for.
Let’s face it: online ads will be enormous in years to come (surpass TV ads by 2021). The question is: to whom shall the spoils go to?
Plenty of Foreplay, No Action
So, much the same way that Battelle questioning the non-sale of the Industry Standard is moot, for anyone to ask whether he should have accepted the $100M buyout offer for Federated Media is a bit foolish and a waste of time.
- Was there really an offer?
- Who was the buyer?
- What were the terms (cash vs. stock, earn-outs, non-compete’s, etc.)
I’ve had interested parties inquiring about Mojo Supreme and WatchMojo.com in particular, but without an actual offer, in black and white, I discount such “offers” and write them off as mere flirting.
But, we’re not talking about me and our company, we’re talking about John Battelle’s Federated Media, which is essentially an ad representation firm. I’ll spare the 1,000 words on my thoughts on that, if you want more, click to read The curse of ad representation which I posted when Fark.com left… you guessed it, Federated Media.
Is Federated Media worth $100M? Well, let’s see where Federated Media ranks in the ecosystem. To do that, we need some comparables.
We defined assets as:
- Talent/People:
John Battelle is the figurehead of the company but you will see that the company seems to have a lot of talented people. My first reaction was “lots of overhead” but I think you need to cater to advertiser and authors’ needs.
- Content:
FM does not own any of the blogs and sites it represents.
The sites he represents are all very solid ones, for sure, they include:
- tech publications: Tech Crunch, GigaOm, Mashable, VentureBeat, Silicon Alley Insider, ReadWriteWeb, BoingBoing, Ars Technica
- leading blogs: Paul Kedrosky’s blog, Fred Wilson’s blog
- social media sites: Sphere, Digg
But, the fact that he does not own any of those sites means that he should trade at a discount. But, a discount to what? It is said that Gawker Media is worth $100M. So if Gawker Media is a blog network that owns all of the underlying blogs, which include Gizmodo, Wonkette, DealSpin, Valleywag, Gawker, etc., then by logic Federated Media is worth less.
- Audience:
This one is tricky. Via partnerships with these underlying sites, FM reaches the audience and is exposed to the readers’ therein, but it does not own the audience. In other words, while FM gets a lot of props for building a network (we know buyers love network effects) it is not quite an owner of said network. Again, FM would trade at a discount for this reason. Using an example: WatchMojo.com owns the audience on the WatchMojo.com URL, but 99% of our streams now come on our syndication network, on sites like YouTube, MySpace, Veoh, and 100 others… so while we reach audiences on those massive sites, we do not own those audiences. I am candid enough to realize that that is less valuable that if we owned those audiences (we make up for it by diversifying our distribution access points, so I would argue that at least the sum of the parts of those audiences make up for not owning it, but that’s another post).
- Rights/Contracts/Relationships:
Rights are valuable. We own rights to our content (because we produced it) and via 1,001 contracts, to many other things. FM has rights to represent and sell advertising on all of those sites, but they are all probably about 60 to 90 days away from cancellation via an out-clause (the reason why it’s 60-90 days is because FM might have submitted RFPs - or request for proposals - to advertisers and that time span ensures that the underlying sites will honor the deals). But the fact remains, sites like GigaOm, Tech Crunch etc. (I presume) will over time want to develop their own sales channels, if they have not already. This means that the rights that FM have are an asset, for sure, but not fool-proof by any stretch of the imagination. Think of how Fark swapped out FM for Maxim’s sales force (in all fairness, Fark is a far better fit with Maxim than FM, which is tech-oriented).
- Technology:
This is the key. Above, I alluded to network and you might have noticed it was italicized. Networks were the bread and butter of the investment banking M&A business last year (see all 2007 M&As here). But most if not all of those networks’ drive up value thanks to their technology.
- Right Media (Yahoo! / $725M) has an auction mechanism technology platform that made it worth a lot to the buyer.
- BlueLithium’s (Yahoo! / $300M) clickstream technology made it a leader in the ad network insdustry.
- aQuantive (Microsoft / $6B) was a very diversified play in the online ad market, but Razorfish and SBI were leaders in technology; AtlasDMT was a very strong ad serving platform, etc.
- Doubleclick (Google / $3.1B) was all about technology and is in fact the world’s largest software in the cloud operation in the online ad sector, and thus, all about technology.
- Quigo (AOL / $340M) was a great challenger in the text ad sector, building an impressive client list while competing with industry behemoth Google.
The list goes on, and on.
Tale of the Tape
So, if Battelle wants to push the enevlope and benchmark FM to these comparables, he can. But any sophisticated buyer would ultimately benchmark him more to Gawker Media, or rather, Gorilla Nation Media. Gorilla Nation bills itself as the world’s largest ad representation firm. I know its two founders, Aaron Broder and Brian Fitzgerald. I first interacted with them as a VP of Sales at a mid-size publisher. One of America’s Top 500 Fastest Growing Companies (according to Entrepreneur Magazine), GN’s sales have soared from $1.6M in 2002 to $28.3M in 2006. Unlike FM, Gorilla Nation actually has owned some of the sites, for example, it sold Quizilla to Viacom. Gorilla Nation is not an incidental comparable. It raised $50M in private equity from Great Hill Partners last year. The valuation was not disclosed, but I presume that is the deal that Battelle is eyeing as a comparable these days.
What about Investors?
Battelle needs no advice or counseling. The man is smart, connected and has the backing of a seemingly unlimited amount of investors with even more unlimited funds. They include JPMorgan Partners, The Omidyar Network, The New York Times, Mitchell Kapor, Andrew Anker, Mike Homer, and Tim O’Reilly.
He’s only raised $4.5 million in a Series A round two years ago. Tech Crunc’s Erick Schonfeld mentioned that Battelle is a controlling shareholder, so assume at the very low end he owns 51% of the company, though I presume he owns much more. As it stands now, he can make his investors very happy but if he does go ahead and raise $50M (or anything that maddening) on a $125M pre-money valuation, then he would have to build a $500M or $1B company to add to his already very impressive reputation and track record.
Seller Beware
Battelle needs to be careful, however. If the sites he represents put a lot of weight on the $100M rumor, sooner or later, they’ll ask, why use Federated Media… why not go direct (to marketers and agencies). This is what I talked about in The curse of ad representation.
M&A vs. Funding - So, what is FM Worth?
According to MergerMarket, via TechCrunch in a March 2007 article, FM’s revenues were $4.5M in 2006, with forecasts of $30M in 2007. FM probably pays out 30-80% out to sites he represents.
COO Jason Weisberger said “If Federated Media keeps performing the way we’ve predicted in 2007, it would be a really ripe time for a media player who understands this space to buy us now rather than having to buy us for a whole lot more later.” The article also said “While he was unsure how much Federated might sell for, Weisberger said similar companies have gotten 8x to 10x gross revenue…Another possible valuation for a sale of the company is a multiple of 25x EBITDA.”
If FM owned the content, audience and technology, this is all plausible and feasible. But 25x EBITDA is too rich for an ad network that lacks technology. The article continued:
There was a laundry list of possible acquirers mentioned by Weisberger, including media companies (AOL, CBS, Google, IAC/Interactive, Fox, Yahoo were mentioned) and advertising agencies (Universal McCann, Ogilvy & Mathers, aQuantive, Saatchi & Saatchi, and TBWA/Chiat/Day).
While media companies such as AOL, CBS, IAC, News Corp. and Yahoo! are potential homes, advertising agencies are not at all going to be buying FM, or any content site. The reason is simple: there needs to be a Chinese Wall between media planning/buying (what ad agencies do) and owning the sites that they place ads on (FM’s sites). This is why today ad agencies do not own TV stations, radio stations, magazines or billboards. The conflict of interest would be immeasurable.
But the fact remains, a company like CNET might be interested, because it gives them access (rights) to a lot of great blogs without having to worry about the overhead etc.
In light of this, I think I understand why Battelle does not want to sell (presuming the $100M offer is actually legitimate).
Since talent poses a flight risk in any M&A but is usually invigorated by a funding round (change in ownership vs. more resources) and he lacks technology, I suspect he plans on raising more money to develop some technology. That would change the complexion of his company and jack up the price to revenue and price to sales multiples he could command.
But, the flip side is that by raising $50M on a $125M value, he might make his company unsellable because he would:
- in the process lose majority control and
- getting a 5x or 10x - let alone a 100x - return will make it very hard for Battelle to pull off.
Of course, because:
- Battelle won’t be running out of money any time soon
- His moneymen are richer than God
- Online advertising is booming
- FM diversify and move into non-tech verticals
- FM can build technology first
- FM can buy some sites to own the content,
then I suspect he won’t sell. Is he right to do that? Only Battelle knows the answer. But bear in mind that once he starts to invest in all of those areas, his costs will shoot up, his margins will suffer and his profitability will take a hit. In turn, that affects his P/E and P/S and all this work might not sufficiently raise the value of his company (when you take into account the time value of money).
If I were Battelle, I could think of 3-5 creative ways to considerably drive up revenues and create value. But it’s not my place to suggest those, frankly… and this post is getting long enough as it is.
History Repeats Itself?
In the end, Battelle seems to want to make up for the fact that he did not strike vast riches with the Industry Standard… which is fine and respectable. But you know the saying: Those who do not learn from history are bound to repeat it.
Here’s hoping that Battelle is as familiar with The Industry Standard’s history as he is with The Search’s.
The following is a perpetual-work-in-progress. Once you start to compile a list of mergers and acquisitions, you realize why it’s nearly impossible to have a complete list. We are quite confident that the following is a very good, comprehensive list of the largest, more notable deals… but it is not - and no list will be - fully complete because there are too many countries around the world and too many industries to report (it is highly possible that the Wall Street Journal or Financial Post, for example, has such a list… but it would be thick and unwieldy).
We have included:
- many industries
- have not adjusted for inflation
- mergers (be it all cash, cash/stock, or all stock)
- acquisitions (we have excluded partial acquisitions)
- private equity deals.
It is certainly not complete, send me any ones you think I am missing or industries you want us to add next to ash@mojosupreme.com or leave in the comments.
Trivia:
- In 1981, when DuPont acquired Conoco for $7.8B, it was the biggest deal of all time. But adjusted for inflation, that remains a $20B deal by 2008 standards.
- KKR’s private equity deal for KKR remains the biggest buyout when adjusted for inflation, but in actual dollars it has been long surpassed.
Related on HipMojo.com:
I was half-right,
When I was at Paid Content’s Economics of Social Media conference in LA in late April, I realized Gorilla Nation Media was working with Paid Content sponsor DeSilva and Philips Jordan Edmiston to raise some money, or sell the company.
Having worked with GNM founders Brian Fitzgerald and Aaron Broder, I knew it was the former, and not latter. These guys would not be content with a modest sale, they were aiming for the fences.
Brian and Aaron are ambitious and aggressive guys. The two are former LA-based lawyers who started a site called CelebrityBlvd.com to manage web presences for stars. Yes, sort of like a MySpace before online was kicking and booming.
“We were horrible at content,” Broder told me when I first spoke to him in 2003 or so. At the time I was the VP of Sales for a men’s online publisher, and Broder had just cold-called me trying to win over our ad inventory. GNM was in the business of repping websites, but soon afterwards branched off into many other things.
Broder, it turned out, had given up on the idea of managing online presences for stars in lieu of repping websites to advertisers and ad agencies. Between 2003 and 2005, Broder and his partner Fitzgerald were one of the many ad reps we worked with to generate revenues for our site. Throughout that period, I outsold the ad reps we worked with 75-25%, but I could tell that their firm, Gorilla Nation Media was printing money.
The duo were adding headcount, publishers they repped and even though they did little to meet our expectations (partially because I was doing a better job, in all honesty/fairness), I could tell they were building a massive business.
Over the years, they were launching and or buying websites, selling them, as they did with Quizilla to Viacom.
Today they announced a whopping $50M financing round with a PE fund. I saw this on Paid Content, and while the post did not say that DeSilva and Philips was involved, I just know that they were - or rather, have a gut feeling that they were - based on a few conversations I overheard and was involved in.
Today, this gut was confirmed because Paid Content broke the news in an exclusive, and of course DeSilva and Philips is a marquee sponsor on Paid Content. Of course, so is Jordan Edmiston.
Coincidence I think not.
In all honesty, I thought of writing a post called “Is DeSilva and Philips Raising a Boatload for GNM” upon my return but knowing where to draw the line between executive and reporter, I put the kibosh on that post. To the readers of this blog, I guess I apologize but please understand my position: I get some good scoops as an executive, and having no filter will invariably mean I’ll be cut out of those circles.
UPDATE: it would have been interesting, since GNM worked with Jordan Edmiston, also a PC sponsor.
Point is, props to GNM and Jordan Edmiston for this deal, and I guess, to Paid Content for the exclusive.
Does GNM need all of this money? No.
But much the same way they realized that ad repping was limiting their potential and launched sites and developed technology, they realized that they can raise some money and aggregate a lot more value in terms of media properties and tech applications and sell for hundreds of millions down the road.
In fact, something tells me the timing is not a coincidence, considering that WPP bought 24/7 Real Media for $649M and critics (us included) calling for MSFT to buy content sites, and not marketing enablers… something tells me GNM is one of those companies - like our own Mojo Supreme on a much smaller scale since we’re born in January 2006 - that presents a helluvan acquisition by a larger company.
Anyway, I could write a lot more, trust me, but the bottom line is that this deal, the timing thereof and everything is a testament to how shrewd and sharp Brian and Aaron are.
Congrats on this deal and looking forward to reporting on the company in the future.
For more on the deal, check out - where else - Paid Content.
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