At WatchMojo, we’ve signed a lot of partnerships and distribution deals over the years. We’ve also managed to work with major marketers such as Coca-Cola, McDonalds and Malibu Rum; all sources of pride.
But probably none have made me as happy and proud as our new partnership with IGN.com. Check out our channel here.
IGN is the world’s #1 ranked video games site, part of the News Corp. media empire. They’ll be distributing our movie and video game content. Of course, we work with many News Corp. units, including MySpace and Hulu.
But this one is extra special… and long overdue.
As many of you know, in 2005, IGN bought my old company AskMen where I was a VP and partner, so this is a kind of homecoming of sorts. And yes, it was largely thanks to the proceeds of that sale that WatchMojo exists today.
Life has a funny way of unfolding and this deal is fitting (and ironic) in many ways, especially as we approach our 4-year anniversary and cross the 100,000,000th all-time video stream milestone!
Check out the sweet player, to boot:
According to eMarketer, the size of online advertising revenue is $1.35B in 2008.
Since launching WatchMojo.com in 2006, I’ve had some questions about that figure… so here goes:
Definition of Online Advertising Revenue is Unclear
I’d be interested to know what falls into the category: if it’s only video pre-rolls, post-rolls or mid-rolls, then we leave out companion display ads… which on a site like YouTube account for the vast majority of revenue. Moreover, accounting departments need to standardize this definition. Conclusion on this item, we need transparency and clarity in Accounting definitions and guidelines, I’d be curious to see if an eMarketer spokesperson can address this.
Rich Media vs. Video Ads
When I was running sales for a mid-sized publisher, I recall that rich media ads (Unicast, Eyeblaster, Eyewonder, etc.) were bundled in with video ads because many rich media ads contained video… is this still true? I am not sure. Why?
Because…
In-banner vs. In-stream
Video ads can be in-stream or in-banner. In the latter case, it would be a video ad in a 300×250 that is rich media, YHOO has loads of these; then there are in-stream video ads, which go before, during or after video content. MSNBC has oodles of these. This is a very important nuance.
Double counting for partnerships?
Say FOX Sports has a partnership with MSN, who books that revenue? This kind of stuff is fairly standard, think of all ad repping firms who collect and remit ad revenue… but in MSN’s case, for example, it also has a partnership with NBC Universal on MSNBC.com. It’s somewhat useful to know how that is all booked. Is it case by case or is there an accounting rule that is actually respected industry-wide?
Ad Networks
Say an ad network such as Tremor Media, Brightroll, Video Egg, Broadband Enterprises etc. place some of these ads, they need to be accounted somewhere. The questions is: where are they accounted? My take is that like it was with display ads’ networks, video networks will touch 15% of the video pie.
Here’s our breakdown:
Using the figure from eMarketer for total US online video advertising revenues at $1.35B, up from $750M in 2007, as a benchmark.
- Yahoo.com = $200M
Yahoo did over $7B in total sales… with over $5B coming from ad revenues. Yahoo! has a lot of video content along with plenty of rich media on its site. As the world’s largest property, I could easily see Yahoo! doing even $250M in video-derived ad revenue, but when you consider that video accounts for less than 5% of the online video advertising pie, then we will assign a 4% share to online video for Yahoo! total ad revenues.
- Viacom = $125M
I think Viacom generates a larger than normal share of its online advertising revenues from online video ads. Last year I noticed MTV.com running a good dosage of video ads when my wife was watching The Hills on their site (I swear she was watching it). I also think that between Nick.com, MTV.com, NeoPets.com, iFilm/Spike, Atom.com and Comedy Central.com, one reason why Viacom is making a big deal about piracy on YouTube is that it sees just how good the online video advertising business can be.
- AOL Time Warner = $120M
Time Warner’s sources of revenue from online video includes AOL.com, TMZ.com, CNN.com, Time.com and many other prominent places. In fact, while TW does have the cable assets, if AOL TWX had more video assets, I think it could generate $200M per year from video, easily.
- News Corp./Fox Interactive Media = $100M
This is seemingly bullish, but note a few things:
Fox Interactive Media did $900M in total revenues… with MySpace.com doing $750M alone. Of that, it’s worth noting that MySpace is #2 behind YouTube, with MySpace TV making a push to get lots of premium content… leveraging News Corp.’s sales team, to boot.
Moreover, between AmericanIdol.com and IGN Entertainment (which includes IGN.com, GameSpy.com, RottenTomatoes and my old stomping grounds AskMen.com), this is actually quite feasible.
(disclosure: WatchMojo.com is a content partner to MySpace TV)
- NBC Universal = $100M
When it is not hosting the Olympics, literally, I think NBC Universal does about $75M from online video, when you consider that NBC’s online portfolio includes its namesake assets including NBC.com, MSNBC.com and the recently launched NBCSports.com. However, bear in mind, NBC also owns iVillage and Healthology, both sites that use a decent amount of video, and thus, generate online video ads. I think one reason why eMarketer pumped up its estimate to $1.35B is precisely because of the Summer Games in Beijing, which should generate loads of revenues for NBC and parent GE, I would put the 2008 take to $100M.
- MSN.com = $100M
Depending on the accounting, MSN.com can be making anywhere from $100-250M… but seeing how NBC and Microsoft remain 50-50 partners in MSNBC.com, but Microsoft has reduced its stake in the television network to 18%, I suspect most of the accounting revenue falls to NBC, who then remits a cut to Microsoft’s MSN unit (I could be wrong on this). Anyway, between MSN.com and MSN’s video assets, I think MSN does $100M in annual revenues from video advertising.
- Disney = $100M.
Disney consists of ESPN.com, Disney.com and ABC.com. That is a lot of video inventory.
Moreover, Disney is actually quite the king of online media. Well, at least it was, before News Corp. and CBS spent $2B in 2 years to accelerate their efforts. But the bulk of Disney’s $1B+ digital sales come from ticket sales at its themed parks, as well as merchandising… however, you know online advertising figures prominently, and video advertising growing quickly.
I had done an analysis previously, with Disney’s range coming in at a monthly low of $1M to a high of $7M.
Is it right? Who knows… Do I look like Nostradamus? Unless you have a better idea, let’s assume the math makes sense… however, given a few factors, I now put Disney on the higher range, and give them an annual revenue from video advertising of $100M.
- Hulu = $75M
Using AlleyInsider’s range of $45-90M in revenues, we’ll peg Hulu’s revenues at $75M this year in revenues. Hulu is now a top 10 video site, according to both Nielsen and comScore.
Disclosure: Hulu is a distribution partner of WatchMojo.com, as well.
- Google/YouTube = $65M
The bulk of that $200M comes from display banners. The only part I would attribute to “video advertising” is the sum of revenues from promotional/commercial videos that YouTube runs off its main page. At an run rate of $65M per annum, that is $175,000 per day, times 365 days. It comes from Forbes’ analysis. I should state, all the way back in 2006, one month before Google bought YouTube, I said “YouTube should be making $15M per month, or $180M per annum”. No comment. Disclosure: WatchMojo.com is a content partner to YouTube.
- CBS = $60M
CBS made $24M from March Madness… mainly from banners etc., but some videos, too. And CBS has been growing very rapidly, of late, launching its syndication network. I am not sure if CBS was doing much more than $5M per month on video ads because its reach was largely on third party sites that consisted of the Syndication Network, and let’s face it, once you embed ads, no one embeds your content on third party sites…
So if CBS was doing more than $60M in online video advertising in 2008, then more props to Quincy Smith and his team.
CBS only recently cracked the Top 10 list of largest web properties, thanks to its acquisition of CNET, which takes us to:
- CNET = $40M
CNET probably does $40M in video advertising, which out of a revenue of $400M is 10% of its total. Considering that on your average site online video accounts for less than 5% but CNET was an early mover here, I think that sounds about right… and yes, I am guessing here.
- The clones (Metacafe, DailyMotion, Veoh, Break.com, Joost, etc.): $50M
I use the term clone affectionately, but I suspect that combining all of the players looking at becoming #3 in the online video distribution space would give you a figure north of $25M but less than $50M. Why? Too much UGC content holds them back…
To really avoid double counting, I am omitting all video networks, such as Brightroll, Yume, Tremor, Broadband, etc.
- Rest of Web: $220M
Doing the math means that the rest of the Web is fighting for just under a quarter of a billion dollars.
What do you think? Does this breakdown make sense? Who are we missing?
When I worked at IGN, I recall the hatred and disdain the brass there had for CNET. CNET owned Gamespot.com, IGN owned both GameSpy.com and of course, IGN.com. Not being a gamer, I did not get the rivalry.
That, was child’s play compared to the competition between Rupert Murdoch and Sumner Redstone. The former went on to buy IGN Entertainment for $650M in 2005, the latter’s CBS (where he is Chairman) today acquired CNET for $1.8B.
I think the war of the media moguls just escalated a tad today.
In 2005, News Corp. bought MySpace, a social networking site with a music affinity.
Then, it bought IGN Entertainment (where I was employed at the time at one of its many subsidiaries), a gaming-oriented site.
It also bought Scout Inc., a sports community.
What about CBS?
CBS starts off buying MaxPreps - similar to Scout.
Then it buys Last.fm - a music oriented social network.
As we called it in April, CBS just now bought CNET - essentially a bigger, slightly more diversified and older IGN Entertainment.
Is it just me: is that a coincidence of big media’s playbook.
Check out Center Networks’ live coverage here.
One by one, they pick up the baton and run with it.
News Corp. Chairman and Rupert Murdoch had mentioned how he had become enamored with the Web because with very little investment, he got abnormally positive returns. So off he went.
After remaining largely quiet for a decade, News Corp. got serious about the Web in 2005 and spent nearly $2B buying up Intermix (parent of MySpace), IGN Entertainment (that’s how they inherited me for a few months), Scout Inc., and then capped off 2007 with purchases of Strategic Data Corp., Photobucket, Flektor.
But, by 2007 the buying spree was over. His Chief Buying Officer Ross Levinsohn left for greener pastures, launching his own investment fund with former AOL Chief Jon Miller, merging with ComVentures.
Then last year, CBS picked up the mantle of Chief Acquisitor by buying Last.fm and Wallstrip. While relatively small, you could see there was more in store, especially with former Allen & Co. Quincy Smith being brought in as CEO of CBSI, reporting directly to CBS CEO Leslie Moonves, and Yahoo!’s former corporate development executive Michael Marquez rounding up the team.
We then commented: is CBS the new News Corp. in that regard?
Perhaps. Today they made it official: CBS spends $1.8B to buy CNET. There will be those who say this was a lot of money for an old Web company, but CNET is a proven business with $400M in annual revenues and over 100M global users, propelling CBS to become a Top 10 Media Property in the US.
Of course, we always liked this idea, even prompting CBS to do so just back on April 14th.
The point is: TV-based media companies need to buy and buy big time, otherwise the future looks awfully like print’s past: downwards and smaller.
The following is from SAI, about Fox Interactive Media’s revenues:
- Branded revenue is up 21% over last year and branded sell-through is trending up for the year with a 19% increase from Q1 to Q3.
- Performance revenues were up 24% year over year.
- Most importantly, as MySpace user base continues to grow, we’re actually earning more money per user. FY 08 revenue [display + search] per unique is up 49% over last year.
- 54% of all social network ad dollars are going to MySpace (eMarketer, 12/07)
- Hundreds of HyperTargeting campaigns have been run in last eight months – with 20% or more of all orders today including HyperTargeting.
- Seeing double CPMs for HyperTargeting vs. non-Hyper-Targeted
- Orders with HyperTargeting are about 60% larger
- Enjoying considerable number of repeat orders with about 75% of advertisers ordering HyperTargeting again.
- Also, seeing successes in sales of key pages with sought-after branded advertisers and attracting many high-profile brands for the first time this quarter, including Novartis, Wrigley, Virgin Mobile, Unilever and Toyota. Several have stepped up to the popular branded “skin” of the MySpace home page which goes for a 70% premium on the standard homepage buy.
- Major category growth including Automotive, up 73%, Consumer Electronics, up more than 300%, Beverage, up 600% and Education up 850% year over year.
- MySpace is at an all time high in terms of audience reach and engagement according to both comScore and Neilsen – more than doubling Facebook’s U.S. audience with 73 million users compared to Facebook’s 36 million.
- And minutes spent on MySpace in the U.S. far surpass Facebook – 242 vs. 167 minutes per user per month.
- MySpace TV continues to grow and is the number two online video site after YouTube.
- IGN and Photobucket are up 40% year to year in unique visitors worldwide. IGN remains the number one games information property and in the past quarter, its Direct2Drive service surpassed one million games sold. Photobucket’s worldwide page views for March 2008 were 2 billion – up 85% year on year
- FoxSports.com is up over 20% in worldwide unique visitors year on year and recently launched its mobile WAP site expanding its reach further – the Number one mobile WAP site for mobile sports information.
Right about now, I should mention that I was employed by IGN after they bought my old company. That last a few months until they pushed me out. Also, my new company, WatchMojo.com, partners with both MySpace TV and YouTube and provides these with a steady supply of video content.
That being said:
We know that MySpace’s annual revenues will come in at about $900M for fiscal 2007. That’s lower than the $1B that Rupert Murdoch threw out some time ago, but it remains a very promising figure.
SAI is right to point out that:
Even while MySpace and all of the other FIM sites continued to grow, FIM revenues dropped from $233 million in Q2 to $210 million in Q3; about a third of that total came from a 3-year guaranteed deal from Google.
But all that means is that MySpace remains an untapped goldmine, a work-in-progress. Admittedly, no one wants to see declining revenues and I am a bit surprised about that. All right, a lot surprised. Then again, I am a sales guy at heart and I always see media properties as “glass is half full” scenarios with more inventory as an asset and there always being more advertisers to engage.
I am not very bullish on social networking revenue, but I am very bullish on video advertising.
News Corp. itself admits, social networking has some specific challenges:
1) Tons of inventory. Lack of scarcity creates a liquidity challenge. Working on bringing big brands aboard.
2) People who are visiting social networks there for different reasons, different uses. Figuring out how to target.
3) What’s the value of a “friend”? Trying to figure out new metrics to communicate with marketers.
I believe MySpace TV needs to position itself as more of a media property and less of a social network. Why?
The numbers speak for themselves:
Let’s compare, first the figures for Worldwide Social Networking Advertising Revenue:
Compared to US Online Video Advertising Revenues:
This all comes from my earlier post: Hype Watch: Social networking revenues.
Regardless, MySpace’s stats show two things:
1 - In the social networking segment: right now, MySpace is crushing Facebook when measured by revenues.
2 - In the video segment: while Google CEO Eric Schmidt says that he does not yet know how to monetize YouTube, Rupert Murdoch guns for $1B revenue target…
I will say it: when it comes to media and advertising, technology firms are largely out of their element. Apart from Google who is the most successful ad-supported technology company, any company that strives to be an ad-supported entity needs to adopt a media-centric approach and folks, MySpace is doing that…
COO Peter Chernin might be spinning the facts, but in the context of “how long did it take for YHOO or GOOG to hit $1B” he is not wrong. However, I would add, GOOG and YHOO really had no clue with regards to advertising, I do think that using News Corp.’s world class sales force, MySpace should and could be doing a lot better. Maybe in a better economic backdrop and with more contribution from IGN, this would be a reality.
The following overview is pretty much a carbon copy of what made IGN Entertainment merge with Gamespy and roll up Rottentomatoes, TeamXbox, etc.
Tech Crunch says the merger fell through, citing personality clashes between Jeremy Wright (whom I’ve spoken to via phone here or there) and Richard Jalichandra, who was the VP at IGN who was our point of contact when my old company sold to IGN.
Can I imagine Richard and Jeremy not getting along? Sure. But beyond that, matching a technology company like technorati to a media company like B5 Media is not all that wise because Technorati’s credibility would take a hit if they owned some of the blogs they are indexing. If Google owned a bunch of sites, people would say WTF, no?
Also, not to be too negative on blogs… but while I think B5’s strategy of being diversified is a good one (unlike tech blogs who focus on one category), there’s a very big difference between what IGN did and what Technorati was aiming to do here.
Anyway, regardless of the outcome, it will be interesting to see if this shotgun marriage will pan out. Why shotgun? Tech Crunch suggests neither company is mustering enough demand for a follow-up financing round…
I can think of 2-3 better M&A fits for each company, but last time I gave some feedback to IGN it wasn’t exactly embraced, so I won’t start giving Richard unsolicited advice now.
As a side note, Erick Schonfeld is a pro and all, but Tech Crunch could have done a better job of mentioning that B5 Media is an indirect competitor to Tech Crunch (by way of being a blog network) and that his colleague Duncan Riley was a founder of B5 Media who got pushed out - and felt backstabbed, no less - from the company. Why? Leaving that out leaves one to think this was a deal that was about to happen and this was a way to derail those talks. But then again, no one likes a good conspiracy theory as much as I do.
I guess in that context, I should state: HipMojo.com is a blog within the BloggerMojo.com network of blogs, which loosely compete with those… already mentioned my relationship to Jalichandra above, the man helped me make some coin.
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.
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:
Judging by the title, you’d think I’d be writing on Rupert Murdoch and the WSJ journalists, right?
Wrong. Well, sort of.
Reading that Murdoch is reaching out to journalists (namely: health reporter Tara Parker-Pope, who is joining NYT to start a health blog there, securities reporter Kate Kelly - also considering NYT - and money and investment reporter Henny Sender, considering FT) who are leaving the recently acquired WSJ led me to think just how much things would have fared differently had someone at News Corp., anyone in fact, tried to get me to stay at Fox Interactive Media in December 2005. News Corp. bought the company that bought my company. After I helped integrate my company into FIM, the writing was on the wall.
There was an exit sign and it flashed for me.
When we were talking about my departure and the separation, someone mentioned (in hindsight I realized it was pure BS):
—– Original Message —–
From: xxxxxxxxxxxxxxxxxx
To: Ashkan Karbasfrooshan
Sent: Monday, December 05, 2005 7:10 PM
Subject: RE: ThanksYou beat me to it, Ash. Thank you for everything, including your professionalism. And, I’m sincere about the other stuff we talked about–let me know if you are working on stuff in the future that you’d like us to talk about.
My best you to you, Ash
Of course, things turned out much, much differently.
To this day, I wonder if I would have built Mojo Supreme and WatchMojo.com in particular within News Corp. Today WatchMojo.com is arguably the largest producer, publisher and syndicator of web video. Go to any web destination and see how ubiquitous our content has become. That, my friends, is just the beginning.
Anyway, would I have built this company as an intrapreneur instead of as an entrepreneur? I don’t think I would have been all that against doing some kind of joint venture with News Corp.’s FIM unit… but the honest answer today is probably not. I had no contact with anyone at News Corp., mind you, but at IGN, the company that bought my company, I’d never felt so discriminated against in such a short time as I did after IGN bought my old company… ironic mind you since the bulk of the discrimination came from someone you’d think would be the target of prejudice, but I digress.
Point is, like I say, things happen for a reason.
Instead of worrying about what could have been, I’m focusing more on what the future holds for our company.
But over the next few weeks, a couple of months tops, a few people over there will be asking themselves what could have been…
PLAY
