HSW is one of my favorite sites, I rarely check it now because I’m so busy with managing WatchMojo.com but it’s a fine example of skipping the UGC hype and sticking to creating high-quality content. By way of disclaimer, I should admit that in the past, I’ve worked with HSW in various capacities.
That being said, HSW is a classic textbook example of new media done right:
Founded by Marshall Brain early on, the company went through the dot com bubble and survived, eventually being acquired by WebMD’s founder Jeff Arnold’s investment arm: Convex Group. The company has raised $75M - separate from a $50M investment for its international joint venture, which today PaidContent mentioned was excluded from today’s grand slam sale to Discovery Networks for $250M - before its sale today.
$250M. Wow. Hats off to the entire HSW and Convex team.
A few thoughts:
“Synergy”
- Discovery has plenty of video in the offline world, but online, they’ve stalled, so by marrying their premium video to HSW’s online mojo, then 1+1 could in fact yield 3, if not more. Time will tell if this deal is as successful in practice as the theory suggests… I think once traditional media companies see just how much smaller the online video ad market is to the TV space ($750M vs. $75B), and they see the accelerated path of offline ad dollars to the Web, I really do wonder if they’ll stick to their guns and shrink their businesses in favor of online opportunities.
Buy, Don’t Build
- But, that being said, it does show that you need to acquire and not build if you want to be taken seriously: it would have taken HSW ages to build up a sizable video library… and conversely, it would have taken (and has taken) Discovery quite some time to ramp up online.
Think Big
From a management and growth perspective, here is the main thing all entrepreneurs need to realize.
When I worked at the midsized online publisher from 2000-2005, we were roughly the same size - of not larger - than HSW. Sure, they were far more informational (we were entertainment-oriented) but they decided to stick to their guns, raise $75M and go deep, way deep.
The main principals at my company did not have the stamina to bide their time, so they accepted a purchase offer in 2005 that increasingly looks cheap (this isn’t a hindsight is 20/20 kind of comment, even back then, we got one inquiry from a VC firm but the principals could not be bothered, they accepted the only offer they got).
Point is, Arnold to his credit has thought big over and over and over again. Even before WebMD, he turned a $25K investment into millions, then with WebMD he built the quintessential successful web 1.0 startup which now is a $3B market cap company… and by identifying properties like HSW for his Convex Group, he just proved that third time is indeed the charm.
The lesson for entrepreneurs is simple: once you start an enterprise, don’t become a low expectation you-know-what once you see the light at the end of the tunnel, as one successful entrepreneur (About.com’s Scott Kurnit) told me, don’t just aim for the fence, “knock the cover off the ball!
Tags: Discovery, M&A, Management|
Posted By: Ashkan Karbasfrooshan | Oct 15th
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