Clearly, startups will have to adapt, this means operationally but also with regards to expectations in an M&A.  However, I am not sure big media has the stomach for deals now.

Case in point: here are a couple of email exchanges from today:

Exchange 1:

Me: “I am sure you folks are having fun in this market, a lot of companies that were probably too expensive must be awfully cheaper (ie. less demanding) nowadays.”

Media executive #1: “Expectations have definitely come down.  We are seeing a lot of well funded companies looking to sell everything for <$100k.  It’s fire sale time.”

Me: ” It’s healthy and about time.

- A company approached us with 500 mojo related domain names (BerlinMojo, NYCMojo, etc).  I’ve always envisioned having local sites… they initially wanted a ridiculously high price.  We balked.  Then they sold all 500 for $2,000.

- Last year when we were looking at VC, they would always demand that we boost our burn rate to well over $250,000 per month.  I’d ask: “for what?” - today we’re breaking even… with no VC.  If I would have raised money, we’d have roughly the same revenue, but we’d be losing money; and VCs would pull the rug from beneath us depending on their mood in the morning.”

Exchange 2:

Me: “This week I’ve gotten a couple of emails from people (CEO/Board/VC) asking us if we want to buy very-well-funded companies for pennies on the dollar.  Cuh-razy…  I couldn’t afford them anyway… but it’s crazy that people are just looking to get out of losing propositions so quickly.  It’s a reflection of the higher cost of capital, and the credit crunch.”

Media executive #2: “We are in some very interesting times…buying opportunity if you have the stomach for it, in my opinion – what do you think?”

Me: “Yes, I think the web remains a great place to be investing now these days; recall that companies who were buying in 2003-05 ended up making good bets (AOL/Advertising.com).  However, I am not sure if traditional media has learned their lesson.  While they should be buying up assets now, I think they will stay on the sidelines.  For example, CBS was probably willing to spend $1.8B on CNET in good times but if CNET was worth $800M today it would not spend $1B on it today… not sure if that makes sense or you agree, but that is how I read Big Media behavior.

CNET was a good fit for CBS, however, the faddish areas are that much less interesting all of a sudden: areas like UGC and social media become a harder sell:

- Why would anyone buy Digg now for example if it is so painfully clear that it’s not what advertisers want.  NYT has more inventory than it knows what to do with, for example.

- How can you justify Slide’s or Facebook’s valuation, for example.

You cannot, and in many ways it will look like Priceline being worth more than all airline company stocks when it IPO’d: lunacy.

On my end, I did not raise capital but on the one hand, I do wish I had more leverage because we can do a lot more now.  The local network is a good example: we bought 500 URLs for $2,000.  The guy initially wanted $50,000 (!).

Then again, we’re profitable because we did not raise money and were not forced to invest and up our burn rate… so net-net, no complaints for me.  We’ve booked more revenues in 2008Q1-3 than we did in all of 2007 and more have more commitments for 2009 than we’ve had sales in all of 2008… I just hope that those clients don’t disappear off the map, though… so we shall see.

Ash”

These are separate, but it gives you an insight into what is going on these days on the front lines.