Archive for January 8th, 2009

Yay! A useful post on techcrunch!

As a friend of mine said:

Consumer magazines, on the other hand, sold for only 1.5 times revenues and 8 times EBITDA.

That’s a bigger stat than it might appear.

But we already knew that.

What isn’t so obvious in all this madness is that digital properties are far harder to defend than well established offline.  Sure the world has changed, but no acquiring company should ignore defensibility as people go digital.  Though the multiples are high now eventually very real difficulty of maintaining audience for the long term will start to bring these multiples down.

For instance, CNET is not a good buy at that valuation.  They are built mostly on SEO and some older properties.  {traffic profile} They will be hit badly by this ad recession AND they have very little staked out in social media (they have some minor efforts).  It’s certainly a beachhead for CBS, but the SEO game will collapse eventually – it already is for a lot of people.

Think about that insane investment!  1.8 billion for maybe 10-12 million UUs.  I’ve spent probably 10 million of investor/corporate money in 3 years and generated upwards of 20 million UUs across various properties which reeled in 35 million or more in revenue (at a 21x multiple this would be 735 million valuation).  I’m not saying that i’m worth more or have found a magic formula.  What I am saying is that 1.8 billion could have been spent far more strategically.  i.e. a bunch of micro acquisitions that have huge upside.

Getty Images wasn’t a great acquisition either at that price.  I mean with citizen journalism, exclusives on photography are just not going to matter as much.  Getty has some nice services, but it isn’t a growth company at all.

Sometimes the mass of these media operations gets in the way of good financial sense.  That’s the one bad part of old media going digital.  They haven’t learned from Google, Yahoo, WordPress.com… you just don’t need the same resources when the computers and users take over.  Old media has been acquiring with their pre 2009 excess money and their fear of extinction.  Unfortunately, there’s a lot of lame M and A out there which isn’t going to help old media much.

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