Tags containing: "acquisition"

Media companies seek to innovate through acquisition

November 19, 2018 Rande Price, Research VP – DCN

The media M&A market is booming. PwC’s new report, US Media and Telecommunications Insights Q3 2018, finds that deal volumes have reached a two-year high in Q3, registering a 9% increase compared to the same time period one year ago. Beyond sheer volume, the strategic rationale underlying the deal activity highlights the continued importance players are putting on M&A to further their position in this competitive and ever-changing landscape.

This year, many companies put innovation and consumer engagement at the forefront of their acquisition strategy. Beyond the usual motivations, companies are also looking to make acquisitions that include offerings that help them attract, engage and retain customers.

Additional trends this quarter:

New deals do not surpass $5 billion dollars, resulting in a 43% decrease in deal value compared to Q3 2017.
F five deals this quarter are over $1 billion dollars, accounting to $12.4 billion dollars or 69% of total deal value.
The largest deal in Q3 is Adobe’s $4.8 billion-dollar acquisition of Marketo Inc., a cloud-based marketing platform for B2B customers.
The Advertising & Marketing and Internet & Information sub-sectors continue to outnumber other categories in terms of deal volume with 82 and 71 deals, respectively, in Q3 2018.
Private equity deal volumes are growing strongly this quarter, representing 26% of all deals. However, the value of private equity deals shows a 21% decline this quarter.

Deeper Motivations

Significantly, many of the deals in subcategories such as Internet & Information and Advertising & Marketing show that investors are looking to acquire new platforms rather than building them. This is especially true of companies that can easily add a new service to an already existing platform in order to grow their user base. Many companies are also competing for advertising dollars and consumer engagement so they looking to invest in new platforms and new technologies to deliver personal and immersive experiences.

Importantly, new acquisitions this quarter show that companies are responding to changing consumer viewing and listening habits and shifting revenue streams. A new and notable area of growth includes podcasts. The podcast industry is growing substantially. In just five years the audience grew to grew over 325% to 98 million listeners so, or roughly 30% of the US population. In this quarter alone, there are nine podcast deals, four of which involved podcast production companies.

Additional areas for further acquisition exploration include virtual and augmented reality platforms, as well as egames (multiplayer video-game competition platform and alternative content formats created purposefully for smaller screens and shorter attention spans). As these areas continue to grow, the M&A scene is likely to keep growing and be reflective of organizations’ nee to continue to innovate and grow.

Perspectives

Discovery, Lerers consolidation yields an enviable audience but bears risk

October 20, 2016 Mark Glaser, Founder and Publisher – MediaShift

It’s hard to survive on your own as a digital media startup—even if you have 2.4 billion monthly video views. That was the conclusion of NowThis (with those big view numbers), Thrillist and The Dodo, which combined with Discovery Communications’ Seeker and SourceFeed Studios to create a new holding company, Group Nine Media. Discovery poured in $100 million for a 35% stake and the chance to take a majority stake over time.

What do these startups have in common? The Lerer family, as Ken Lerer of the VC firm Lerer Hippeau has stakes in all the startups, while his son Ben Lerer runs Thrillist and daughter Izzie Lerer runs The Dodo.

The premise behind the roll-up—one of the biggest in the digital media sector, which values the new company at around $550 million—parallels other partnerships between legacy media and startups that took place last year: NBCUniversal’s investments in BuzzFeed and Vox; Disney’s $200 million investment in Vice Media; and, more recently, Univision’s purchase of Gawker and Fusion. The bottom line seems to be that legacy and digital-native publishers need each other.

Scale and Millennials
If you had to sum up the reason for the roll-up, it would come down to two words: scale and Millennials. The startups were all growing but would certainly benefit from the extra reach that Discovery has with its cable channels. And Discovery needed a way to reach younger viewers, which the startups have in spades. According to numbers reported by Variety’s Todd Spangler, all the properties in the roll-up have a majority of users under the age of 34.

The merger also helps drive a more strategic — and therefore more lucrative — advertising business. Advertisers will be able to purchase campaigns across all five properties of Group Nine, as well as work with individual partners. “I think advertisers want fewer, bigger partners, and they want bigger data sets and they want to go deep and wide, and that’s one of the reasons to do this,” Ben Lerer told Ad Age’s Jeremy Barr. Ben Lerer, who was previously founder and CEO of Thrillist, will be Group Nine’s CEO.

Discovery’s offerings in the deal are Seeker, its video network, and SourceFed, a video production company. The two of them together generate more than 3.5 billion video views a month, mostly on Facebook, according to Discovery. NowThis, which specializes in short-form video, is the number one video news publisher on Facebook. The Dodo specializes in animal content, with more than 700 million monthly social video video views, as AdWeek’s Sami Main reported. And Thrillist, known as a “dude-centric” site, has “doubled to almost 20 million monthly unique visitors,” Main wrote.

Pros and Cons of Going Big
But not everything may be rosy with this kind of roll-up. Individual startups run the risk of losing independence and their unique culture, although Group Nine says its individual properties will maintain editorial independence. And expectations can definitely increase with size — just look at the red flags that went up when BuzzFeed missed its revenue targets last year.

Being part of a larger business also pushes these properties to mature. Take the example of Vice Media, which has certainly pushed the boundaries. When a report on Columbia Journalism Review surfaced that Vice had failed to pay its freelancers, media insiders took notice in more ways than one. Tolerance for immaturity wasn’t going to sit with such a valued media property, and Vice was prompted to release a memo verifying it would work on its missteps.

Another thing to note is that more mergers potentially mean fewer leaders in an increasingly competitive digital space. Gawker, beloved by the Internet, couldn’t survive on its own after it went bankrupt and had to essentially put itself up for auction. Univision saw what purchasing it could do for its company, and vice versa. As AdWeek’s Sami Main wrote, “This merging of brands seems to create competition for the leader position for the next decade across mobile and other content areas.”

It will certainly be interesting to watch how these investments pan out — and what other mergers may be looming as consolidation continues among digital media startups.

Innovation | Revenue

Purch Acquires AnandTech in Continued Push to Connect Content and Commerce

December 22, 2014 Michelle Manafy, Editorial Director – DCN

With its acquisition of AnandTech, Purch continues to put its money where its mission is. Since it rebranded from TechMedia to Purch last April, the company has steadily continued to build up the ways in which it can “ease complex buying decisions for shoppers.” Fitting neatly into the buying funnel, AnandTech further enhances the reviews component of the ever-growing Purch stable of sites, joining its Top 10 Reviews, the Tom’s brand of tech media sites (purchased last year) and BuyerZone (purchased in June).

Anandtech.com is known for its computing and IT analysis and reviews, with an emphasis on mobile, which the company feels will round out Tom’s Hardware coverage. “AnandTech will be complementary, more than competitive, to Tom’s” says Purch COO, Doug Llewellyn. “The world is going more mobile. These guys got there early and do it better than anyone else.”

However he emphasizes the importance of what the two brands have in common: loyal, engaged audiences of tech enthusiasts. “With acquisitions, we always look at the user community and the people driving that community,” according to Llewellyn, pointing out that Purch focuses on the connection of content, community and commerce. He also says that the feeling across Purch is one of admiration and respect for AnandTech’s rigorous reviews process as well as its writers and editorial team, who will be staying on as part of the acquisition.

AnandTech Editor-in-Chief Ryan Smith–who took the role after the site’s founder Anand Lal Shimpi’s retired from journalism to join Apple in August–wrote a lengthy post about the search for a buyer. In it, he says Shimpi spent almost a year meeting with potential buyers to find one that had a sustainable business model (particularly given that AnandTech has been profitable since inception) and could improve the site’s reach. They also sought a buyer that had values that aligned with theirs. Smith found the process hearting, noting recent investments from traditional and new media, as well as VCs in the business of creating high quality content.

Smith writes that, “In meeting with the Purch business and editorial teams, there was a clear interest in further developing AnandTech’s strengths as well as feeding back AnandTech’s learnings into the rest of the Purch family.” Llewellyn echoes this, pointing out that through the Tom’s acquisition, “we learned a ton from how they do things and you can see the effect across our entire portfolio.” He feels confident that Purch “can bring enormous expertise on how to scale a brand, given that Tom’s was a third, or maybe only a quarter the size it is today when we acquired them last year.”

And scale, as well as advertising sales and marketing acumen are things that Smith clearly looks forward to increasing under Purch: “While we had no issues competing with larger corporate owned sites on the content front, when it came to advertising we were at a disadvantage…larger corporate owned sites could show up with a network of traffic, substantially larger than what AnandTech could deliver, and land more lucrative advertising deals than we were able to.”

Given that Purch boasts the number one position in ComScore’s Tech-News category, a global readership of more than 100 million monthly unique visitors, and the ability to drive more than a billion dollars in commerce transactions every year, increasing scale for the AnandTech brand should not be a problem. “We are really attuned to how marketers want to reach and speak to readers,” says Llewellyn. “But as we tie this great brand to the portfolio of brands under Purch, we definitely want to be sure that the readers know are excited to support the best of breed content that AnandTech is known for.”

Perspectives

AOL Aims to Improve Programmatic Performance with Convertro Acquisition

May 8, 2014 Michelle Manafy, Editorial Director – DCN

Yesterday, in its Q1 earnings call, AOL CEO Tim Armstrong was “pleased to report another quarter of growth at AOL.” Along with growth in AOL’s platform area, video and global expansion Armstrong specifically pointed to growth in programmatic advertising as a factor in the company’s performance. His statements followed just a day after AOL purchased Convertro, a maker of attribution modeling technology, to power its Adap.tv, AdLearn Open Platform and ONE by AOL.

Seth Demsey, CTO of AOL Platforms, says that programmatic addresses many of the digital advertising industry’s inefficiencies by helping to automate buying and selling. “It is also a great revealer of waste.” According to Demsey—and AOL’s proprietary data—as much as 70% of an advertiser’s digital investment (or publisher’s revenue) “gets lost in the digital ad ecosystem to niche ad tech features masked as media. We call this the ‘Technology Tax’ and by our estimates, it’s one of the biggest factors affecting the growth of digital investment.”

AOL’s programmatic strategy involves not only efficiency, says Demsey, but also “modeling go-forward insights. This may sound neat and tidy, but it’s actually an extremely complex problem to solve on just one screen, much less multiple screens including TV.” With the Convertro acquisition, AOL adds a new intelligence layer to its existing “proprietary optimization ‘brain’ in AdLearn to measure, attribute and optimize media across all screens programmatically.”

Starting immediately, all of AOL’s programmatic offerings will be able to leverage Convertro, so that customers “will have a 360-degree view of marketing performance across online and offline channels—with engagement, CPA and ROI of every ad unit automatically calculated.” It will also provide them with the ability to manage budgets between channels and within channels. Converto, says Demsey, “will help us make our advertiser customers smarter about how they allocate their budget, and our publisher partners smarter about what their advertiser customers deem most valuable.”

AOL agreed to acquire Convertro for a closing purchase price of approximately $101 million. This investment is certainly evidence that, as Demsey says, AOL has “doubled down on the platforms side of our business and we are not turning back. We expect to be a long-term leading player here.”