Content Matters

GigaOm Acquires PaidContent Creating Premier Digital Media Brand

Tech blog GigaOm has acquired Content Next Media, parent of PaidContent and related blogs.

Content Next, first acquired by Guardian Media in 2008, has been on the shopping block in recent months, as GMG looks to focus its operations. 

Of all the rumored buyers (including AOL, Vox Media, WebMediaBrands, Dow Jones, SAY Media) this is likely the best possible result, both for readers and the Content Next team.

From the outside, it looks as though the two companies have very similar cultures. Both founded around the same time as independent blogs (by Om Malik and Rafat Ali), GigaOm has been able to remain solo, taking venture funding along the way.

The combined GigaOm - Content Next will be an impressive media company:

• Great editorial - from editors and writers like Staci Kramer, Ernie Sander, Mathew Ingram, Nicole Solis, Om Malik, Erica Ogg and others - will yield great coverage of the digital media and technology space.
• Both companies have great events - including Structure, Structure: Data, Mobilize, PaidContent, PaidContent Entertainment, and more.
• GigaOm has experimented with paid research, led by VP research Michael Wolf, which has the potential to grow further.

With a modest cost structure, the combined company should retain the flexibility and nimbleness to test and adapt in an ever-changing digital media environment. 

Congratulations to both companies. I look forward to seeing what comes next.

Why AOL – HuffPo is a Smart Deal

The big media news this morning was the AOL (AOL) acquisition of the Huffington Post. HuffPo had long been considered the diamond of the alternative media world. The only online newspaper site with more traffic than HuffPo is NYTimes.com.

Many argue that it may be too little, too late for AOL, but I’m not so sure. Content may not be King (platforms like Facebook, Google and Twitter have proven that), but traffic can still be monetized.  By adding HuffPo, along with Engadget and TechCrunch, AOL positions itself strongly in the upper and middle segments in terms of quality content, while it already covers the lower end with its Seed platform.

The acquisition strengthens their position in local news, augmenting their existing Patch platform. And, HuffPo gives AOL much greater potential reach for Wow, it’s daily deal/Groupon clone. And the large AOL  sales force should be able to generate much higher revenues from the Huffington Post.

Key to the deal is Arianna, who will bring a clear voice to their disparate content properties. As Felix Salmon writes:

It’s smart, and bold, to put Arianna in charge of all AOL’s editorial content, since she is one of the precious few people who has managed to create a mass-market general-interest online publication which isn’t bland and which has an instantly identifiable personality. That’s a rare skill and one which AOL desperately needs to apply to its broad yet inchoate suite of websites.

Meanwhile, Jeff Jarvis notes:

Content alone isn’t enough for Aol. It has content. Lots. What HuffPo and Arianna bring is a new cultural understanding of media that is built around the value of curation, the power of peers, the link economy, passion as an asset, and celebrity as a currency.

Yet analysts remain cautious about AOL. Macquarie’s Ben Schachter advises clients to “wait on the sidelines”, while Clayton Moran at the Benchmark Company notes that the $315m price tag is “more than 40% of the $802 million in cash that AOL had on hand at the end of last year. The acquisition price is a bit of a stretch.”

There are really only two major online content companies left – AOL and Yahoo. With this acquisition, AOL takes a big step forward.  As Keith Rabois points out, with this acquisition, AOL becomes a more attractive acquirer for startups and entrepreneurs than Yahoo.

As newspapers experiment with moving content behind the paywall, it creates additional opportunity for free news sites. With a mix of topical, political and local content, AOL is positioning itself to fill any void. Of course, the proof will come in the months that follow. Will authors look to be paid? Will Patch integrate nicely with HuffPo? Lots of questions yet to be resolved, but this is a smart deal and it has a good chance for success.

 

Alacra Pulse M&A Rumors Fuel StockTwits Streams

A few weeks ago we did a soft launch of a "stream" of Alacra Pulse M&A Rumors on the StockTwits platform. StockTwits has been doing a quiet rollout of the Streams, which will launch with more visibility soon.

This morning, StockTwits' Phil Pearlman wrote a blog post spotlighting a couple of deals that were uncovered by Pulse early on before the market reacted:

Alacra Pulse: M&A Rumors & Deals Stream is Officially Rocking

The first deal involved Smurfit-Stone Container (SSCC) being acquired by Rock Tenn (RKT), which was announced January 24. As Phil notes in the post, on January 20, Alacra Pulse pushed out notification that Smurfit-Stone would be a good acquisition target, based on a blog post from Footnoted. Investors who bought the stock at the market close on the 20th would have seen better than a 25% return.

A similar case occurred with Genoptix (GXDX), acquired by Novartis (NVS) also on the 24th. Two weeks earlier, the Pulse M&A Rumors Stream noted that Genoptix was rumored to be in-play.  Investors buying on the close that day would have gained 27% on the stock.

Through our partnership with StockTwits, we can push these Pulse Streams, previously available only to institutional clients, out to a broader market of active traders and investment professionals.

To learn more about the Pulse M&A Rumor Stream on StockTwits, visit the StockTwits Marketplace and sign up for a free trial.

 

Who Should Buy Barnes & Noble?

Barnes & Noble (BKS) is being put on the block due to its depressed stock price. Current market value is barely $750 million, making it a reasonably inexpensive purchase.

The two most obvious suitors are founder Len Riggio and investor Ron Burkle, who currently owns about 19% of the company. But beyond those two, who might bid for the company?

Some have suggested Amazon (AMZN), but I don’t see that happening. First, that deal would be unlikely to pass antitrust scrutiny. More importantly, the deal wouldn’t make a lot of sense for Amazon. In Barnes & Noble, they have a weakened competitor on both the traditional book and eBook market. The Amazon model is working and there’s no reason to burden it with the negatives of running a brick & mortar business.

I’m sure that private equity firms will be in the mix (they always are) but won’t speculate on which ones might bid. Suffice to say that there will be other financial bidders here.

Barnes & Noble might also gain attention from other traditional brick & mortar retailers. It could be an interesting purchase for Target (TGT) or Wal-Mart (WMT), but neither is very acquisitive and I’m not sure that it would fit either company’s business model nor culture.

I think Barnes & Noble might have the most appeal to companies in the education market, perhaps someone like Blackboard, Inc. (BBBB). B&N already operates numerous college bookstores and its textbook division remains a strength. More importantly, the Nook seems well positioned to become the delivery platform of choice for education. B&N and Blackboard recently signed a partnership for eTextbooks. Financially, a deal wouldn’t be that easy. Blackboard’s market cap is just $1.3 billion, so they would need help in financing a deal. But a combination of the two companies could establish the dominant player in the educational e-reader space. The Nook would have incredible branding (every time a student logs on to their Blackboard service) and would have both online and offline distribution.

What Sidney Harman should do with Newsweek

It’s possible that 91-year old Sidney Harman acquired Newsweek simply as a means of minimizing estate taxes for his family. But assuming he truly wants to turn Newsweek into a viable product in the coming years, what might he do?

Here are three steps he might take to make Newsweek viable.

Leverage the brand

This won’t be easy. Newsweek has very strong brand recognition, but that brand name is an anachronism in the age of real-time news.Perhaps the best thing he can do here is come up with a clever tagline. Maybe something like:

There are 604,800 seconds in every week. Newsweek covers each and every one of them.

Kill the print edition

This one is the most obvious, but will also be very difficult for many inside Newsweek to embrace.
But there is no better way to change the mindset of a newsweekly than to eliminate the weekly editorial and print schedule.

It may seem harsh to kill the print version and the many jobs that will go with it, but if he wants to save the brand, he will need to move swiftly in that direction.

Reconstitute themselves as the curator of choice for politics & policy

Rather than trying to author content on a vast number of topics, what if they instead set out to become the curator of choice for political and policy content? Don't try to comment on the news - instead, provide insights on key policy issues, both domestic and international.

Retain a few key editors, each of whom will be expected to write 1-2 blog posts each day. Then, using a combination of technology and lower-cost curators, sift through content from other media and blog sites, identifying relevant content and classifying it by topic. The end result will be a series of high quality pages on compelling topics, led by a modest amount of proprietary blog content surrounded by carefully curated web content. Some topics may be evergreen, while others may be cyclical (elections) or event-driven (e.g. WikiLeaks). The content should be multimedia in nature and should aim to provoke and promote discussion.

I would trash the existing Newsweek.com site and come up with a dual strategy for website and mobile.  They should take a look at what Flipboard and Pulse have done on the iPad for inspiration. Everything should be based on easily browsing and sharing content.

That’s what I would do with Newsweek. What would you do?

 

There’s No Room for News Weeklies in a World of Real-Time Niches

Yesterday’s announcement by the Washington Post of their intention to sell Newsweek should come as no surprise. In fact, it wouldn’t have shocked me to see them announce they would simply shut it down. Yet many traditional media analysts still seem surprised by the news.

Time and Newsweek have held prominent positions in media history. For decades, it truly mattered what topic they chose to adorn their covers each Monday. In a world where news was dominated by the evening newscast, these two publications truly influenced the national agenda. But it’s been at least 15-20 years since either publication was truly relevant. As David Carr asked in a tweet yesterday, when was the last time you picked up a copy of Newsweek other than in a dentist office?

 

The impact of real-time news cannot be dismissed. Looking at the Newsday announcement itself, the first tweets appeared yesterday around 10:45am in a tweet by Anthony Edgecliffe-Johnson.  Within 15-20 minutes, I’d seen 40-50 comments on the announcement in my tweetstream. In fact, when I saw a tweet “announcing” the sale yesterday afternoon around 2:30pm by Steve Rubel, I recall thinking “why is he tweeting old news as though it were just breaking?”. 

I realize, of course, that only a small number of consumers are Twitter users, but cable news has the same impact. How many people have seen the photo of the Times Square bomber already?  Would you buy an issue of Newsweek or Time next Monday if his picture were on the cover?

I can only think of three weekly news-oriented magazines which remain relevant to a wide audience. The Economist is successful largely on the quality of their writing, their willingness to do long-form stories which lend themselves to deeper analysis, and the fact that they bring a global (or at least European) perspective to world events. New York Magazine remains relevant because it covers stories that others don’t. They don’t have a new focus, though certainly have elements of news in their pages. For New Yorkers, they provide a mix of who, what & where that remains important, though I can see them threatened in the long run by various blogs from Gothamist to Gawker. The New Yorker remains relevant for some of the same reasons as the Economist. Long-form stories, often on topics barely touched on elsewhere, combined with fiction from top writers make the New Yorker a good read.

Newsweek certainly has some quality writers, Jonathan Alter and Fareed Zakaria among them. Yet their format doesn’t provide a forum for these writers to do quality investigative journalism. How much of a difference in quality shows through in a 500 word story? Let’s face it- Rolling Stone has probably produced more relevant and impactful articles on politics and finance in the past year than Time and Newsweek together.

Of course the key parlor game question is “who will buy Newsweek?” I’ll play along with a few suggestions (apologies to those who saw me tweet these yesterday morning – I guess blog posts can seem old compared to real-time tweets).

First, I’ll dismiss the one that many others have suggested. I don’t see any likelihood that Bloomberg will buy Newsweek.  Yes, they have a lot of money and just bought Business Week, but their efforts to reach a wider audience don’t go as wide as Newsweek. Bloomberg wants to reach the corporate C-Suite, not Main Street. The new Bloomberg BusinessWeek gives them a great vehicle, in print and online, to do that, while providing more commentary to deliver through their terminals. Newsweek provides neither. So, those hoping to see a BloombergBusinessNewsWeek masthead will be disappointed.

News Corporation (NWS) could buy Newsweek. During its heyday, Newsweek was always a center-left publication, as compared to the more right-leaning Time under Henry Luce. From an ego standpoint, I can imaging Rupert Murdoch’s delight in moving Newsweek aggressively to the right. I can imagine his enjoyment in letting Glenn Beck or Sean Hannity sit behind the desk formerly inhabited by Ben Bradlee. Yet I see this as unlikely. Fox has print vehicles already (most prominently the WSJ) and I don’t see Newsweek as ultimately that attractive.

The Huffington Post or Politico should buy Newsweek. These alternative media have grown tremendously. HuffPo traffic is now ranked 10th among news with more than 13 million uniques in March. They have aggressively moved beyond politics, covering world events and local news. Yet the brand perception remains as a left-leaning political site. The Newsweek brand could bring instant credibility with a wider audience. While the print side of the business may not be that attractive, I could see where keeping print alive might bring them some advertisers they would otherwise not reach. If not, they could easily shut down the print operations a year or two from now, keeping the brand as an online-only news product.

For magazine publishers, the long-term question may be the one posed by Mathew Ingram:

Hopefully trade rags like Adweek and Mediaweek have already given some thought to their business model, but they might want to change their names while they're at it. And, in the world of real-time news, will we soon be saying that Women's Wear Daily and Investors Business Daily sound too static?

Salesforce Acquires Jigsaw, Shifting Prospect Data Landscape

Salesforce.com (NASD: CRM) acquired Jigsaw in a deal worth $142m this week. Once described by TechCrunch’s Mike Arrington as “one of the most evil companies on the planet”, Jigsaw has leveraged crowdsourcing of editorial content to effectively transform the prospecting database segment of the content industry.

For those unfamiliar with Jigsaw, they’ve built a prospecting database using a simple premise: sales reps could enter “business card info” for their prospects and clients, accessing one free record for each they uploaded. While no sales reps will give away their “Glengarry leads”, Jigsaw understood that one sales reps trash was another’s treasure, and reps would gladly share info on non-active prospects in return for new leads.

Jigsaw has transformed the industry in a few ways.
First, and most obvious, is the use of a crowdsourcing model for data maintenance. The crowdsourcing model is compelling for several reasons:

• Cost structure is low, as you push the cost of maintenance to your users. In Jigsaw’s case, they developed a thriving community who would actively source and update contacts in the Jigsaw database in return for free access to the service. Over time, Jigsaw found that by providing a “leaderboard” of the most active in the community and a marketplace for selling the points acquired by cleaning data, a subset of these users were updating thousands of records.

• Scale and reach go beyond what any traditional data collection process could provide. Today, Jigsaw has more than 46,000 people at Deloitte LLP, for example. Traditional people databases might capture 50 or 100 or maybe 500 executives at a firm like Deloitte. But they’d never be able to navigate the structure of a firm that large to amass that number of contacts.

• Maintenance is the greatest challenge for people databases. It’s easy to aggregate a bunch of names and titles, but once you go beyond the C-Suite, it’s incredibly difficult to maintain that information. Jigsaw implemented a crowdsourcing model where its users could challenge and update any records that were incorrect. In other words, every time a sales rep dialed an outdated number or had an email bounce back, rather than getting annoyed, they had an immediate opportunity to gain “points”  by updating the record in Jigsaw.

 
The second, and less obvious change that Jigsaw has brought is a mass-market data cleansing & management solution. While Jigsaw is known as a prospecting database, a large part of its revenue comes from selling what it calls its “graveyard”. Customers with large CRM databases can compare their data to the Jigsaw graveyard, identifying and cleaning up any “dead” records. For those records that are active, Jigsaw can append missing or updated information such as direct dial phone number, new titles and more.

Acquiring Jigsaw is a very smart move by Salesforce.com. Since the birth of the CRM industry 20 years ago, one of the biggest challenges has been populating and maintain quality data. The way to get sales reps, generally averse to any kind of reporting, to actively use a CRM system is to provide compelling leads. Unfortunately, maintenance is often an afterthought, so even those systems that get off to a good start often become a neglected mess of useless information.

For traditional aggregators of people data, this will place added pressure on what was already a difficult market. Providers such as InfoGroup, D&B, Leadership Directories, Hoovers, ZoomInfo and others will need to step up their game. While each of those providers can point to core markets where they provide specialized services not offered by a generic database like Jigsaw, a significant portion of their revenues come from more general use of their data. As Salesforce more closely integrates the Jigsaw platform, it will make it significantly more difficult for these businesses to succeed.

Congratulations to Jim Fowler and the Jigsaw team. They’ve built a rapidly growing, highly disruptive business in an important segment of the content industry.

(Note: Jigsaw was named one of the "50 Content Companies that Matter" by the Content Matters blog in December, 2005).

Morningstar Acquires Footnoted.org blog

Morningstar (NASD:MORN) has acquired Footnoted.org, the blog-based financial research service that reads through footnotes of SEC filings, spotlighting the items that companies prefer investors not see.

Footnoted also posts its "worst footnote of the year" each year - for 2009, the "winner" was Chesapeake Energy (NYSE:CHK) which spent more than $12 million to purchase its CEO's antique map collection.

Last year, Footnoted introduced Footnoted Pro, a service geared towards hedge funds and institutional investors.

Congratulations to Footnoted.org founder Michelle Leder, who has tirelessly read through more filings in the past seven years than most analysts do in a lifetime. Following the acquisition, Michelle will continue to run Footnoted under its new parent.

Update: Some insights from Michelle on the acquisition, posted at Footnoted.org.

Ten for Ten: Digital Media Predictions for 2010

I think we’re all happy to see 2009 come to an end, while we prepare our businesses for the growth we hope to see regenerated in twenty ten. And with that eternal hope comes that other classic year-end exercise: predictions.

So, here are my predictions for digital media and technology in 2010:

1. Apple (NASD: AAPL) will break its exclusivity with AT&T (NYSE: T), making the iPhone available on other networks (T-Mobile and Verizon). AT&T will get to test the loyalty of its new subscribers (and find many of them leaving their dropped calls for Verizon).
2. Android (NASD: GOOG) shows itself to be a serious player in smartphones. This one will take some time, but I think that going into the 4^th quarter of 2010, the Android platform will have established itself as a legitimate competitor to the iPhone. Android will also make a run at the enterprise market, providing a viable alternative to the Blackberry.
3. Spotify will line up its partners and launch by mid-year and will mount a realistic challenge to the iTunes model of buying music. Apple will respond with a service-based offering, based on the LaLa platform it acquired.
4. Online advertising spend will exceed analyst forecasts. As the market begins to recover, advertisers will first expand their budgets online where they can measure results. Pepsi’s decision to skip the Super Bowl and focus online could be the tipping point and we’ll see lots more growth to come.
5. The real-time web will continue to grow in importance, and will be more fully integrated with the existing web (especially on mobile devices). Hence...
6. Real-time search results presentation will be overhauled. Google and Microsoft Bing (NASD: MSFT) rushed solutions out the door after inking deals with Twitter, but the results are mediocre, with a “last-in, first displayed” approach like web results circa 1998. Given time to do it right, I expect that Google will display results using measures of influence (based upon a mix of followers and engagement) to rank results, similar to their core page rank system.
7. Consumers embrace web video as an alternative to cable: Roku’s partnerships with Netflix (NASD: NFLX) and Amazon (NASD: AMZN); and various devices launched on the Boxee platform will begin to drive mainstream acceptance of video downloading. This integration of television and the Internet will lead to new and innovative offerings.  Meanwhile, Blockbuster (NYSE:BBI) finally declares bankruptcy, shuttering most of its stores.
8. Apple will release its long-rumored Tablet. While it will not instantly cure cancer or bring world peace, it will provide functionality that the naysayers had not considered, much in the way that the iPhone was more than simply an iPod with a phone built-in. The Tablet will not be the savior for the print industry, but will accelerate consumption of television content and may also provide a boost to glossy magazines and other visual content.
9. Mobile gaming will continue to explode; the iPhone and Android will be considered viable alternatives to Nintendo DS and Sony PSP as handheld gaming devices.
10. Internet Explorer market share drops below 50%. While Apple and Google fight over control of the rapidly growing mobile screen, Microsoft’s long domination of the desktop will be diminished as Firefox, Chrome and Safari eat into Internet Explorer’s share.
11.  The M&A market will be strong in 2010 as entrenched companies pick off weaker competitors at what they perceive to be bargain prices. Here are a few deals that I think we could see:

• MSFT should buy RIM and give up on Windows Mobile; otherwise, they will cede the mobile space to Apple and Google. Can Steve Ballmer make a large deal happen without his ego screwing it up?
• LiveNation should merge with MySpace. The recording industry is dead; live performances are the way that the big acts make their money. Meanwhile, MySpace is a great platform for awareness, but doesn’t fit with News Corp’s long-term strategy and is dying as a social media platform. News Corp should spin out MySpace and merge it with LiveNation as the dominant music platform.
• Twitter will not be acquired; instead it will have an IPO. Ditto for Facebook.
• Numerous content company CEOs will overpay for underperforming old media assets, convinced they can turn around these “gems”. They will fail.

Will these predictions come true? Who knows. But, it’s pretty clear that mobile, the real-time web, gaming and video are where huge opportunities will come in the next 12-24 months.

Is the M&A Market Warming Up?

It's been a while since we've seen multiple deals in the content and technology space on the same day. I don't want to get ahead of myself, but perhaps this is a sign that the M&A market may soon heat up a bit.

Three deals were announced yesterday. The big one was Amazon's acquisition of Zappo's. Earlier in the day we also saw Roll Call (the Economist) acquiring Congressional Quarterly, while private equity firm Apax Partners took out Bankrate.

The Amazon - Zappos deal seems to be a no-brainer. Reports indicate that Zappos CEO Tony Hsieh (@Zappos) was in no rush to sell, but was pressured to do so by their investors. A price of roughly 1x revenues is a bargain for a growth engine like Zappos. It seems to be a great fit. Zappos is known for its amazing corporate culture and its fantastic customer service and has been called the "Amazon of shoes". Amazon, of course, has the infrastructure, processes and scale to handle ecommerce at a tremendous scale. If Amazon can scale Zappos without damaging its customer service capabilities, that will be a huge win.

And while Amazon immediately becomes the dominant player in online footwear, I think the company will be able to extend Zappos' success into other soft goods, such as clothing, where Amazon has made some inroads but has only on a limited basis. Zappos has been able to get consumers to buy shoes online (where fit and comfort are key); it would seem other clothing items might be easier. That said, one challenge Zappos has faced is the huge number of returns. They have encouraged users to order multiple pairs of shoes, keeping the ones that fit best. While Amazon's logistics infrastructure can minimize the expense of shipping shoes back and forth, it seems that the "order two pairs and send one back" model is not sustainable in the long run.

I thought that Roll Call's purchase of CQ was also a terrific deal. And while the print media business has been under tremendous pressure, CQ is in one of the few growth spots in the industry. While deal terms were not announced, pre-announcement rumors were in the $100M range. While there's certainly overlap between the two companies, it's good to see CQ find a strong parent in the Economist. I'll be sorry to see CQ CEO Bob Merry step down, though. He's done a terrific job leading the company.

The Apax - Bankrate (NASD:RATE) deal struck me as a bit of a surprise. The $28.50 price, a 15% premium over the prior closing price, seems a bit rich for the current environment. Obviously, Bankrate has been hit hard by this economy. While the entire online advertising market has taken a big hit, that has been compounded for Bankrate, whose lead gen and advertising businesses are centered around home and auto financing. According to the 10K, Q2 revenues dropped to $31M from $40.2M a year ago, while net income plunged from $4.1M to $1.9M for the period. While I can see Apax viewing this as buying at the bottom, I think there are pure-play online media businesses in more attractive markets out there right now. I believe that the online ad market will be an early winner when the economy does come back, but banking and automotive will continue to drag for quite a while.