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Why No One’s Gonna Buy Your Blog

E-media valuations are just too flippin' high.


Henry Donahue By Henry Donahue
03/07/2008 -08:24 AM






I'm on the record here as being in favor of hiring away other people's bloggers ("Coveting Thy Neighbor's Blogger") and there was an entertaining Internet dust-up this week about the next logical step: whether or not big media companies should buy big blogs.

The recap:

Jeff Segal on breakingviews.com thinks that media companies should steer clear of buying blogs right now because of some obvious risks. Blogs are tough to value, dependent on writers with individual fan bases and also notoriously faddish. On top of that, he takes a gratuitous swing at Gawker.

Felix Salmon at Portfolio mag's Market Movers blog thinks that Segal is "hilariously off base" and "utterly clueless." He sees plenty of comparable transactions (Engadget, Freakonomics) and the big blogs have good, old-fashioned revenue as a starting point for valuations. He also points out that many big blogs (including Gawker) have thrived after the departure of their founding editors. Salmon says that acquisition discussions are going on all the time and, once buyers' and sellers' price expectations cross, we'll start seeing some big blog acquisitions.

Gawker itself chimes in with hastily composed rundown of the reasons why a few of the biggest blogs will never be acquired. Gawker: too outsider-y. TechCrunch: really just one guy. BoingBoing: really just three guys and a gal. Weblogs.inc: already acquired.

Based on my experience over the past six month, Segal comes closest to the crux of the current M&A market: e-media companies (including blogs) do have estimable valuations, but those valuations are too flippin' high. Like 1999 high.

More than one company has recently expressed to me that their value expectation starts at "$10-20 per unique visitor" and goes up from there. In this environment, traditional media players have a couple of options:

1. Get in on the land grab. Discovery Networks is a great example of this, with their Treehugger and HowStuffWorks acquisitions. Valuations be damned, if you're a multi-billion dollar cable network about to go public, you can pay up for these properties and accelerate your online strategy to light speed.

2. Invest in your own site instead. Most people I talk to (who are not multi-billion dollar cable networks) think that valuations have to come down. In the meantime, if you have a sub-$15 CPM, you're likely to get a better return on a $5 million investment in your in-house product than the same money spent on a site with 300,000 to 500,000 uniques.

So Segal ends up being laughably wrong on all the specifics but right on the recommendation. Everybody but the deepest pockets probably has to wait for valuations to come down.

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Henry Donahue By Henry Donahue -- Henry Donahue is the CEO of Discover Media LLC, the publisher of Discover magazine and Discovermagazine.com. Donahue was formerly CFO of Primedia's Lifestyles Magazine Group, a 30-plus magazine division, which included Soap Opera, Crafts, Boating, Equine and History titles.

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