On The Web, Media Giants Keep Grabbing—Not Building | Adweek On The Web, Media Giants Keep Grabbing—Not Building | Adweek
Advertisement

On The Web, Media Giants Keep Grabbing—Not Building

Advertisement

If you can deliver the traffic, the time is coming to cash in. One look at NBC Universal's $600 million purchase of women's portal iVillage last week shows that it's a good time to be an independent Web publisher.

For the last year or so, traditional media giants have been snatching up prominent Internet brands like it's going out of style. Witness the New York Times Co.'s purchase of About.com in February, News Corp.'s shopping spree last summer and Viacom's acquisitions of Neopets and iFilm.

And the feeding frenzy isn't over. Observers expect more deals to be inked in the coming months, as traditional media players hunger for a bigger piece of the vibrant online ad market—and getting it means buying out one of the remaining Web sites with instant traffic.

"What we're really seeing in 2006 is that original online content is still king," said Tolman Geffs, managing director at investment bank Jordan, Edmiston Group. "There is an intense hunt on for these companies. We're going to see quite a few of [them] transact."

In a presentation delivered recently to the Online Publishers Association, Geffs proved clairvoyant in citing iVillage as a company likely to be acquired. He also listed Gawker, CNET, Facebook.com, Atom Films, Beliefnet.com, YouTube.com and CollegeHumor.com as the next targets.

"There's huge pressure on traditional companies from Wall Street," said Dave Morgan, CEO of behavioral targeting firm Tacoda. "They're saying, 'What are you doing digitally?'"

Most traditional media companies are doing plenty in the digital space but are finding it tough to match the scale of an iVillage (15 million unique users) overnight. "The buy continues to be a safer bet than the build," added Jim Rutherford, evp of Veronis Suhler Stevenson.

Beyond branded content sites, most media giants were taken aback by News Corp.'s $580 million purchase of MySpace.com. It's a site, after all, that produces virtually no content of its own yet has over 50 million registered users.

"[Traditional companies] are seeing that social networks have very low customer acquisition costs and are very sticky applications," said Safa Rashtchy, managing director at Piper Jaffray. "It's almost opposite of the traditional business models."

After iVillage, the most obvious target for a takeover is CNET, said Rashtchy. With its techie male audience, huge reach (26 million unique users) and popular affiliate sites (GameSpot and TV.com), CNET is speculated to be worth close to $1 billion (not that CEO Shelby Bonnie needs the money).

One entrepreneur who seemingly wouldn't mind cashing in is Mark Zuckerberg, the 21-year-old founder of Facebook.com, a social networking site designed specifically for those with e-mail addresses ending in .edu (that is, college and grad students). The site's traffic has skyrocketed—up from 2.8 million unique users last year to 10.5 million as of February, according to comScore Media Metrix—and so has its price tag. Some advertisers believe Facebook's student-restricted environment is better than MySpace for brands. Executives from Facebook, as well as TheKnot.com, were spotted at a conference last week hosted by investment bankers Allen & Co.

Which companies might do the buying? News Corp. still has some cash to spend and could make a run at a company like CNET. Meanwhile, Viacom's MTV Networks would seem to be a perfect fit with Facebook's core 18-24 demographic. Web giants such as AOL and Yahoo! are always contenders. Even print players like Condé Nast, Hearst or Gannett—media companies most threatened by the Web—may want to buy their way in. And don't forget Barry Diller's IAC. But time is running out, and prices are only going up.