D.C. Based SB Nation Gets a Big Round of Funding

Yesterday, D.C. Based SB Nation announced a “mid-seven-figure” funding round. The round was led by Accel Partners and included Allen & Co., Ted Leonsis, Brent Jones, who previously played for the San Francisco 49ers, Dan Rosenweig and Jeff Winer who were previous Yahoo! execs, and a few others. What is SB Nation? Ultimately, it’s a sports blog network.

The company is run by Jim Bankoff, who used to be the programming chief at AOL. The network includes a group of high quality sports blogs, each of which uses a similar design across the network. The company provides equity in SB Nation in exchange for full ownership of “the content, URLs, and related assets”. Bloggers also receive a portion of the ad revenue.

It’s great to see another D.C. based digital media company generate substantial buzz, but one has to wonder how the company will justify what can only be assumed as a sizable valuation. Then again, if we run the numbers, the company could easily come up with a nice exit. With 2 million unique visitors a month, and the average blog receiving less than 2 page views per visit, at a $20 CPM, that would result in monthly revenues of $68,000 per network ad spot.

With 4 ads on each site, the company could easily surpass $3 million in revenue per year. If a high traffic blogger received 1 percent of the company and it eventually is sold for around $30 million, each blogger might walk away with $300,000. Not exactly a large sum if you’ve been slaving away at your blog for a few years. Conversely, that’s at the company’s current size. If they can grow (as most networks do) significantly, there could theoretically be a much larger exit.

I don’t know any of the details though on how equity was swapped but networks tend to favor the owners of the networks and not the bloggers. In this complex new media landscape, it is pretty challenging to figure out a successful business model where the bloggers benefit. Creating a network definitely adds a lot of value for a potential acquirer though so at least it’s nice to see the creation of a valuable company.

The real question is when will we start seeing a large number of blog network acquisitions? As newspapers continue to decline, one can only assume that each company will expand their digital media presence. I’d guess that the next 12 to 24 months will be ripe for acquisitions in this space.

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