Looking Beyond Traditional Media
Blogs have gained mainstream appeal. Dealmakers, judging by recent activity, are just now starting to take notice
April 22, 2008
With traditional media in a tailspin over the last few years, its online counterpart, the blog, has steadily flourished. And at the same time newspapers and television stations are trading hands as part of the upheaval caused by new media, the M&A market is just starting to develop for blogs.
Buzznet, a music-focused social network, made two blog acquisitions earlier this month, buying the top two alternative rock blogs, Stereogum and later Idolator from Gawker Media. Gawker Media, meanwhile, which currently oversees 12 blog sites, last week sold two other titles besides Idolator — D.C. political blog Wonkette and urban travel blog Gridskipper. (Wonkette was sold to its managing editor, while Gridskipper went to Curbed, a network of real estate sites.)
Noticeably absent among the buyers are the big media companies, which so far have largely shunned acquisitions of blogs. Many media giants instead fumble with attempts at capturing the same audience and advertisers. Witness The New York Posts’ attempts at cutting into the “TMZ demographic” with its since shuttered PageSix.com. The newspaper again rolled out a new blog effort earlier this month with PopWrap, a site Gawker called out as an “inevitable Gawker clone.”
It’s likely most media companies share the view expressed by The New York Times. During their conference call last week, the company said it was actively looking for digital acquisitions but was having trouble finding targets that would meaningfully shift the needle in terms of cash flow. The newspaper giant reported a loss for its first quarter, hurt by a charge and a steep fall in advertising, and now faces job cuts. The story is familiar throughout most of the print media universe.
But while blogs have proven they can navigate the online world much more skillfully than print, even the most established models face too many questions that haven’t fully been answered. Blogs, after all, are still in their infancy.
“There is some broader interest [in blogs],” says Seth Alpert, managing director at AdMedia Partners. “But there is some uncertainty around it. Whether these kinds of sites can be successfully turned into large commercial enterprises, similar to traditional publishing, is getting sorted out.”
The most attractive benefit blogs offer is the combination of significant eyeballs with very low overhead. Most blogs are niche-focused as well — their closest traditional counterpart would probably be the magazine as opposed to the newspaper. That might also speak to why certain magazines, such as New York Magazine and Radar, have proven more successful at launching their own blog offerings. The niche component also aids in selling ads, which is why Barry Graubart, author of the tech media blog Content Matters, believes investment in the space should be a no-brainer.
“If you’re a media company you have to take it seriously now,” Graubart says. “There are a handful of sites that are clearly ahead of traditional media properties, getting information on the newest phone, newest device, whatever it may be. They’re reaching good demographics. Rolling up a handful together, you get significant page views [and] they’re attractive from an advertising perspective.”
He contends that the larger media companies could gain a lot of immediate page views through blogs rather than through more traditional targets, considering the deal size for many of blogs sites remains relatively cheap, in the $5 million to $15 million range.
The larger blog networks, if sold, are likely to fetch much more. Basing their valuations on such metrics as advertising revenue, page views, income from related businesses and a number of other measures, financial blog 24/7 Wall St. last month ranked the 25 most valuable blogs. Gawker Media, which claims about 30 million monthly unique visitors, took the top spot, valued at $150 million.
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