WORKWEEK

With the Axios announcement to Cox last week for $525M we’re in a clear window of acquisitions of the digital media industry.

Why is this happening?

Let’s first start by recognizing the purpose behind every deal varies. In my mind there are three types of acquisitions for media companies:

• Marketing Playbook
• Strategic Media
• Private Equity

The marketing playbook has started to really flourish because of Barstool’s acquisition to Penn. I like to joke that this is the “Hey, let me look good in the board meeting” playbook. As someone who has witnessed this up and close and personal at Under Armour, this is much harder to pull off than it appears. Mostly due to core competencies being so widely different and a company losing their north star and the budget for these companies almost primarily comes from how much signups/leads it provides. But that sexy pitch of “look at how much lower our CAC can be” is hard to ignore and will always be something that exists. 

The next playbook is strategic media. This is, essentially, larger media companies buying smaller media companies that fill holes in a strategy or weakness. What I find interesting is that there has been a string of emerging media businesses to sell to these larger behemoths in the space. Compared to the past where the industry was full of depreciating assets being sold in a fire sale, the last 3 deals created a new blueprint. There’s no doubt to me that Sean Griffey and the Founders of Axios owe the Morning Brew guys a drink. The Brew sold a majority stake for $75M and is reportedly going to do $74M in revenue this year (2 years after acquisition). The deal showed that buying emerging assets can be massively fruitful and protect the moat of legacy brands. Hence the the juicy multiples for Axios and Industry Dive.

The last playbook, which hasn’t been as active lately, is private equity. Historically, this was the move for media businesses. If we look at the newspaper businesses almost all of them were purchased by private equity for their cashflows, despite their slow death. Axel Springer remains the gorilla in this space with ownership over Business Insider and Politico. If we look at why this playbook may have gone a bit silent, we don’t have to look much further than the EBITDA multiples that companies have been selling at. Industry Dive sold for 15-16X – well above what most PE firms I’ve spoken with are willing to pay. If the economy starts to really plunder this playbook could come back in a big way. 

Marketing Playbook

• MyFitnessPal (Under Armour) – $325M
• The Hustle (HubSpot) – $27M
• Barstool (Penn) – $400M 

Strategic Media

• Morning Brew (Business Insider) – $70M+ 
• Axios (Cox) – $525M
• Industry Dive (Informa) – $525M

Private Equity

• Politico (Axel Springer) – $1B 

I don’t think the run of acquisitions is over in any meaningful way. PE firms (think TCG & Axel) to legacy brands (think SBG or Nextstar) to product-driven companies (think Shopify & Zillow) are all flush with cash and I bet are trying to make strategic moves with media properties. 

And there are plenty of opportunities. Could TCG buy a majority of Newsette? I could see it. Could Hearst buy 6AM City? I could see it (Note: I’m on the board of 6AM City and in no way implying that this is happening). Could theSkimm get bought by L’Oreal? Very possible (though not at the valuation investors will want). 

On top of that, there are dozens, if not hundreds of solo-creators who have email lists north of a 1M+ subscribers. These folks are primed for a strategic partnership.

So the market is hot – now what?

My advice to media operators: get your economics down, have data be part of your story, and know what you need to 10X+ the business. This is what Axios, Morning Brew, Industry Dive, and just about everyone else who got a great deal nailed. 

For the buyers: Focus on appreciating, not depreciating, assets. The more you try to get a “great deal” the less you’re focused on the future. Morning Brew wasn’t spitting off tens of millions of cash when that deal closed, but they for sure are now. Buying a depreciating asset only hurts your larger brand and relationships and won’t get you the return emerging assets can provide .

If you’re a media operator needing some advice selling or a buyer looking for some strategic insight, email me. I’d love to continue the conversation.