Whoever is considering bidding on Forbes, which announced Friday that it is up for sale, must first address two questions:
1) Is revenue growth based on its aggressive branded-content and unpaid-blogger strategies sustainable?
2) If the answer the first question is “yes,” why would the owners sell?
Hint: If the answer to question #1 is “no,” never mind question #2.
Before we address the sustainability issue, though, let’s consider how we ever got to the point that the management of Forbes could, with a straight face, seek $400 million in the open market. That market has, after all, seen values of media properties plunging for the entirety of the 21st century. The Washington Post was recently sold for $250 million. The Boston Globe just changed hands for $70 million, a slight 94.6% erosion of value over 20 years. Maxim is on the block for $20 million. Six years ago, Quadrangle Capital acquired it with two other titles for $250 million. The other titles have since been shut down.
So where does Forbes get off seeking a sum that would represent a mere $130 million haircut over its 2006 valuation? The answer to that one is that if you squint real hard, it almost looks as if Forbes CEO Michael Perlis has cracked the code. Plummeting CPMs and general ad avoidance have cast doubt on the emergence of any business model for publishing, online or off, yet hasn’t Perlis sharply reduced costs and generated a whole category of new revenue without wholesale losses in readership? He has indeed.
On the cost side, he brought in Lewis DVorkin to Huffingtonize the editorial product. The roster of professional writers has been trimmed, replaced (and then some) by 1200 contributing bloggers, mainly businesspeople and academics with a perspective on certain subjects (arguably) elusive even to Forbes’ famously analytical specialty journalists. These folks produce a lot of copy -- some of it worthy, some of it self-serving, some of it barely comprehensible -- which in the aggregate generates a lot of audience, which is to say, a lot of clicks.
Meanwhile, Forbes has pioneered so-called “native advertising” with its BrandVoice program through which advertisers offer “content” that looks very much like editorial matter. They do a decent job of disclosing its essential marketing-ness, and the advertisers in general do a decent job of making the material readable (sometimes even interesting.) Most importantly, the audience is paying some attention. The click-through on some BrandVoice “articles” approaches that of actual editorial content. Considering that the click-through rate on display advertising is functionally zero, many look at BrandVoice as the template for all publishers’ revenue future.
The sales staffs at otherwise respectable publications are falling all over one another to deliver similar opportunities to agencies and their clients.
Because -- miracle of miracles, if the privately held company can be taken at its word -- Forbes Media is profitable.
Once again, however, “profitable” is not enough information. Is the company sustainably profitable?
No. Of course it isn’t. Why? Have you ever visited Forbes.com? It’s like being trapped inside a pinball machine.
are “top stories.” Video (on unconscionable, noisy autoplay). “Most popular” stories. Stuff trending in social media. Feature stories (how they differ from “top” or
“popular” in unclear). BrandVoice “articles.” Forbes videos. “Recommended” (by whom and based on what is also anybody’s guess). And Forbes Lists, including
the billionaires lists and the Celebrity 100, but not including the list of all the endless varieties of text and video you’ve just bounced around within. Clicking on any of these items sends
you afresh inside -- BING BING BONG BING -- another unpredictable arcade game.
The experience is confusing and it is exhausting. And visitors will tire of it.
They will tire of separating the wheat from the chaff. They will tire of not knowing the agenda of whoever wrote a given article. They will tire of giving Forbes the benefit of the doubt each time they get sucked into purely promotional text. They will tire of audio blaring in their ears without permission or warning. They will tire of wondering what exactly, under the banner of Forbes Media, is not for sale.
In short, the more they experience the content bazaar, the less they will like it. My best guess -- and it is only a guess -- is that the numbers are already beginning to reveal Forbes fatigue. This would explain the sudden attempt at what VCs and private-equity funders call an “exit.”
On that subject, I would pose to any prospective buyer yet one more question:
3) Is this really an exit…or just an attempted escape?