What Is All About?

I was out on a lovely Washington evening, when my BlackBerry began to vibrate repeatedly with friends and colleagues alike notifying me: The New York Times Co. acquired for north of $400 million. By some reports, this was 10-15x NEXT year's revenue; 25-30x NEXT year's EBIT.

The reactions:

"The bubble is back!"

"Newspapers are dead, so Dow Jones and The New York Times have to do SOMETHING, and few properties of size are out there. It's the hail Mary!"

"Only an industry player could justify this price--there must be a ton of synergies under the covers; otherwise this makes no sense."

One self-interested private equity rock star, wanting to invest in the Internet consumer space, said--perhaps least charitably of all--"F--- The Times and Dow Jones--now I'll never be able to afford anything!"

This last remark aside, suspicious reactions break down MarketWatch and into roughly three categories: 1) paid too much; 2) had no choice; 3) must be synergies.



Anything is possible in the world we live in, and any of these reactions may prove out. My own view on them, however, is: 1) time will tell; 2) these are multibillion-dollar market-caps with outstanding brands--they have a TON of choices; 3) even if there are synergies, they usually are never as much as people think; and a 10-20% cost improvement gets you only so far on returns.

I think something else is going on here--a firm, irreversible commitment to the proposition that interactive advertising is here to stay, and will grow more significantly and more quickly than others believe. That's right--these deals are a belief, first and foremost, in the TOP line. And these institutions are putting their money where their mouths are, and in big ways.

And here, I believe, they are dead right.

"But MarketWatch makes sense, Chris. Dow Jones has expanded its reach into its existing advertising base. The content is similar. What IS" one journalist asked me yesterday.

No doubt that The Wall Street Journal newspaper is not, shall we say, a significant growth opportunity. And probably caps or at least slows its Internet advertising growth by aggressively pursuing subscriptions. MarketWatch certainly opens wide increased audience and advertising opportunities in and around Dow Jones' sweet spot. This is one confirmation of belief in the interactive advertising world: reach more, and in related areas, and deliver greater value to consumer and advertiser alike.

But there is another phenomenon on the Web, and perhaps this is where comes in. I've often written here that the Internet is all about the individual--folks want what they want when and how they want it. Through Google and other search engines, they are going to many places to find out what interests them. In this world, is not about one "destination," but effectively, a holding company of many destinations for many needs. I've never seen the numbers, but I suspect that very little traffic STARTS at's home page--but over 20 million people find pages when searching for their needs. Know something about these users; get useful advertising in front of them--even experiment with greater ease with pay-for-performance (which traditional media companies fear)--and the revenue growth opportunity is significant.

In this scenario, is not about a cohabitation with an existing brand and capability--but a new and large expansion into serving users with information they want when they want it, from traditional and community alike. That a group like The New York Times Co. owns it can mean greater focus on quality and accuracy, but if they are smart, they will embrace more community and the separateness of need each "vertical" requires. And then they've opened up a new channel--new relationship--for their existing and new advertisers.

Now it's time to deliver. But three years from now, if margins in these deals improve some--but, more importantly, revenue growth out-performs trends, which I believe they will--no one will question what this was all about.

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