• by adam.m , Michael Deibert , July 12, 2005

The acquisition of Internet companies by traditional media entities has continued unabated in the first half of 2005, with an uptick in mergers and acquisitions (M&A) that has the market approaching heights it hasn't seen for some five years.

In June, media giant Gannett bought PointRoll, a Web-based suite of online advertising technologies, in a transaction that was said to be in the $100 million range. The same month, the Scripps Howard News Service bought the comparison-shopping service Shopzilla for about $500 billion. And in February, The New York Times Co. paid $410 billion to acquire About.com.

"It's a little bit of a carrot and stick approach," said Tolman Geffs, managing director at Jordan, Edmiston, a New York firm that specializes in middle-market merger and acquisition advisory services to the media and information industries. The firm represented PointRoll during its acquisition.

"The carrot is the growth opportunity for ad-driven businesses online; the stick is the hole the Internet is creating in the profits of the traditional media, particularly newspapers," Geffs said. "Online extensions of those newspapers are not enough to fill that hole, and so what they are doing now is re-deploying 10 to 20 percent of their market gap into faster growth business."

According to a Jordan, Edmiston tracking study of 11 media and information sectors, during the first half of 2005, 266 M&A transactions were completed. That represents a 15.2 percent jump from the same time period in 2004, totaling nearly $27 billion in value.

The number also represents a 180 percent increase from the same six-month period one year earlier, and nearly totals the $30 billion in M&A transactions for all of 2004. The amount of activity marks a steep increase from the first halves of 2001, 2002, and 2003, which saw media transactions at the $15.3 billion, $5.9 billion and $8.5 billion level, respectively, and came within sight of the $36.8 billion in activity that was seen over the first half of 2000.

"Through the end of 2006, we expect to see further re-positioning of capital by the big, diversified media companies into building online portfolios," said Geffs.