Online Values Seen As Bubblish, Social Nets Most 'Overhyped'

Nearly two-thirds (62%) of senior executives at major U.S. media companies believe a "bubble" is looming for online media properties, but the vast majority don't expect it to pop until 2009 or beyond. The findings, which come from a survey of 1,600 senior executives at leading media companies released Tuesday by investment banker AdMedia Partners, also indicate that online media properties will continue to command the highest multiples in the media industry's mergers and acquisitions market during 2008.

Industry executives estimated the median range of multiples for online media deals this year would be 12 to 15 times EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. By comparison, traditional media properties such as consumer magazines are expected to attract multiples of seven to nine times EBITDA, while newspaper deals would average about five times EBITDA.

"The steep drop in newspaper valuations is a reflection of the industry's challenges in developing an alternative business model," the AdMedia Partners report explains, noting that online and interactive media would continue to command valuations that "resemble the 1999-2000 craze."

The validity of those valuations was underscored by another of the study's findings. Asked whether they felt online content companies had developed "sustainable business models," the industry seems split. Fifty-one percent said yes, 49% said no.

"It's the electronic Wild West out there and will be for at least the next two to three years as people experiment, fail and try again," said one of the survey's respondents. "There is not enough advertising money to go around for a pure online media play, particularly with ads representing a shrinking share of GDP," said another, adding: "Content sites will have to find other sources of revenue, including the sale of data, transaction sharing and subscriptions."

Asked which of online media's content and business model niches are most "overhyped" in the financial marketplace, respondents cited social media networks as their top choice, followed by user-generated content (see table below). The "most accurate" models cited were "niche enthusiast online media," mobile content and gaming.

Growth Opportunity For Each Of The Following Is Accurate Or Overhyped



Don't Know

Niche Enthusiast Online Media




Mobile Content




Gaming (Branded and Co-Branded)




Integrated Ad Networks




User-Generated Content




Social Media Networks




Source: AdMedia Partners' 2008 Prospects for Media Mergers and Acquisitions survey. Base = 1,600 senior executives at leading media companies responding in December 2007.
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