John

The Valuation of Blogs Vs Newspapers: No Wonder I’m So Depressed.

In News, Online on May 17, 2008 at 8:14 am

It’s been a long couple of weeks since I last posted up anything, and tonnes of stuff have happened since, most notably Microsoft pulling out of its $44 billion deal to acquire Yahoo!. More recently, however, there’s been a couple of acquisitions of involving Digital Media companies all happening in the past three days, which also indirectly highlights how depressed the valuation of newspapers are. First off is the acquisition of CNET by CBS for $1.8 billion, a deal driven by CBS’s desire to mostly buy its way into online advertising. John Simons, an analyst for CNN Money, questions whether CBS paid too highly for its ticket into the world of lucrative online ad revenue:

With its bold $1.8 billion purchase of CNET, CBS is making a play for ad dollars that are shifting to the Internet. But the company may be paying too much for a network of Web sites that won’t address the conglomerate’s main problem: an over-reliance on advertising dollars as a source of revenue.

CBS management touted various “synergies” that the acquisition will unlock, but on the conference call with investors Thursday, executives offered few specifics. In a release, Moonves pointed out that the CNET deal would give the company exposure to the “fastest-growing advertising sector” – Internet advertising.

The acquisition takes place against a backdrop of slower ad spending. Overall advertising outlays grew at their slowest pace in five years during the last quarter of 2007, and that pace is expected to continue, according to Bernstein Research. Internet advertising grew 27% during all of 2007 to $25.5 billion, according to research firm, International Data Corp. Even so, that $25.5 billion represents only 7% of all U.S. advertising.

Then yesterday, Conde Nast announces its intention to purchase Ars Technica, a technology blog, for a rumoured valuation of $25million–a fact confirmed by the Wired blog yesterday (the purchase, not the price). I’m not sure how Ars Technica would fit into the Conde Nast family just yet, with its editorial staff not being integrated into Wired, as posited by TechCrunch. But Cripes, you think: $25 million for a blog isn’t too shabby is it? I liked one comment on TechCrunch that said: “I still can’t quite wrap my head around the valuations of blogs.”

Speaking on valuations, while blogs and digital media ventures keep appreciating, newspapers just keep getting lower and lower. It’s depressing. I used to visit Guardian’s Media site on Press and Publishing with excitement, not least for David Hepworth’s magazine column. But the news on newsprint gets gloomier by the day–at least with digital media, there’s a fervor of ambition.

This difference in valuation and ambition was highlighted by Jeff Jarvis a few days back in his post “The Plummeting Value of Newspapers”:

Now there’s a second huge writedown of the value of a recent newspaper purchase.

* Lee and the St. Louis Post-Dispatch, from Paid Content:

  • Back in March, newspaper publisher Lee Enterprises (NYSE: LEE) warned that it would take a $500-$700 million non-cash hit related to its $1.4 billion purchase of Pulitzer in 2005. We’d wondered previously when that would happen, given that all of the other newspaper deals have resulted in major writedowns. In a 10-Q filing (via AP) last night, the company confirmed that it had written down $721.9 million worth of goodwill related to that deal. It also warned that the final numbers aren’t set in stone, and could still change considerably.

* Earlier, the Minneapolis Star Tribune was written down twice: McClatchy had bought the paper for $1.2 billion and took a bath when it sold the orphan for $530 million and now the purchaser, Avista, has written that down by 75 percent. By my calculation, that’s a drop from $1.2 billion to $130 million — essentially a drop to 10 percent of its value only a decade ago.

It’s ironic that I’m still in print, I know.

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