Tag Archives: Acquisitions

Digg guys are up for sale again, quietly

The situation around Digg is heating up, but not because there are many potential buyers bidding for the company, but it seems the rumors are all around us telling stories where Digg is in desperation to sell out. It has happened before; it happens today again, the only difference is the price tag. Digg is again getting serious about a sale and has hired Allen & Company to shop the site for what rumors claim to be anything in the $300 million range.

Investment bank Allen & Company has been involved in a number of high profile mergers and acquisitions in the past. Interesting for the Allen & Company is the privacy the investment firm seems to be working in as argument for which is the absence of even a basic site for the company on Web. Perhaps they don’t like publicity. Yet, we have found the firm’s contact details, which can be found among the other links on the end of the story’s page.

For Allen & Company, there’s no business like financing show business. The investment bank serves variously as investor, underwriter, and broker to some of the biggest names in entertainment, technology, and information. Viewed as something of a secret society, the firm has had a quiet hand in such hookups as Seagram (now part of Vivendi) and Universal Studios, Hasbro and Galoob Toys, and Disney and Capital Cities/ABC. The firm’s famous annual retreat in Sun Valley, Idaho, attracts more moguls than a double-black ski run (Warren Buffet, Bill Gates, and eBay CEO Meg Whitman have attended). Brothers Herbert and Charles Allen founded the company in 1922.

Key people and executives for Allen & Company LLC are as follows:

  • Non-Executive Chairman Donald R. (Don) Keough
  • President, CEO, and Director Herbert A. (Herb) Allen
  • Managing Director and CFO Kim M. Wieland

The obvious question is will Digg sell with a $300 million valuation given that it has been on the market (quietly) for months, even year or two, with no serious interest to date?

According to Quantcast, which we believe is very accurate, Digg.com is hugely popular site and is reaching morethan 22 million unique visitors per month.

Here we go again with lots of speculations for one of the top and most popular web 2.0 websites: digg.com. In our understanding there must be something wrong with either Digg, its business/revenue model or the momentum is simply lost, or something else.

Here are our thoughts on why Digg.com did not get sold so far:

  1. Not profitable enough towards their claims of having 22M visitors a month; in other words too many visitors, too much popularity that seem hard to be monetized.
  2. Digg.com is Slashdot.org 2.0., how much did Slashdot.org go for? As far as we remember it was bought for $20M something.
  3. Their technology and concept is not distinctive and definitely not defendable. There are too many followers and competitors, including Netscape.com (now Propeller.com). Digg set the standard but it seems too many old media companies are building up the same technologies within their web properties which will additionally undermine Digg.com’s popularity.
  4. Digg.com was and still is widely criticized for being corrupted in getting manipulatively different news stories promoted to the home page by a handful savvy Digg.com users.
  5. Geeks are not clicking on ads, as what many people say, so the advertising model seems highly unlikely to be the panacea for Digg.com.
  6. In the past Digg.com and News Corp negotiations have failed for one reason or another, which might have negative impact towards other potential acquirers.
  7. Digg is in one way or another under the control of its top users like Dmoz.org and Wikpiedia. What helped those sites grow to such popularity levels is what seems to be their setback. The new owner has to deal with this issue and it is not a small one.
  8. Top Digg users are often requested to help stories get the home page, sometimes in return for cash payments.
  9. Digg has issues with spam, scam and gaming of their system.
  10. When you have a system that works like Digg, of course there will always be people wanting to organize and promote stories that they like or have interest in. You can’t expect people to vote as an individual, they have friends, they have jobs, and they are involved in communities. Digg should have focused into the tech news at first and stay there. Now Digg is becoming mainstream with inaccurate, sensationalist, boring news mostly recompiled by bloggers from other news. As some people say: the front page posts are recycled news of web, nothing new there. Unless you want to see articles about Digg or the newest Free collection of fonts, the stories are crap. The only stories and news that make it to the home page appears to be the ones submitted by the top users.
  11. Digg is a great idea which has grown faster than its creators’ ability to administer it. In a perfect world, they’d be ahead of these sort of problems, rather than playing catch-up trying to fix scenario after it’s proven to be broken. I suppose broken is a bit harsh actually, but the site is definitely being gamed with Rose et al trying their hardest to implement some rules/policies that will keep it together without destroying the essence of what the site is all about.
  12. Being forerunners in this sort of self-run community, they get to sort out all the pain for those similar sites that will follow later and improve on the idea. Slashdot lead the way for a long while in this regard, and Digg.com came along and improved on the model without having to figure out a lot of the issues Slashdot had already been through. Now Digg is leading the way and having to wade through the mire themselves.
  13. We think that Digg is great success, and with the success all the issues come along, but it takes on old media outlets, which puts fire under their feet and unless they figure this out and find their niche, they are under the risk to have their concept and popular site ruined.
  14. Most users are around and gone after few months, short-term loyalty with revolving door.
  15. Mob mentality crowd which creates abusive comment section.

Despite anything said above, Digg.com, in our view, does cost more than $300M at the very current moment, with or without steady revenues, simply because of its popularity, leadership, reach and target audience. 22 Million unique visitors per month is almost a mainstream site and we have seen sites with less that traffic getting acquired in the 10 digit range.

Yet we cannot get rid from the feeling there must be something wrong that the general public is not aware of, which might be the key reason behind the decision of so many suitors so far to have backed off.



AdultFriendFinder.com finally sold out – $500M

We have been hearing for quite long time that the company’s founder Andrew Conru kept on trying to get rid of the AdultFreindFinder.com and its affiliate sites during the past 2 years pitching various potential acquirers. The company was recently rumored to have revenues in excess of $300 million annually and the acquisition price was said to be 3x revenue, or around $1 billion.

These days it turned out that the company was not sold for $1 billion but rather for half a billion and the buyer is Penthouse Media Group. It is confirmed already and taking into consideration the revenues the company is bringing in the acquisition now looks more like fire sale rather than major liquidity event for the owners.

Penthouse Media Group has acquired the adult-oriented social network operator Various Inc. for $500 million. Various runs a vast network of social net sites under its flagship site, AdultFriendFinder.com.

Andrew Conru is the founder. He is a mechanical engineering doctoral student at Stanford who grew up with churchgoing Lutheran parents in northern Indiana and he started the first online dating site, WebPersonals, in the early ’90s. He sold it in 1995, pocketed a minor windfall, and started all over again. Now he owns 27 sites under an umbrella company called Various, controlling twice as much online dating traffic as better-known rivals Match.com and Yahoo Personals.

Aside the Friend Finder Network Andrew Conru is also involved with several other companies like Dine.com (online restaurant reviews), ConfirmID.com (3rd-party personal info verification service), QuizHappy.com (free etests), GradFinder.com (alumni locator), BreakThru.com (spam-free free email), GuanXi.com (Chinese business networking), NiceCards.com (free ecards), ShareRent.com (roommate directory), LikeMyPhoto.com (photo review site), FriendPages.com (free homepages), and HelpCrew.com (remote customer service).

Prior to these companies, he started the first Internet website development company (Internet Media Services – 1993), the first company to centralize Internet advertising (Focalink Communications/AdKnowledge – 1995, sold to Engage and CMGi in 2000), the first online personals site (WebPersonals.com – 1994), and the first commercial website personalization software company (W3, Inc – 1995). “I’ve enjoyed finding new ways to use emerging technologies to solve real-world problems” says Conru.

Of all the dating sites Conru has launched–ones for Latinos, seniors, Asians, Jews, churchgoers–the biggest by far is AdultFriendFinder, which accounts for more than 60 percent of Various’s revenue. Conru says his privately held, 450-person company brings in well over $200 million in annual revenue, averaging 40 percent growth for the past nine years. With more than 35 million visitors in 2006 and 75,000 new users registering each day, AFF ranks among the 100 most popular sites in the United States.

For instance both Compete and Quantcast report for slightly more than 20 million unique visitors to the AdultFriendFinder.com but considering the fact that these sites are mostly reporting on American traffic it is likely the Various claims for 35M unique visitors per month to be true.

While porn remains one of the most profitable areas of online media, more traditional companies like Penthouse and Playboy have been struggling to catch up on the digital side. Playboy CEO Christie Hefner boasted of 50 percent gains in digital revenue earlier this month at the UBS Global Media & Communications Conference, thanks in part to the launch of its social net PlayboyU.com this past year. She cited the investment in a community site as a way to extend Playboy’s brand.

Penthouse CEO Marc Bell also points to brand building among 18- to 34-year-old men as the impetus behind the purchase. Various brings Penthouse an existing membership base of more than 260 million users, with roughly 1.2 million paid subscribers. The combination would bring in an estimated $340 million in revenue this year.

In addition to its porn-related social nets, Various also has sites that aren’t centered around sex, including Italianfriendfinder.com, gradfinder.com and a faith-based community site called bigchurch.com. The company also owns Passion.com, alt.com and outpersonals.com; and Streamray, Inc., with its popular video chat site Cams.com. Penthouse now expects to absorb all of Various’s holdings.

Apart from the acquisition, Various has settled charges brought by the U.S. Federal Trade Commission related to adware issues. While the suit specifically named its AdultFriendFinder.com site, Various’s agreement with the FTC, which includes a promise to clean up its marketing tactics and use of pop-up ads, cover all of its properties. Since this was its first violation, the company is not subject to fines, according to FTC rules.

Penthouse Media Group Inc., parent to Penthouse Magazine, one of the world’s leading men’s lifestyle publications and producers of online, licensed and broadcast content and materials, announced today that it has acquired internet social networking giant Various, Inc. and its subsidiaries for $500 million in cash and securities. With $340 million in projected combined 2007 revenues, this acquisition makes Penthouse the largest adult entertainment company in the world.

“We are very excited to welcome Various and its employees as a part of the Penthouse family,” said Penthouse Media Group CEO Marc H. Bell. “Various is an attractive addition to our already strong print platform, and one that puts Penthouse in a very robust position in the ever-growing online social networking arena. We like where the business combination puts us and that this transaction will enhance PMGI’s current and future licensing, print and interactive ventures.”

“We are excited to be combining our substantial internet presence with one of the most recognized adult entertainment brands in the world,” said Lars Mapstead, VP of Marketing for Various, Inc. “Together we will expand in many areas, both online and offline, to solidify our position as the world leader in adult entertainment.”

The transaction is the latest step in Penthouse’s expansion march, with the company having previously acquired Danni.com and the Jill Kelly Productions library in separate 2006 transactions. Penthouse is continuing its acquisition program as it continues to consolidate the industry into one global brand.

Various, Inc. is based in Palo Alto and is the trend-setter in the online personals sector, distinguished by its creative marketing programs and technological innovation.

The company has developed dozens of owned and operated sites along with many popular co-branded partner sites. Its holdings include FriendFinder Network, Inc., a group of multi-cultural and multi-lingual dating, social networking and personals websites; AdultFriendFinder.com and similar venues for more intimate social networking such as Passion.com, alt.com and outpersonals.com; and Streamray, Inc., with its popular video chat site Cams.com. Visit www.friendfinderinc.com for more information.

We have researched to find out who are the investors in the company but found nothing worthwhile aside that venture investors seem to have shied away from him, in part because of “sin clauses” in their contracts prohibiting investing in adult companies.

[ http://adultfriendfinder.com/go/page/corporate.html ]
[ http://siteanalytics.compete.com/adultfriendfinder.com/ ]
[ http://www.quantcast.com/adultfriendfinder.com ]
[ http://www.techcrunch.com/2007/11/17/whoa-adult-friendfinder-may-have-been-acquired-for-1-billion/ ]
[ http://money.cnn.com/magazines/business2/business2_archive/2007/04/01/8403370/index.htm ]
[ http://www.paidcontent.org/entry/419-penthouse-buys-adult-themed-social-net-various-inc-for-500-million/ ]
[ http://biz.yahoo.com/prnews/071212/clw048.html?.v=101 ]
[ http://conru.com/ ]
[ http://venturebeat.com/2006/11/01/owner-of-adult-site-adultfriendfindercom-raking-in-100s-of-millions/ ]
[ http://www.mercurynews.com/mld/mercurynews/business/15899851.htm ] {expired page}

Web2Innovations.com Launches Web 2.0 Money

Web 2.0 Money is a new initiative of Web 2.0 Innovations to discover, report and analyze the money behind the Technology and Internet Industries. We will start from some of the earliest funding deals we know about as discovered by us at the following web addresses through out the past year and a half:

Web 2.0 Innovations We do believe there is a significant correlation between the web 2.0 industry at all and the money within. Although the vast majority of the great web 2.0 innovations that took place over the past 2 years were either funded or acquired we still see a pretty large number of web 2.0 innovative projects, start-ups and companies with little to no money allocated to them.

Based on our observation and despite that many people are claiming that no location plays any role where innovation happens (although some do), it appears that 90% of all funding and acquisition deals that took place within the web 2.0 industry sector since 2005 happened to be in California and Silicon Valley in particular. 5% or something did happen in the rest of US as again only a few states dominated like New York, Massachusetts, Illinois, Virginia, Texas and one, as far as we know, in Indiana, a deal on a company, which many IT experts and influencers disagreed to be considered web 2.0 innovation. The rest of the deals appeared on the business map of just a few more countries such as U.K., Sweden, Norway, France, China and one in Singapore.

Basic conclusion: while it might be true that web 2.0 innovation is happening all over the world, it clearly seems the money from web 2.0 innovations can only be made within the US.