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Peachtree Media Advisors, Inc. is a New York-based investment bank providing M&A advisory services to
growth and middle market digital media companies both in the U.S. and abroad. John Doyle, Managing Director
& Founder, has been a media investment banker for more than 13 years; closed and structured more than 22
deals; and has a strong knowledgebase of financial and strategic buyers in these sectors. If you are interested
in learning more about valuation, positioning, preparation or the merger and acquisition process, please go to
www.peachtreemediaadvisors.com or contact John Doyle at 212-570-1009.
In 2009, there were 755 capital raises, transactions and deal value increased in billion acquisition of Omniture in Septem-
mergers, and acquisitions in digital media, the second half, driven primarily by fol- ber, Amazon’s $928 million acquisition of
representing a 7% increase over the 707 low-on venture capital investments in Zappos in July, Google’s $750 million ac-
recorded in 2008. However, total transac- portfolio companies that were able to cut quisition of AdMob in November and GSI
tion value dropped 10% from $16.9 billion costs and weather the economic storm as Commerce’s $350 million acquisition of
in 2008 to $15.2 billion in 2009—a decline well as divestitures of underperforming Retail Convergence in October.
mitigated by the $2.5 billion merger be- or non-core assets. Strategic acquisitions
tween Ticketmaster and Live Nation. in the second half were also propelled by As seen in Figure 1, social network-
strengthening valuations, cleaner balance ing saw the sharpest drop-off in trans-
While housecleaning and return to core- sheets, and a recalibrated strategic focus. action volume from 102 transactions in
competency were the corporate themes These strategic land-grab type acquisitions 2008 to 47 in 2009. Conversely, mobile
of a quiet first half, both the number of into new markets included Adobe’s $1.8 experienced phenomenal growth—from
Figure 1: 2009 and 2008 Transaction Volume Comparison (# of deals) ▼ Figure 2: 2009 Online Sector Categories
82
Consumer publisher, aggregator
85
Online Business Services
63
Video, online gaming B2B
88
14
Ad networks
B2B
34 Agency, SEM, SEO
34 Lead generation, customer acquisition
Ad networks
29 Interactive marketing services, email
12
Agency, SEM, SEO
30
Mobile
14
Lead gen, customer acquisition
30 Mobile content
34 Mobile applications
Interactive marketing services
31 Mobile interactive marketing services
85
Mobile
41
7 Commerce
Travel, rental, housing
9
Transactions, auctions
13 Travel, rental, housing
Jobs, classifieds
8
Jobs, classifieds
0 25 50 75 100 125 150 E-commerce, comparison shopping
41 transactions in 2008 to 85 in 2009—as help boost scale and scope, as well as bol- eBay ends Skype experiment
increased affordability of smartphones ster digital revenue. Razorfish is the lat- In September, investors acquired a 65%
and data plans attracted flocks of new con- est in a string of Publicis buys. The deal stake in Skype from eBay for approximate-
sumers. A focus on optimizing advertising can also be seen as a response to the rising ly $1.9 billion; eBay had originally bought
revenue through more effective targeting pressure to compete in the online ad space, the company for $2.6 billion. The purchase
of engaged users also helped the ad serv- given that digital advertising has recently had never paid off, so the virtual market-
ing, web analytics, cms and web ap- become a more significant segment of ad- place conglomerate sold this nonstrategic
plications, enabling, it, cdn categories vertising. asset at a valuation of $2.75 billion.
increase from a respective 38 and 86 trans-
actions in 2008 to 74 and 144 transactions DivX purchases AnySource Media GSI Commerce buys Retail Convergence
in 2009. In September, DivX acquired AnySource In October, GSI Commerce acquired Re-
Media for $15 million. DivX’s specialized tail Convergence for $350 million in a
Lastly, in addition to a 139% increase in in high quality video services across any demand generation transaction aspiring
deal volume from 2008, transactions, device, which would be enhanced by Any- to bolster GSI’s base as e-commerce pro-
auctions, e-commerce, comparison Source’s streaming expertise, providing vider.
posted $4.5 billion in deal value, the high- access to hundreds of virtual on-demand
est of any category and 82% above its 2008 channels. Burst Media acquires targeted ad firm
number. Though few acquisitions provid- In October, Burst Media acquired Giant
ed financial details, the ones that did were Adobe acquires Omniture Realm, offering ad placement for a targeted
very large: Ticketmaster merged with Live In September, Adobe acquired Omniture consumer group of male video game fans,
Nation for a combined value of roughly for $1.8 billion. This deal, paid fully in for $2.1 million. In line with the greater
$2.5 billion, and Amazon.com acquired cash when liquidity was scarce, aimed to communication trend between advertisers
Zappos for $928 million, amongst others. diversify Adobe’s software business model and users, this deal was designed to bring
The category’s dominance reflected the with an analytics platform. The Omniture the former closer to a bigger quantity of
heightening comfort level of consumers to acquisition is a testament to Adobe’s strat- qualified consumers.
use e-commerce platforms and make pur- egy to capture low-hanging fruit revenue
chases online, and the large transactions streams that touch its software, such as Google goes holiday shopping
also highlighted the importance of scale in B2B demand generation and interactive Google embarked on a diverse buying
this category, since larger players are able marketing services to sales forces that use spree late in the year. From August on,
to provide deep discounts to consumers. its software as their primary presentation Google acquired: On2 Technologies for
or white paper sales collateral. $106.5 million to help build its video plat-
NOTABLE TRANSACTIONS form; Gizmo5 for $30 million for develop-
OpenTable goes public Figure 3: 2009 Reported Transaction Volume by Sector (# of deals)
In May, OpenTable, a virtual reservation
network, successfully filed an IPO for $31.4
million. OpenTable provides a link to the
future of location-based social marketing. Commerce
96
In 2009, the main clientele riding this new 13%
Consumer
wave were restaurants and local bars. Yet 230
OpenTable could and should open doors 31%
for luxury retailers to target consumers Enabling, analytics, ad
making reservations, for instance, in order serving
to invite them to sample sales or give them 236
31%
incentivizing discounts. Business
108
Mobile 14%
Publicis buys Razorfish 85
11%
In August, Publicis Group acquired Ra-
zorfish (Microsoft) for $530 million to
ment of Google Voice; Teracent, for its both by reported deal value and transac- surprise that the sector, which consists of
display ad capabilities; AppJet, for Google tion volume, representing 34% and 31% ad serving, technology, web analytics, web
wave development; and also announced of total deal activity, respectively (see Fig- applications, and enabling technology, ac-
the pending acquisition of mobile ad pro- ures 3 and 4); it also saw the largest dol- cumulated the largest volume.
vider AdMob for $750 million. Addition- lar gain from 2008—of nearly 110%. With
ally, Google was close to buying Yelp for VCs maintaining their picks and shovels Category-wise, web applications, ena-
$550 million before the deal fell through approach to investing from 2008, it is no bling, it, cdn, with the second highest
in the eleventh hour when Yelp apparently
backed out. The review site’s bold decision Figure 4: 2009 Reported Transaction Value by Sector ($millions)
indicated that the company is not cash-
strapped and has a clear growth plan; it
could also imply that Yelp is planning for
Consumer
an upcoming IPO or a deal with IAC/City- $1,977
Search or Open Table, both of whom are 13%
Commerce
more natural fits for the company. $4,689 Business
31% $2,014
TRANSACTIONS BY THE NUMBERS 13%
Mobile
In 2009, U.S. digital media transactions $1,347
totaled $15.1 billion, representing a 10% 9%
Enabling, analytics, ad
decrease from the previous year. Of the serving
digital sectors (see Figure 2 on page 3 for $5,168
34%
a sector breakdown), enabling, analyt-
ics, ad serving had the most activity
B2B $106
Ad networks $192
Mobile $1,347
Search $66
deal value of $2.9 billion (see Figure 5), Figure 6: Cumulative Number of Capital Raises vs. Acquisitions in 2009
continued to dominate this year in volume,
even increasing by 53% from 2008. An- 600 Cumulative # of Capital Raises Cumulative # of Acquisitions
other notable performer was ad serving,
web analytics, cms with $2.2 billion val-
500
ue and one of top volume spots. The value
runner-ups were mobile with $1.3 billion,
trailing right behind the top volume spots 400
as well, and the video, online gaming
category with $982 million, also slightly
behind the volume winners. In 2009, bb, 300
social networking, and travel, rent-
al, housing continued to slide in deal
200
activity. Deal value in the bb category
decreased substantially from $2.7 billion
in 2008 to $106 million in 2009. The de- 100
crease in bb was due to a the global pull-
back in industry ad spending throughout
0
the supply chain. The pullback in travel
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
investing was a wait-and-see approach on
the part of both acquirers and investors.
Social networking, which lost ground with
the “experimental” part of the overall ad
budget being all but eliminated in 2009,
did not find many VCs willing to prop up
companies so far behind Facebook. ■
As the continuing gap between buyer and Figure 7: 2009 Mergers & Acquisitions by Quarter
seller valuations and a general unwilling-
ness to take risks combined to suppress 70 # of Acquisitions Dollar amount of acquisitions ($millions) $10,000
deal flow, 2009 proved to be another chal-
lenging year for the digital media M&A 60
market. Although there was a huge uptick
50
in the second half of the year, both deal
# of Transactions
Dollar Amount
volume and deal value tumbled from 2008 40
levels; the $11.0 billion in reported deal $5,000
value furthermore represented a precipi- 30
tous 74% drop from 2007. Indisputably,
20
the recessionary effects that began in late
2007 still lingered, but signs arose in the 10
latter half of the year hinting at a thawing
of the ice, headlined by optimism in the 0 $0
equity markets, loosening of credit, and an Q1 Q2 Q3 Q4
M&A BY THE NUMBERS ated wildly between quarters and $6.27 followed by consumer, publisher, ag-
billion—more than half of the total deal gregator with 30 and video, online
There were 221 mergers and acquisitions volume in 2009—was recorded in Q3. gaming with 26. Buoyed each by billion
in 2009 for a total of $11.0 billion, though dollar deals, the categories with high-
only 22% of the transactions actually re- Analyzing the drivers of the volume trends est deal value were transactions, auc-
ported deal value. Comparatively, 359 this year, it is notable that the consumer tions, e-commerce, comparison (Live
transactions occurred in 2008 for a to- sector easily experienced the most activ- Nation-Ticketmaster) with $4.09 billion,
tal of $13.3 billion, with a slightly-better ity with 87 deals, almost double that of web applications, enabling, it, cdn
31% disclosing deal value. With the over- the 49 transactions within the runner-up (Skype) with $2.24 billion, and ad serv-
whelming majority of transaction values enabling, analytics, ad serving sector. ing, web analytics, cms, ad exchange
undisclosed in 2009, deal volume serves To round out the other sectors, there were ■
(Omniture) with $1.91 billion.
as a more accurate indicator of the level of 35 transactions in business, 27 in com-
interest in different areas of digital media. merce, and 23 in mobile.
Deal volume remained relatively steady
throughout the year 2009, ranging be- Breaking the sectors into categories, web
tween 49 and 63 deals in each of the four applications, enabling, it, cdn, led the
quarters. Interestingly, deal value fluctu- way this year with 33 transactions, closely
Despite total U.S. media spending falling Figure 8: 2008 vs. 2009 Reported Capital Raised ($millions)
by 14.6% this year, digital media ad spend-
ing has been steadily growing. In 2009, 2008 2009
$4.1 billion in capital was raised by U.S.
digital media companies, up 16% from Commerce
$196
$592
2008. Capital raised in the commerce
sector increased 184% in 2009 to $592
million (see Figure 8). Given some of the $892
Enabling, analytics, ad serving
$1,015
large scale consolidation moves within the
e-commerce platform—which were dis-
$341
cussed earlier—this “chasing the exit” in- Mobile
$360
crease in capital raise activity on the part
of the venture capital community makes $488
sense. Online business services
$757
E-Commerce Amazon.com Inc. 60,320 116 4,000 56,436 21,690 1,160 2.6x 48.7x
eBay Inc. 30,860 200 3,160 27,900 8,390 2,640 3.3x 10.6x
Expedia 7,820 895 887 7,828 2,880 735 2.7x 10.6x
Monster Worldwide 2 180
2,180 50 208 2 022
2,022 983 105 2 1x
2.1x 19 3x
19.3x
Move, Inc. 268 65 116 217 220 5 1.0x 44.1x
OpenTable 600 0 67 532 64 10 8 3x
8.3x 54 1x
54.1x
Priceline 10,080 271 719 9,632 2,200 445 4.4x 21.6x
MEAN 3.5x 29.9x
Interactive Marketing Digital River Inc. 1,040 9 411 637 395 95 1.6x 6.7x
Ser ices
Services GSI Commerce 1 400
1,400 204 135 1 469
1,469 965 73 15
1.5x 20 0
20.0x
LivePerson Inc. 344 0 36 308 82 15 3.7x 21.0x
Marchex Inc.
Inc 183 0 33 150 105 7 1.4x
1 4x 20.8x
20 8x
ValueClick Inc. 855 0 159 696 546 131 1.3x 5.3x
Inuvio, Inc.
Inc.* 16 8 1 24 40 (2) 0.6x n/m
MEAN 1.9x 14.8x
O li B2B Content
Online C t t S
comScore I
Inc. 530 1 84 448 126 17 33.6x
6 26 6
26.6x
Forrester Research 579 0 270 309 235 46 1.3x 6.7x
Gartner Inc
Inc. 1,750
1 750 276 113 1,913
1 913 1,160
1 160 169 1.6x
1 6x 11.3x
11 3x
WebMediaBrands Inc. 36 7 4 39 120 12 0.3x 3.2x
TechTarget 246 2 69 178 94 10 1.9x 17.2x
TheStreet.com Inc. 73 0 65 9 67 2 0.1x 4.4x
MEAN 1.5x 11.6x
Diversified Media CBS 9,380 6,990 474 15,896 13,040 1,840 1.2x 8.6x
Comcast Corp 48,730
48 730 29,450
29 450 918 77,262
77 262 35,340
35 340 13,680
13 680 22.2x
2x 5.6x
5 6x
Discovery Communications 8,800 3,510 433 11,877 3,460 1,320 3.4x 9.0x
Entravision Communications 292 383 21 654 194 54 3 4x
3.4x 12 1x
12.1x
Gannett Co., Inc. 3,600 3,310 124 6,786 5,860 1,160 1.2x 5.9x
HSN, Inc. 1,150 377 239 1,289 2,690 142 0.5x 9.1x
McGraw-Hill 10,660 1,200 957 10,903 5,900 1,420 1.8x 7.7x
Media General 181 722 7 896 689 101 1.3x 8.8x
New York Times 1,770 917 28 2,658 2,540 306 1.0x 8.7x
NewsCorp 35,790 15,250 7,830 43,210 30,110 4,810 1.4x 9.0x
Time Warner 34,130 17,500 7,130 44,500 45,360 13,010 1.0x 3.4x
Washington Post 4,180 399 904 3,675 4,490 540 0.8x 6.8x
MEAN 16
1.6x 79
7.9x
Judging by transaction multiples in 2009, talization is certainly justifiable. The ma- and EBITDA multiples, respectively. The
the heavily anticipated economic recov- jor increase in transaction multiples for e- relative weakness of this segment is sup-
ery is in fact well on its way. Transaction commerce underscores the improvement ported by prior analysis of a pullback in
averages for all category multiples showed in market conditions evident by the end of business marketing spend during during
considerable improvement from 2008 2009. Additionally, the huge competitive the recession.
numbers, and the wide range of increases advantage that big players in e-commerce
supported the leading category trends we receive enables them to further expand Higher valuations relative to the prior year
have already established for 2009. through consolidation. reflect the improving economic condi-
tions, contributing to higher expectations
e-commerce experienced the strongest Meanwhile, interactive marketing of future cash flow for the digital segments.
growth in valuation with revenue mul- services was the valuation runner-up, Unlike a year ago, M&A no longer needs
tiples increasing from 1.2x to 3.5x and with a 140% increase in the average Rev- to revolve around addressing short to me-
EBITDA multiples tripling to 29.9x. This enue multiple to 1.9x and 130% increase dium term liquidity needs and can now
dramatic change was propelled by a few in the EBITDA multiple to 14.8x. Within once again devote its attention to strategic
large players’ major expansions. Within this category, LivePerson grew the most rationale, as was seen in the second half
e-commerce, the large-cap companies— year-over-year: its market capitalization of this year already. Economics condi-
Amazon.com, eBay, Expedia and Price- went from 89 in 2008 to 344, and the Rev- tions should continue to recover in 2010,
line—saw sizeable jumps in multiples over enue Multiple grew by 300% to 3.7x, but and valuations should keep strengthening
2008. Amazon.com multiples more than its EBITDA multiple rose only by 52%. as a result, which should certainly inspire
doubled over the year, rising to a revenue Consumer, advertising and search more and larger scale M&A activity next
multiple of 2.6x and an EBITDA multiple followed, with a performance half as im- year.■
of 48.7x, all stemming from a 264% in- pressive as interactive marketing
crease in market cap from 2008 to $60.3 services, judging by the year-over-year
billion. Amazon.com has now established gains: the Revenue multiple increased 60%
itself as the number one e-commerce and the EBITDA multiple rose 73%.
player in terms of site traffic, and, when
considered alongside an active 2009 year Notably, bb posted the smallest category
in M&A activity, its higher market capi- increases of just 15% and 30% in Revenue
As the above analysis suggests, improving dured a disastrous year. Projections foresee industry that targeted social marketing is
economic conditions and strengthening relatively flat ad spending growth in 2010, harder work, but produces superior results
valuations offer promise to a languishing which, while not great, is highly preferable by allowing marketers, through specific
M&A environment. With credit also on to the double-digit plunge posted in 2009. media channels, to engage with the user
the rebound, equity markets showing up- It’s noteworthy that even in these difficult in a manner that is effective and beneficial
side, and confidence slowly developing in economic conditions, online advertising to both parties. To wit, search advertising
the marketplace, conditions are ripe for a remained quite resilient, and figures to ac- has always met success because it is inher-
modest recovery in M&A for 2010. celerate its momentum in lockstep with ently targeted—ads are displayed based
economic recovery. upon and in response to search queries.
Given that equity markets have been dis-
tinctly trending upwards and M&A is tra- Meanwhile, the continued proliferation of To summarize, targeting users effectively
ditionally correlated with equity markets, online and digital media into the lives of is the new goal of advertisers, marketers,
budding optimism from the equity mar- consumers ensures that venture funding and content producers alike. Web analytics
kets is expected to translate over to the will continue pouring in. This prolifera- and advertising technology are seen as the
M&A environment, much as it has already tion has also transformed the way people pathway to this goal for advertising, and
begun to do late in the year. Rebuilding experience media and advertising: eve- web applications and video related plat-
confidence is crucial in this marketplace, rything is now about the consumer, and forms for content, and mobile will serve
and major acquisitions by both Google advertisers, marketers, and content pro- as a significant medium for both. In re-
and Adobe in the second half—after their ducers alike have scrambled to take a tar- sponse, investors will keep their eyes glued
valuations improved over the summer— geted approach based upon genuine user on these areas and pour money into them.
have brought hope of rosier times ahead. engagement. These sectors have already gained momen-
Also seen in the second half was the nar- tum in 2009, but most importantly, they
rowing valuation gap between buyers and Everything now is about reaching the indi- carry the potential to lead digital media
sellers which enabled the spike in deal vidual user, and web analytics, advertising into the future. Together they will be some
flow. A continued narrowing of this gap, technologies, and mobile are all benefac- of the driving forces behind digital media’s
alongside stabilization of the economy, tors of this trend as they participate in the evolution in 2010, marked by products
will bring buyers from the sidelines into process of delineating user preferences and and services becoming more personalized,
the marketplace as they cautiously depart delivering content (or advertising) based contextualized, and distributed. ■
from defensive positions to sniff out new upon that data. And with smartphone
opportunities. sales exploding, mobile serves as the fu-
ture pathway for reaching the consumer.
An improved economy should bring good
news to both the M&A environment and In responding to the rise of social network-
the digital media landscape. The economy ing and user-generated content, marketers
is what drives ad spending, which in turn are no longer focused on flooding banner
drives digital media revenue, and so im- ads, for example, which are now widely
proving economic conditions should spell regarded as inefficient, intrusive, and thus
relief for an advertising industry that en- ineffective. It has become evident in the