Episode 136 - John Doyle on Mergers, Acquisitions and Capital Raises in the 2009 Media Industry
John Doyle is back, with his 2009 round up of all the companies in the media and marketing industry.
Find out who raised money, who was acquired and for how much and what the hot sectors were last year and what John thinks they'll be for 2010.
Google went on a buying spree - it was a happy Christmas season for a few companies. Learn who they acquired and why.
How did Social Media fare? What were the remarkable deals?
What areas are HOT for acquisition in 2010?
And if you've survived the storm, and you're a CEO or working in a start up, what you should do this year to improve your lot.
John Doyle does an amazing job tracking our industry. Get an overview of all the momentum in a half hour on DishyMix.
Susan Bratton: Welcome to DishyMix. I’m your host, Susan Bratton, and on today’s show we have a repeat visitor. This is somebody that I think I’m going to bring on every single year until the day I die ‘cause he does such an awesome job. You’re going to get to meet John Doyle. John is the founder and managing partner of Peachtree Media Advisors. And every year he does a digital media M & A – mergers and acquisitions – roundup report where he’s tracking all the capital raises and all the M & A in the industry, in our industry. And I’ll tell you, you know, we see these deals come and go by and Twitter get Twittered and see them in our news feeds. But it’s really nice to have a single place where you get the whole thing rolled up with John Doyle’s amazing analysis. So lets get him on the show and lets find out what’s happening in the world of investment banking, who’s raising money, what are the hot trends, where are the dogs and who are the stars, including John Doyle. Hey John.
John Doyle: Hello. Hello Susan. How are you?
Susan Bratton: I am great. You know, you’re probably the least stuffy investment banker I’ve ever met. I can do a “Here’s Johnny” and you’ll just be laughing. I love it.
John Doyle: That’s why I started my own investment bank, a fun bank.
Susan Bratton: Exactly. And you all of a sudden, you said you’re on fire. You’ve got a ton of deals going on.
John Doyle: Well yeah, we are doing well. It’s a far cry from where we were last year at this point…
Susan Bratton: Oh my god, there was nothing.
John Doyle: Things were going pretty down hill pretty fast.
Susan Bratton: Well and I see you’ve added some staff, you’ve got some new team members at your company.
John Doyle: Yeah. Yes.
Susan Bratton: You’re going to need them, John. You’re a winner, I can tell…
John Doyle: Thank you.
Susan Bratton: I know my talent. So tell us, what’s going on in the world of media marketing advertising? What are the big strategic things that happened last year? What are the biggest deals? Lets start with that.
John Doyle: Okay. Well I think that the biggest deal is clearly the Live Nation Ticket Master merger. But I would say some of the biggest in terms of strategy-wise, I would say Google acquiring Admob for the Ad Cellular Space. That’s pretty big in the sense that Smart Phones, which six years ago, they were pretty much for business people, and it seems like they penetrated into society more and everyone’s got a Smart Phone. At least many people have Smart Phones and iPhones and access to the internet over their phone, and a lot of people – especially young people – with limited funds are using the iPhone as their only access to the internet. So that trend is driving a lot of the investment and Googles acquisition of Admob for about $750 million dollars I believe.
Susan Bratton: And I have to give a shout out to my buddy Tony Nethercutt over at Admob. I think he’s done very well for himself, and I didn’t – at first when Google bought Admob I was like “I don’t get it. What is that?” And now of course it’s crystal clear; there’s an Android phone, here’s an ad serving, mobile ad serving platform. Uh huh, I got it. $750 million dollars makes sense.
John Doyle: Yeah, that’s big.
Susan Bratton: It is big. Oh and I just wanted to point out too, you mentioned the Ticket Master and Live Nation deal. That was a $2.5 billion dollar merger, which was very interesting.
John Doyle: Yeah, that, I mean, everyone knows about that deal, and it’s getting held up a little bit, but I think it’ll pass…
Susan Bratton: What are some of the other ones that you think are the biggest?
John Doyle: I would say Amazon acquiring Zappos and GSI Commerce acquiring Retail Conversion. These are pretty much a testament to consumers increasingly, they’re more comfortable making purchases online and they’re doing purchase research online, and that’s part of… Amazon buying Zappos was one of the biggest, one of the bigger larger transactions of the year.
Susan Bratton: So let me go back to Google for a second. I got the sense from your report that, you said Google went Christmas shopping. They were very busy in the holiday season buying up companies. Give us a rundown of a couple of the ones that they purchased.
John Doyle: Okay, yeah. Google was the first to pretty much, they led the effort to start buying. Once their stock, which was at $250 dollars, went up, doubled almost to $400, $500 dollars, they began an acquisition tear. They started buying strategic assets such as OnTo Technology, which is a video streaming, video compression company. And they obviously bought Admob. They made a few other investments. And the acquisitions by them were different from some of the other transactions, which were companies divesting from non core assets and a lot of cleanup was going on. But Google started making acquisitions that were strategic and for growth and for the future.
Susan Bratton: So give us the kind of levelset on the acquisition piece of the business. 2008 versus 2009; what was the total amount of money spent in those two years approximately?
John Doyle: Well if you, lets say that, total transaction; there were 755 transactions in 2009, which was an increase over the 707 transactions in 2008, but however the transaction value dropped, and that’s clearly because of the recession and the pullback, and that was from 16.9 billion in 2008 and it dropped to 15.2 billion in 2009.
Susan Bratton: And these numbers are way down, right John? I mean in 2004, 5, 6, 7, before everything hit the fan, they were quite robust. There were a lot, there’s lots of funding, lots of capital raises, lots of M & A, right?
John Doyle: Yeah. And that trend is, it’s clearly because of the recession, but it’s clearly because companies are looking to make smaller bets and enabling technology sectors and analytics, the higher tech sectors that use less people, less capital and have sometimes bigger exits. And that trend of smaller capital raises, whereas lets say to start, a long time ago to start up a lot of the Silicon Valley companies you would need billions of dollars, right? But, if you’re talking about Sysco, Intel. But then, now it’s these companies are being started up with $2 to $10 million, $20 million dollar, a $40 million dollar raise is a large raise.
Susan Bratton: Yeah, well and the VC’s are expecting that the entrepreneur is going to raise their own angle money and create a business that’s profitable before they even give them $2 to $40 million dollars.
John Doyle: Yeah, that’s true. The CEO’s knew, the CEO is the fundraiser, it’s a perpetual job that the CEO has. It can be in a continuous fundraising process from startup to series A to series B. That’s the CEO’s job, the new job.
Susan Bratton: Yeah, it’s an exhausting job. And I want to talk about the media world too.
John Doyle: That’s why there’s Peachtree to help the CEO.
Susan Bratton: Yay, there you go. There’s John Doyle. Just give John a call; he’ll do it all for you CEO’s. Not a bad idea. So you wrote “Despite total US media spending falling by 14.6 this year”, in 2009, “digital media ad spending has been steadily growing. In 2009 4.1 billion in capital was raised by US digital media companies, up 16 percent from 2008.” Give us some of the capital raise highlights.
John Doyle: Well it was a big year for capital raises in the second half as well. Companies that, I would say companies that were able to monetize showed different models and models that weren’t necessarily ad supported models to generate revenue. Those took in big bucks. Ad supported companies had a tough time raising money last year. So for example, Revolution Money, which is a secure payments company, they raised $42 million from the Mayfield Fund. Zynga, which is a social gaming platform, I think they raised around $200 million dollars in the fourth quarter of last year…
Susan Bratton: Yeah, did you see Mark Pincus? He’s the Zynga CEO. He was in Time Magazine.
John Doyle: Oh, is that right?
Susan Bratton: Yeah.
John Doyle: No, I did not see that.
Susan Bratton: They were talking about the Facebook phenomenon with the Mafia Wars and the animal whatever it’s called and all that stuff.
John Doyle: Yeah, that site, I know that there’s a little bit of something ambiguous is going on there with how we started up, but I think that everything’s clean now with Zynga and the social virtual goods platform. But lets see, what else happened? Twitter raised some money, which I believe they raised $100 million bucks.
Susan Bratton: From Abu Dhabi Media Company.
John Doyle: Yeah, everyone, somehow they raised the money. I’m not exactly sure, but… Because I don’t, I think that Twitter had a lot of users and I respect them for that, but I don’t know about their business model and whether there will be one.
Susan Bratton: Well it’s so interesting because this latest group of people I’ve been hanging out with recently, they’re saying, “Ugh, Twitter is over.” It’s just, you know, everybody now has so many followers that it’s a useless thing and everybody’s just, you know, programming their stuff and broadcasting their crap out and nobody’s reading it and, you know, it’s just essentially just been destroyed by the size that it grew. It was actually like the opposite of Facebook where Facebook became more and more valuable as they know have 350 million global users…
John Doyle: Right.
Susan Bratton: Twitter, it’s like it beleaguered it or something the way that… I don’t know why that is, but it just seems like that’s the current sentiment is that there’s this kind of growing negativity about Twitter. Now I don’t feel that way at this point; I’m just saying that it’s some other people that I’m hearing these kind of negative rumblings about Twitter. So you also, I’m hearing that from you. I’m getting that kind of vibe about it’s probably maybe game over for them.
John Doyle: Well I’ve always been a Twitter cynic, and the reason is because there’s not, it’s glorified text messaging to me, and it’s like, for corporations, they said “Well, you know, companies would be able to, Twitter’s value was in searching through the Tweets”, and if I never hear that word ‘Tweet’ again, I’ll be happy. But I think it’s, you know, people are just putting out tons of little fortune cookie meaningless links and jargon or babble, and I don’t think it’s… To me it’s not, it’s not a tool for business, you know. If you think of a tool for business being Adobe’s acquisition of something…
Susan Bratton: Omniture.
John Doyle: Omniture.
Susan Bratton: That’s a solid deal right there, man. That was the one smart…
John Doyle: Yes.
Susan Bratton: First they bought Macromedia, then they buy Omninture. That company knows what they’re doing.
John Doyle: Yes, they do. I think that that deals good because people actually use Adobe’s products for business. Most sales people and most businesses use Adobe’s products for white papers, which are people find and then they request more information and that helps sales people, and there’s a whole B to B salesforce.com kind of bottle there that’ll help drive people to presentations or white papers and analyze that, but…
Susan Bratton: Exactly. Hey I want to go to a break, and when we come back I want to talk more about social media, just in general the whole sector…
John Doyle: Okay.
Susan Bratton: You know, how it did. I mean 2008 was a big year for social media capital raises, so I want to find out what happened in 2009.
John Doyle: Okay.
Susan Bratton: And I also want to talk to you just about, you know, the sectors, like where are the hot sectors. Where’s the money being raised and spent. So lets go to break, thank my sponsors – we love them – and we’ll be right back with John Doyle of Peachtree Media Advisors. And John’s report can be downloaded for free for all DishyMix listeners. You don’t even have to go post your desire in the DishyMix Facebook fan club for once, you can just go get it. And you just go to peachtreemediaadvisors.com/research and there’s this fabulous report which you will love. But then again, John’s going to tell you all the greatest highlights of the report right here on DishyMix when we come back from break. Stay tuned. We’ll be right back.
Susan Bratton: Okay, we’re back with John Doyle from Peachtree Media Advisors, and when we left we were talking about social media. 2008, that was where so much of the action was. How did we do in 2009 in the social media world John?
John Doyle: Not so good. Social media unfortunately did not do so well. It’s all the largest drop off in transaction volume. Of all the sectors there were 102 transactions in 2008, 47 in 2009. The amount of capital going into these social networks pretty much dried up, and primarily due to the fact that Facebook was the leading entity. It’s going to be the dominant player. It’s clear, the writing’s on the wall. And most of these other social networks were ad supported businesses in the middle of a recession, and with the experimental part of ad budgets being cut from the marketing spin, most investors pull back on social media investments. And the companies that had scale were able to continue raising a little bit of capital, which was the 47 transactions, but there were a lot of carcasses in the road as we went through the year.
Susan Bratton: So if social media is dead in the water and game over, Facebook wins, what were the hot sectors in 2009? Where did the money go?
John Doyle: I don’t, I’m a true fan of social media, always have been, and I don’t think it’s necessarily dead in the water because I think there are niche players that are…
Susan Bratton: Sure, like LinkedIn, right?
John Doyle: LinkedIn, yes, definitely. Yelp, Flickster. But it’ll probably move more towards an enthusiast niche category, but it won’t, they’re the broad based, everyone joining on social media, I think that Facebook is going to be the dominant player. You asked which were the hot sectors last year?
Susan Bratton: Yeah.
John Doyle: Definitely mobile, we analytics, ad serving, enabling technology sectors. So those categories, applications, those are of the hottest…
Susan Bratton: Well you predicted that last year on the show. When we did this show a year ago you said the hot categories are going to be web analytics, ad serving, behavioral targeting, anything that’s going to monetize the media that is getting placed. And sure enough, you see that now, huh?
John Doyle: Wow! Yeah.
Susan Bratton: Good for you John. You watched those numbers.
John Doyle: That’s great. Well it certainly was, those were the hot sectors. And we already discussed why mobile is the hot category with the Smart Phone penetration. And web analytics, enabling technology, ad serving applications, content delivery networks, those were hot. Any company that helped publishers optimize advertising or deliver content, that were advertising more efficiently or more effectively, they saw capital flow into their sectors and increase in M & A activity. And again, Adobe acquiring Omniture. But most of the transactions last year, in those categories were in the, they were smaller capital raises in the measurement analytics optimization sectors.
Susan Bratton: So what do you think the prediction is for 2010? Where do you see this all going?
John Doyle: I think that companies that are able to help publishers increase their revenue, monetize, figure out additional ways to monetize their traffic…
Susan Bratton: Like yield management companies, that’s a hot new category.
John Doyle: Yes, yes. Those are going to receive the bulk of the financing. In terms of traditional – I say traditional but I mean in terms of traditional consumer publishing digital media companies – it sounds like a bit of a oxymoron to say a traditional digital media company, but normal ad supported consumer companies, I think that they’ll start being acquired next year. Companies that are what I call in the report “meat and tatoes” – sorry, ‘meat and potatoes’ synergy, meaning someone like Baby Center being acquired by iVillage or where it makes sense, a logical, logical sense. I think that those companies will be acquired next year.
Susan Bratton: So if you are a CEO of some kind of an early stage company or an online entity with, you know, some reasonable traffic or whatever it might be, what should you be doing to position yourself this year? What kinds of things? Should you be out trying to get more capital? Should you be looking for buyers? Where’s the sweet spot in the opportunity?
John Doyle: Well I think that if you say everything goes in cycles, last year was survival and cutting costs. Well then this year and for the next few years it’ll be the scale ain’t up in a smart way. It’ll be understanding your market or your market share and trying to own it, whether it’s… If you’re a publisher, it’s trying to understand more of who your audience is and provide them with application, additional applications and tools to make them come to your site and provide you with more information about themselves and develop more of a one on one relationship with them. And clearly for social networks, I think it’s to get into a niche or a category, as opposed to trying to be a broad social networking company. And then if you’re a social network, I don’t think that the technology and platforms I think is good for moving over the enterprise side, meaning helping a business find knowledge bases or knowledge sources within their company. So if you have a huge company like GM or Craft or any of these large intel companies, if you, someone writes a report or does a white paper they can put it up on a social network and attach the person to it so that someone in, that’s at an office in San Francisco or Chicago or China can tap into that knowledge and recruit that person for a project or ask that person for insight. And so some of these enterprise social networks are the, are the next phase, and those, they’re not ad supported but they’re more subscription based or software as a service model.
Susan Bratton: It’s interesting that you say that. I had Ted Shelton on DishyMix a month or two ago. He’s with The Conversation Group, and he wrote a white paper called Open Platform, which is all about enterprise leveraging social platforms to advance their business more strategically, both internal to their own organization, as well as with their partners and vendors. And…
John Doyle: Yeah.
Susan Bratton: that’s, you should download that white paper. I think you’d really like to read that.
John Doyle: Okay, I will.
Susan Bratton: Just search on “Ted Shelton The Conversation Group Open Platform” and you’ll find it, I’m sure, and if you don’t let me know.
John Doyle: Okay.
Susan Bratton: So, who knows what’s going to happen, but what do you think are the big acquisitions that could happen next year? You know, who do you think should be acquired?
John Doyle: Lets say I would say Yahoo should acquire Facebook, and if not Facebook I think they should buy Yelp. I don’t think…
Susan Bratton: Can Yahoo afford to buy Facebook?
John Doyle: You know, no. Maybe not. But I think if Facebook goes public they’re going to have to go to the grind of forecasts in their numbers and performance and having their numbers picked over and looked over, and I don’t know if the…
Susan Bratton: The renegade culture of Facebook could cleave to (unintelligible) or whatever.
John Doyle: Yes. That’s what I’m trying to say.
Susan Bratton: Yeah.
John Doyle: It’s, yes, that’s exactly what I’m trying to say. And if they do go public, it’ll be a rude awakening for them. I think…
Susan Bratton: So if Yahoo acquired Facebook, would there be a chain reaction in the market? What do you think would happen next?
John Doyle: I think that Microsoft would buy them.
Susan Bratton: Mm hmm. And who else do you think might be a good, who would you buy? Is there another good acquisition target? Who do you love?
John Doyle: I really think that there’s going to be, lets say next year and the next few years I think that there’s going to be a battle over the remote. So, you know, Comcast just bought NBC. There’s Apple TV. There’s Netflix, which has the roku player. And there’s a battle for the home remote and access over the internet, and that’s interesting how things are going to play out there because as I say, Google buying onto the video compression service, it’s, internet coming is almost going, you know… eventually it’s going to overtake cable. And you can see, if you can get movies online and you can watch any movie, if you subscribe to Netflix you can watch any movie online, eventually that…
Susan Bratton: Yeah, if you can get your husband to plug your television set into the internet, that’s like… Tim’s going to listen to this and be like “Darn it, I knew she was talking to me.” Every night we watch TV and I’m like, “Look honey, our TV can get Netflix. We wouldn’t have to have the DVD’s.” He’s like, “Yeah, I know.”
John Doyle: Right, yeah. But you need the player…
Susan Bratton: We’ll have to get our husbands to get that stuff hooked up though.
John Doyle: Right, right. And so I just bought my mom a, the Skype and hooked it up to the television so she can see my, I have a new daughter.
Susan Bratton: That’s what, you’ve got a new baby girl.
John Doyle: Yeah, I got a baby girl.
Susan Bratton: What’s her name?
John Doyle: Harper.
Susan Bratton: Oh my gosh, that’s such a cute name. Harper Doyle.
John Doyle: Yes, Harper Mary Doyle.
Susan Bratton: Harper Mary Doyle. Is this your first?
John Doyle: Yes, this is my first.
Susan Bratton: Congratulations. When was she born?
John Doyle: Thank you, yeah. Yeah, it’s a great thing. Hence why I said babycenter.com. I’ve become familiar with that site, or at least see my wife on it a lot.
Susan Bratton: So let me get this straight; you had your 2009 M & A report to do, you had a baby girl, you’ve got like all these deals going…
John Doyle: Yes.
Susan Bratton: And you had time to come on DishyMix and tell us what’s going on in the world…
John Doyle: Yes.
Susan Bratton: I feel like a lucky woman that I got a piece of your time John. I know that’s precious for you now.
John Doyle: Anything for you.
Susan Bratton: I love that. And we got to meet at AdTech….
John Doyle: Yes we did.
Susan Bratton: You and I finally got to meet. There you were. I was talking to Dawn Gilbert over at Affiliate Summit, hanging out shooting the breeze with her, and you’re like “Hey, I’m John Doyle.” Oh my god. It was so nice to finally meet you in person.
John Doyle: Well yeah. Thank you. Yeah, it was nice to meet you. I definitely was, I walked by and I said, “Susan”, and you recognized who I was. It was great.
Susan Bratton: Of course I did. I’ve got your bio up on my website, man. We’ve got an annual date for DishyMix now. You know that, right?
John Doyle: Yes, we do. First or second – actually the second week. What is this, is this the second week? Lets make it the second week every year I speak to you…
Susan Bratton: Perfect.
John Doyle: And this was fun.
Susan Bratton: And we do a show. And congratulations on your baby girl.
John Doyle: Thank you so much.
Susan Bratton: I love that you’re a dad now. Everything’s happening for you John. You’re a winner. It’s all going to be awesome for you.
John Doyle: Thank you.
Susan Bratton: Yeah. And thanks for sharing the report so nobody that listened to DishyMix has to actually go read it unless they’re a super geeky tweaky M & A person. But it’s nice for us to hear what’s happening in the market. It helps us with our business in general. So thank you so much for coming on the show today.
John Doyle: Great. Thank you for having me and I hope to see you at the next AdTech.
Susan Bratton: Me too. You will, ‘cause I’ll be there. All right, I’m your host, Susan Bratton. Hey, I hope this was valuable and you’ll go get John’s report, and at least you know what’s happening in the market. And I’ll see you next week and you’ll seen John next year. Have a great day. Bye-bye.