JEGI's managing director reports that media companies have been buying interactive properties at record rates.
Interactive M&A in the first quarter of 2006 totaled 54 deals worth $3.2 billion, up from $2.6 billion for 47 deals in the last quarter of 2005 (excluding the $1 billion swap of Yahoo China's assets with Alibaba), and up from $2.9 billion for 28 deals in the first quarter of 2005. These transaction totals include online media as well as related services and technology, as tracked by JEGI from public and proprietary sources.
Online M&A remains very active among both internet and diversified media buyers. Major diversified media companies in particular have "fallen in love all over again" with the scalability and profitability of interactive media and services. Groups like NBC, Gannett, Fox and Readers Digest have been moving aggressively to win new online audiences and advertising growth, and to gradually reshape their core offline businesses.
Content remains king-- online companies that own or create popular content, particularly video based, are much in demand as acquisitions. And for good reason; the audience and ad dollars moving into online video are real. Broadband internet access had become the mainstream viewer experience, rising to 68 percent of online users in February 2006, according to Nielsen//NetRatings. Online video advertising is still a modest contributor in the context of the $12 billion overall US internet ad market. However, ad campaigns rarely consist of a single ad format, usually combining video and less-expensive nonvideo inventory. More effective online video ad formats suggest that larger portions of the $64 billion TV market and the roughly $45 billion newspaper ad market are potentially available to shift to targetable, measurable and cost-efficient electronic media.
First quarter video deals include AOL's purchase of Truveo, the acquisition of Kontiki by VeriSign, and the sale of Popcast to VideoEgg. But many more serious discussions are underway as the major players feel out the video value chain, and we expect to see more video deals announced in the second quarter.
Tolman Geffs is a managing director with The Jordan Edmiston Group (JEGI), a New York-based investment bank founded in 1987 and focused on the media and information industries. Tolman was previously CEO of Internet Broadcasting Systems (IBS), the largest online television network. You should assume that Tolman and his firm have or will do business with companies mentioned in this column.