Web 3.0 & NYT (Part 4)

Acquisition Targets

NYT has been making small investments and acquisitions in the online space for the past few years, tipping its toes into the online waters. The Company’s biggest acquisition in this space has been About.com in March 2005, which has been paying off handsomely.

The Company has partnered with Monster which now powers the Jobs sections at NYTimes.com and Boston.com under a revenue share deal. The partnership is good, but would it be enough to set-off the falling advertising revenues from its jobs sections? Acquiring a Job site could be the way ahead, but then Monster is expensive and has a much higher market cap than NYT itself.

NYT already holds a 14% stake in Indeed. Other investors in Indeed include institutional investors Allen & Company and Union Square Ventures. It might make sense for NYT to expand its Indeed holding.

In the real estate space the Company could consider acquiring Trulia or ZipRealty. Zillow is another prominent site, but I have reservations about its capitalization. Trulia recently raised $10 million in Series C funding led by Sequoia Capital. The site has raised $17.7M in total VC funding since 2004. ZipRealty was ranked 9th in the HitWise survey of Top Real Estate sites in the US in February 2007. ZipRealty is traded on the NASDAQ and with a market cap of $160 million, can be affordable. Zillow has raised $57 million in funding till date. According to HitWise data, Zillow is ranked 7th among the top 10 real estate sites in the US. In my opinion, Zillow has been raising way too much money, and rationalizing its valuation against that much investment is going to be difficult. At any rate, NYT’s market cap and cash position would not permit a large acquisition, and these Real Estate prospects may already be out of bounds for them.

Large portions of the personal advertisements have moved online and NYT could consider acquiring a smaller Matchmaking or dating site to gain access to the rapidly evolving online dating scene. Prospects include PlentyofFish, Engage, iminlikewithyou, etc.

There are a number of up and coming auto sites and NYT could acquire one for cheap. CarDomain, CarGurus, etc. are prospects.

The Business & finance space has been growing rapidly and NYT being a leading newspaper company and already having some interest in the space, could look at acquiring a community site like Seeking Alpha. Seeking Alpha is looking for an exit, and can presumably be acquired for not a lot of money. It lacks a good ad sales force, and pairing it with NYT’s own ad sales team, or even Federated Media (an ad network company in which NYT has taken a stake) could turn this asset into a good bet.

NYT has been making a lot of investments in the online entertainment space. It recently launched TV Decoder, a blog on television programs. With entertainment going online this is an interesting move. We have seen the opportunity that lies ahead for the entertainment (movies and music) sites.

In the online movie space the Company could consider acquiring Flixster, a San Francisco based social network where users rate and discuss movies. The site closed a $2 million round of financing in January 2007 with LightSpeed Ventures. Only a year old, Flixster is already one of the largest movie sites on the web with over 15 million registered users and over 500 million movie ratings. NYTimes’ Movie Reviews are widely respected and gets strong advertising dollars, so acquiring Flixster could be a very good strategy that happens to also be an affordable bet.

In general, NYT has to focus on smallish acquisitions, since it has a pretty low stock currency and not a lot of cash. I would conclude this segment by saying, Seeking Alpha and Flixster may be the two next acquisitions to consider, along with an increased stake in Indeed.

(To Be Continued)

[Part 1] [Part 2] [Part 3]

This segment is part 4 in the series : Web 3.0 & NYT
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