Deal Radar 2008: Seeking Alpha

I covered Seeking Alpha a while back. It is a one-stop shop for financial news and analysis.

Founded in early 2004 by David Jackson, it focuses on opinions, analysis and portfolio management tips from contributors, many of whom are finance professionals, Hedge Fund managers and newsletter authors. The incentive for most contributors is the exposure, similar to TheStreet.com.

Seeking Alpha finds content from a variety of sites, including blogs and edits it to guarantee quality. The editors select the content with the readers, including money managers and individual investors in mind.

In turn, Seeking Alpha syndicates its content to Yahoo! Finance, Reuters, Marketwatch, and other financial sites.

According to Alexa Rankings, the three month average traffic rank for the site is 6,925. Acc. to Quantcast, the site gets over 535,000 unique visitors a month. Monthly page views are estimated to be in the 2.5-3 Million range.

The content of the site attracts more attention than any other financial blog. And in spite of the fact that blogs are difficult to monetize via ad revenues, Benchmark Capital invested an undisclosed amount in Seeking Alpha in September 2006. The amount is likely in the $2-4 Million range.

The jury is still out on whether it was a good investment on Benchmark’s part. All other venture firms who have invested in blogs (August Capital in TechCrunch, TrueVentures in GigaOm) are, at this point, in the same boat.

Unquestionably, Seeking Alpha offers value to its audience by bringing together a diverse range of opinions from the financial community. Generally, CPMs tend to be good for this audience. At scale, $25-$50 CPMs should be viable. [I asked David Jackson for feedback on his business, which he declined to discuss for the moment.]

In the best case, with a $50 CPM and 3 Million page views a month, we’re looking at a $150k monthly revenue stream, $1.8 Million annual. This, of course, assumes, that Seeking Alpha has been able to crack its Ad Sales challenge and can successfully sell its entire inventory at these premium prices. [I am simplifying a bit … in each page there are usually 3-4 ads, and not all of them can be sold at premium CPMs, so I am assuming $50 CPM per page, across all ads.]

Perhaps, reality is more challenging. Publishers are not having an easy time selling their inventory. Seeking Alpha, most likely, is getting more like a 50-70% sell-through on its inventory, which brings the revenue run rate down to, let’s say $1 Million annual.

Now comes the question of exit. Who is going to buy the company?

In my opinion, the best acquirer for Seeking Alpha would be Jim Cramer’s TheStreet.com [TSCM]. TheStreet.com is a $260 Million market cap company with 2007 revenue of $65 Million. Technology Crossover Ventures has recently invested $55 Million to fund acquisitions and diversify its portfolio of media assets, especially because the company has always been criticized for being too Cramer dependent. In fact, the company is currently in the midst of renegotiation of Cramer’s employment contract which expired at the end of 2007. Last year, it also acquired James Altucher’s Stockpickr.com.

Seeking Alpha would fit perfectly into that portfolio and provide complete diversification, since it has 300+ authors (including me), and no one author rules. The audiences are also perfectly synergistic.

As for the valuation, what is TheStreet.com likely to pay for a $1-2 Million a year revenue run rate company? Probably $5-$10 Million.

At any rate, Seeking Alpha is on my Deal Radar this year as a potential acquisition target in the financial media space. As for what is the destiny of the other venture funded blogs, we will discuss that later this month.

This segment is a part in the series : Deal Radar 2008