There’s a ton of interesting data included in a new MergerMarket interview with Federated Media Publishing COO Jason Weisberger. The report itself is proprietary research, although a copy was forwarded to us.
The company, which sells advertising for a number of blogs and other websites (including TechCrunch), had revenues of $4.5 million in 2006, its first year in operation. Projections for 2007 were $30 million in sales and “several million dollars” in profit.
Weisberger said “If Federated Media keeps performing the way we’ve predicted in 2007, it would be a really ripe time for a media player who understands this space to buy us now rather than having to buy us for a whole lot more later.” The article also said “While he was unsure how much Federated might sell for, Weisberger said similar companies have gotten 8x to 10x gross revenue…Another possible valuation for a sale of the company is a multiple of 25x EBITDA.”
There was a laundry list of possible acquirers mentioned by Weisberger, including media companies (AOL, CBS, Google, IAC/Interactive, Fox, Yahoo were mentioned) and advertising agencies (Universal McCann, Ogilvy & Mathers, aQuantive, Saatchi & Saatchi, and TBWA/Chiat/Day).
The company is also considering a number of acquisitions, and raising a new round of financing of $3 - 8 million to pay for them. The company previously raised $2.2 million.
Update: I spoke to John Battelle, who says that this interview was done under the impression that it would be used as background material only, and that they have no intention of selling the company in the near future. He also said that the company is not actively fundraising at this time. Battelle also comments below.
Do they have any innovative technology or are they just selling ad space?
Being one of the originators and popularizers of the term WEB 2.0 - certainly helps
8-10x’s revenue for an ad network? That’s some good ganja he’s got going over there.
I only see mediaplex advertising. Which of these ads are from Federated Media?
@Brian
o_O no kidin’ this here dude is my pal.
I bet whoever wrote that article is getting a talking to.
FM’s prices are heavily inflated, if you look at their ad network, many of the publishers do not even have FM ads running on their site. They simply don’t have any proprietary technology as the first commenter Baron pointed out. They have a great brand and great clients, and I wish them the best, but the competition can undercut them pretty easily considering their client base isn’t that big (just over 100 publishers). They are in the right business, but 8x-10x is quite exorbitant giving their lack of technology.
yeah but they have very loyal publishers.
you can buy and sell loyalty - it’s called the bottom line
I also have to say that FM’s prices are really overinflated.
What innovative technology would there be? Selling advertising is a simple concept. You match those with products to blogs with the specified target demographic. Assuming the publishers are creating enough good material to keep the eyeballs coming, it’s just a matter of placing an advertisement for product XYZ on a page where someone is discussing the industry of XYZ. That’s a very narrow view of the subject, but not far from the actual truth of things.
I think if they really are going to sell, they should hold out. If they went from 4.5M in sales last year to 30M this year, even a fraction of that growth rate would put them over $50M for 2008. I wouldn’t be surprised if the buyers seemed all the more eager knowing that purchase price is likely increasing daily.
The economics of purchasing a company like this really don’t make sense. Why would a big marketing company purchase a player that their in house development team should be able to bury with adequate resources. Perhaps some of these marketing firms should open Excel and do some simple NPV calculations, realize that this idea isn’t that complicated, or at least not that complicated from my limited view on technologies, and produce a product of similar quality themselves.
25x EBITDA sounds … pretty zesty!
#4: Rishi, FM’s using Mediaplex’s adserver, MOJO, hence the mediaplex URL’s.
Guys, I’m a publisher at Federated Media, and I have to tell you, I’ve tested many, many advertising agencies over the past two years. FM leaves them all in the dust. Sometimes it’s not about the technology, but the team that makes things happen. I’ve never felt taken care of as much as with FM, nor have I made as much money. With the revenue they’ve created for me, I’ve been able to expand, hire staff and run my site more like a business than a hobby.
Their prices aren’t overinflated; they’re simply a reflection of the higher quality sites they represent. You could be Tribalfusion, and represent 10,000 sites who’d love nothing more than to display Free Flashing iPods at $0.5CPM… or you could be FM and get behind 100 sites with a quality audience and display good looking ads from the likes of Cingular and Sony at $10CPM.
they have no intention of selling the company in the near future. He also said that the company is not actively fundraising at this time
Mike either your title needs revision or JB is … um…lying?
Nope, Joe, not lying. Mike got it right in his update - we’re not looking to sell, nor do we need financing. Sure, any startup has its price, but ours is dictated by a very important caveat - anyone who is looking to purchase FM must first look to our business model, and determine if it wants to take care of the most important asset we have - our publishers. Just to be clear, here at FM we are not focused on selling our business, or even raising money. What we are focused on is adding value to our publisher’s business. That’s it.
PS - those who say we don’t have any technology might be surprised by what we’ve built, were they to take a look….
After being fortunate enought to attend John’s keynote at webmasterworld a few months ago…keep in mind this guy is passionate. He is passionate and loves what he does and what he does is great. I am not sure if he even seems remotely ‘bored enough’ to sell the ship just yet. FM is truly a shining star of what ad networks should strive to be.
Federated needs to expand their strategy. They are selling themselves short by being ‘just’ an ad network. John, you’re in the right position, but think bigger! There’s no reason why you shouldn’t explode current ideas of what businesses an internet company should or shouldn’t be in.
Lack of technology? Dude, look at DoubleClick. Sure, it can be as simple as emailing webmasters, “Hey, can I buy a banner?” But come on, use your brain, it’s a lot of code once you get into all the tracking, analysis, etc.
From a publisher’s perspective (I’m an FM Publisher) I think they do a really good job. The author and service support is really top notch and they focus on literally doing everything for you. They sell the ads, negotiate for the best prices, collect the money, do all the back office work, heck they even place the ad on my own blog. All I do is just get a check once a month.
What’s more though and I’m probably not at liberty to say how much they are but the CPMs that they are able to secure are some of the highest in the business. It really blows me away how much they are able to get in CPMs. I think part of this is matching the right advertisers with the right blogs for their products. This is obviously working for both authors and advertisers as several of the advertisers on my own site are repeat advertisers paying even higher CPMs than the first campaigns.
Obviously I’m just one author and a smaller one at that. Mike might have his own reflection of their service, CPMs and support but they work pretty well for me.
FM Media is using OpenAds as their ad serving platform not mediaplex.
Of course, customizations (payment integration etc.) have been done.
An ad brokering service? What makes this any different since the 100 or so publishers can walk at any time. Especially since about 95% of the impressions from their network are from Digg.
There are plenty of media giants out there who are probably glad they didn’t buy The Industry Standard when they were “ripe”.
FM generating 30 mil in sales this year? That is simply a lie, Michael Arington would be the first to tell you that his site is running empty with google ads…same with the rest of their publishers…oh sorry I forgot the $1 CPM gotomypc ads…keep dreaming
It might be helpful to look at FM from an ad agency perspective. As a senior exec for what is currently the largest agency in the world, I wouldn’t be surprised at all if FM hit $30 mil this year. The faster FM grows, the better it is for agencies and clients.
It’s not just the technology. The traditional and emerging media publishers have an extraordinarly difficult time getting to agency and client media decision makers. Battelle and FM have credibility that opens doors. And they have the ability to clearly and persuasively articulate the category value proposition, which is new to most of us. They are the pioneers in this space and Battelle has a proven track record. That gets my attention, and the attention of my peers. The fact that it does, helps FM recruit authors. My advice to my clients is to bet on FM. Bet on them early and establish a long term relationship with them.
I’m betting Battelle will only sell this year if it gives him access to resources to better serve his authors. That’s what he says he cares about and I don’t see a reason for advertisers not to believe him. It’s much more in his best interests to wait.
proven track record? you mean two failed operations in Wired magazine and the industry standard? Battelle is a great journalist he is NOT an entrepreneur!
Casey Jones I don’t get your logic of how FM is SOOOO different……
Driving that train, high on cocaine,
Casey Jones is ready, watch your speed.
Trouble ahead, trouble behind,
And you know that notion just crossed my mind.
Ho, BigDeal, if you’re going to quote Robert Hunter, check your sources. As far as my logic goes, have you ever planned or negotiated media for a large agency or advertiser? If so, it might make more sense.
Er…Wired was a failure? Hmmm. I’ll grant you The Industry Standard. Man, I’ll grant you that. But Wired? Er…check your facts, brother.
Just testing