Demand Media Buys Pluck for $75 million
Erick Schonfeld
31 comments »
Demand Media, a big buyer and operator of Internet domain name companies, completed negotiations to acquire Austin-based Pluck last night after about two months of negotiations. The price is not being disclosed but is rumored to be in the $50 million range. Update: We’ve confirmed the number from an inside source - $75 million, all cash. Pluck revenues are around $10 million/year.
Pluck raised $17 million in three rounds of funding.
Pluck never really lived up to expectations and the price paid is certainly less than investors had hoped for when writing their checks. The team certainly is scrappy, though, and quick to adapt. They had a promising RSS reader in the early days but eventually discontinued that product. They also released a Delicious-like social bookmarking site called Shadows that was also discontinued. Their most recent strategy is a suite of products that brings social networking features and blog content into big publishing sites. USAToday is a high profile customer.
Los Angeles based Demand Media was founded by former MySpace CEO Richard Rosenblatt. The company has been buying content sites and is said to be preparing for a 2009 IPO, economy permitting. Their last round, $100 million, was announced in September 2007. They’ve raised a total of $320 million to date.
Damm, never even heard of thee guys.
Congrats!
Good exit for Pluck, though not superb.. but at least wise to not be rss software focused as when it started…
Media company is who buys you out because they do
How could investors not be happy? They raised $10M and sold for $75M. They made at least 3 times their money if not more.
Looks like the white label social networking and community building consolidation continues. This news on the heels of Mzinga’s purchase of Prospero.
Open Innovation, community, social newtorking and the like - on the enterprise level - should have a good 2008.
Fred W - VC’s who aim for 3x their money tend to go out of business.
while 3x is not the perfect exit - a win is a win.
hey, for AV, it’s gotta be better than Living.com’s exit
Good point Mike although as Kenny Rogers says “you gotta know when to hold and you gotta know when to fold em”.
I really think that VC’s that make 0X their money are the ones that go out of business, ones that make 3X their money consistently are probably 80th percentile.
Although they could have made more, it is still better then miss. Even if you aim for higher then 3 times you won’t always reach your goal when cashing out
Not a home run, but I doubt the investors view this as one that “didn’t live up to expectations.” Based on revenue and growth rate, they were performing well. Looks like they were just in a situation where they had to choose between taking the moderate win or making a risky bet that they could enter new markets and grow it into a much bigger company. Given that they’d been around for a while, the team probably wasn’t up for attacking the bigger challenge.
Am I missing something? Compete.com says Pluck has 14,000 uniques per month. How did they make $10M in revenues last year?
Erick, do you know where pluck’s revenue coming from?
and how does demand media make $$?
Rosenblatt said he wanted to take it public in 2007. So I guess that’s pushed to 2009.
actually I think pluck had raised quite a bit more than 10mm, I like it was around 17-20. Reuerts invested over 7 and they had at least 10 prior to that,
I totally understand why investors would not be happy; but better 7x than 0x. Congrats to Pluck.
Maybe not what they were hoping for when they wrote the checks but certainly more then they expected everyday after that…
What in the world is Demand Media? It’s like the worst frankenstein monster i’ve ever seen. I’ve been in this industry for a long time but am not prepared for this beast.
Look, Pluck has been around for a while now. They went to market with an RSS reader, and it wasn’t a big hit. Then Shadows, which was a clever idea, but it didn’t really hit either. So they see an opportunity to provide large publishers like Hearst and The Guardian with some social media-type functionality, and they start to get some traction. But it’s not necessarily revolutionary. So why not sell into that strength? Probably a good time to exit after selling to many of the top media companies, because the only way to continue the growth rate is to move down to medium sized media companies, which requires a larger sales force for a lower average price point.
Of course AV didn’t invest in this company hoping for a 3x return, but they know enough to make hay when the sun shines.
@Thom: Pluck makes money by selling licenses for their platform of community tools to newspapers.
Newspapers pay Pluck to add features like community comments, citizen blogs, community photo uploads, etc. Pluck runs the infrastructure, the newspaper gets more pageviews.
I think it’s all based on Javascript widgets with, I’m guessing, a nice backend for administration and lots of rules that help newspapers overcome the fear of allowing the general public to post on their site.
Demand Media looks like a bit of Marchex and a couple others - aggregate a bunch of fair to middling domain names, put just enough content around them to make them SEO relevant, add some community features (Pluck), run some google ads on the site and you have a high margin, near zero cost website. Repeat 200 times across different genres. Print money. Works for a handful of guys in a garage, but for a company that’s raised $320MM???
Um why isn’t somebody paying me millions to install large corporate forums? Can’t be THAT hard….
Ugh, they paid too much. I use Pluck at work and it’s a major disappointment.