Last week Yahoo agreed to spend $90 million on Associated Content. While we sniffed at the quality of Associated’s two million-plus consumer-written articles, the deal has serious implications for the media business. Here’s how it impacts four different constituents.
For Yahoo
I think we can safely say that it depends on post-deal execution, as it usually does with these things. On the one hand that $90 million could prove to be a big ol’ waste of money: Associated’s content isn’t high-value stuff, CPM’s for lower-value inventory will inevitably keep being driven drown by the proliferation of supply and the reduction of friction in the buying process, and both Associated’s network of Joe and Jane Doe contributors and its technology platform could’ve been replicated by a company with Yahoo’s resources for a lot less than $90 million.
On the other hand if it can focus this army on providing the types of content demanded by advertisers — particularly local and niche advertisers who’ve yet to be effectively mined as a source of display revenue but could be extremely lucrative — while finding better ways of vetting the content for quality and building greater demand for brand advertising online, that $90 million could end up looking like a small price to have paid.
For media dealmakers
Dealmakers will read this as another positive indication that the media M&A market is coming back. I’ve only spoken to one lawyer and one banker on the topic, but both seemed confident this was good news for them. We’ve already seen an acceleration of the pace of dealmaking in the technology sector and the banker’s theory was that this deal would trigger more activity in the digital content space.
Obviously if you’re an entrepreneur looking for crazy multiples, you’d still rather you had invented some instantly scalable, must-have mobile software, but the fact that Yahoo — which has at times tried to distance itself from the media business — is snapping up content and talking about why it wants to be a media company must be a good sign for media owners who create original content. Right?
