(by Tolman Geffs, The Jordan, Edmiston Group) Interactive M&A in the first quarter of 2006 totaled 54 deals worth $3.2 billion, up from $2.6 billion for 47 deals in the last quarter of 2005 (plus the $1 billion swap of Yahoo China’s assets with Alibaba). Online M&A remains very active as competition for audiences and advertising growth intensifies among both internet and major diversified media companies. These deal totals include online media as well as related services and technology, as tracked by JEGI from public and confidential sources. More after the jump…
Content remains king – companies that own popular content, particularly user generated or video based, are much in demand. On the user generated side, interesting Q1 deals include the sale of del.icio.us to Yahoo! and the widely reported but unconfirmed move by Fox Interactive to acquire NewRoo. Both of these are representative of a flock of generally revenue-free tools that offer users cool ways to create, categorize and share content. (Hopefully a compelling revenue model will arrive soon.)
Video on the other hand is a bit more substantive – the ad dollars flowing into online video are real. Broadband internet access had become the mainstream viewer experience, rising to 68% of online users in February 2006, according to Nielsen//NetRatings. eMarketer rates online video advertising a mere $225 million market in 2005 – but forecasts the market to triple in the next two years and to reach $1.5 billion in 2009. Industry insiders (predictably enough) expect further acceleration in the shift from TV to online video around the 2006 television upfront season this June.
Online video advertising is still a modest pot of money in the context of the $12 billion overall US internet ad market. The reason for excitement goes a bit deeper. First, ad campaigns rarely consist of a single ad format, usually combining video and less-expensive nonvideo inventory. Second, more effective online video formats will open up a large portion of the $64 billion TV market or the roughly $45 billion newspaper ad market. So a lot more money is potentially available to shift to targetable, measurable and cost-efficient electronic media.
First quarter video deals include AOL’s purchase of Truveo, the acquisition of Kontiki by VeriSign, and the sale of Popcast to VideoEgg. But many more serious discussions are underway as the major players feel out the video value chain, and we expect to see more video deals announced in the second quarter.
Tolman Geffs is a managing director with The Jordan Edmiston Group (JEGI), a New York-based investment bank founded in 1987 and focused on the media and information industries. Tolman was previously CEO of Internet Broadcasting Systems (IBS), the largest online television network. You should assume that Tolman and his firm have or will do business with companies mentioned in this column.
Subscriber content
?
Subscriber content comes from Gigaom Research, bridging the gap between breaking news and long-tail research. Visit any of our reports to learn more and subscribe.
Advertisement
Advertisement
Advertisement
Comments have been disabled for this post