With GUBA facing an upheaval in the boardroom, the company has put itself for sale. The San Francisco-based online video startup has hired a high powered banker to shop it around. Our investment banking sources say that Blake Warner of Thomas Weisel Partners is the man looking to find a new home for the company. Warner was one of the main bankers who helped shop MySpace to News Corp., and is described as someone with considerable connections in the media and technology community. Our sources close to GUBA were able to confirm that GUBA indeed is for sale.
Our sources say that there is considerable interest from a few tech companies and a handful of media companies, primarily because of Johnny, a digital fingerprinting developed by GUBA. For that reason alone, the company could fetch between $25 to $30 million, our sources say.
Johnny allows the company to spot and stop illegal content from cropping up amongst uploaded videos. It is one of the main reasons why GUBA has been able to convince large media companies to partner with them and sell television and movie downloads.
Digital video fingerprinting is an area of intense interest. Yesterday, YouTube got into a fracas over a sex video of a Brazilian soccer player’s wife. Earlier this week, Macrovision bought Mediabolic for about $43 million, hoping to extend its copyright protection and digital rights business into new digital devices such as PVRs and set-top boxes. For GUBA, interest in this space could offer a timely parachute.
There’s no denying that the San Francisco-based company is facing a crisis, as more executives have followed co-founder and chief executive officer Tom McInerney out of the door. Roman Arzhintar, vice president of strategy at GUBA and Bart Myers, senior vice president of product development, soon followed, citing their desire to start yet another Internet video company.
GUBA’s current crisis is also a reflection of company’s confused business model. The company could not shake off its adult content roots, never raised venture capital and could not leverage its business partnerships with large media companies into a meaningful position in the hyper competitive online video market. Straddling two distinct businesses – user generated videos and premium video downloads – GUBA could not decide on one.
The user-generated video-sharing business move was prompted by the growing popularity of YouTube, and GUBA betting that it could leverage its high Alexa ranking (mostly because of a profitable adult content business) into becoming a rival to Chad-and-Steve’s baby. The high Alexa ranking was also a justification for the company to stick to the GUBA name, a move that can be deemed a strategic blunder. GUBA, like a reformed bent nose, hasn’t been able to shake off its questionable past.
The recent changes have come as a result of disagreement over the direction of the company should take. While McInerney was in favor of selling the company, the engineering side of the house wants to soldier on. “I think we can all acknowledge that YouTube has won the big prize,” McInerney bluntly told News.com. He is said to have argued that in the post Google-YouTube world, small companies need a big brother, someone with deep pockets and major media company connections.
The pragmatic McInerney wanted to cash in the chips before the music stopped, which might have been logic too cold for others. But with Warner in charge of selling the company, McInerney might get his wish after all.