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Why Guardian Media Bought paidContent for $30M

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Rafat Ali, founder of ContentNext Media, a Santa Monica, Calif.-based new media startup and publisher of the blog paidContent, puts the blame for his inability to sleep last night squarely on Kara Swisher’s shoulders for breaking the story of his company being gobbled up -– for a rumored $30 million — by Guardian Media Group (GMG). He admits on his blog to being steamed over being scooped on the biggest story of his life – and as a lifelong reporter, I know how that feels.

In a very early morning call he explained that a sale had not been part of his plan; he had been raising another big round of funding to grow his company.  The company had previously raised $1 million for Graycroft Ventures. But the offer to be acquired by a company he respects as much as GMG was simply too good to pass up. The company is going to be run independently from the U.S., he said, and he expects to expand aggressively in Europe and India.

This is a great outcome for a guy who has worked tirelessly to build paidContent over the last six years, one blog post at a time. Rafat is also a long-time friend and — ever since we each started our businesses — a great resource. From a personal perspective, I can only imagine his elation, no matter how short-lived it might be.

Granted, the outcome doesn’t mean that Rafat and his partner in grime, Staci Kramer, get to go and enjoy martinis on a beach somewhere –- they still have to work for their new corporate masters, for the deal does have a big earn-out component. As far as his buyer, GMG, best known for its Guardian and Observer newspapers in Britain, is concerned, this is the right step, a way to buy into the future of media.

While at first blush it doesn’t make sense that a newspaper company is buying paidContent, many overlook the fact that GMG also has a division called Guardian Professional, a multimillion-dollar B2B publisher. With its thriving conference and research business, not to mention a highly influential and targeted audience, paidContent is an ideal Trade 2.0 publisher. It’s no surprise they got acquired.

The B2B publishing business is currently going through an upheaval. Many, like United Business, are retrenching and cutting back on their trade magazine divisions. Their Internet operations haven’t quite been the savior that they thought they would be. In other words, this is a business that can be totally disrupted and as such, reinvented.

As the founder of a company that’s in the same game as Rafat’s, the sale of his company confirms one simple fact: We have a disruptive strategy that involves using technology to build a business that is defining the future of media. Around this time last year I wrote about how broadband has led to new media consumption patterns and how blogs are part of this evolution of media:

This immediate media is information simply adapting to the new methods of distribution…The Internet in its early version upped the tempo, and with the rise of high speed, always-on connections, information is now an unending stream…The more we connect, the more we want to know but in less time. Blogs are a reflection of our time-deprived times.

In order to do this successfully — as Rafat and his team have done — one needs to upend the existing “supply chain” of the media and in the words of Jeff Jarvis, a well-known blogger and an adviser to Guardian Media, explode the news room. By acquiring paidContent, Guardian has placed a calculated bet on the future.

Photo courtesy of Rex Hammock via Flickr

23 Responses to “Why Guardian Media Bought paidContent for $30M”

  1. I just wonder what was the valuation model? PaidCOntent publishes so much about M&A and VC deals in the industry — maybe it is time to disclose some details about the PaidContent/Guardian deal. $30 million seems a lot!

  2. Om-I really admire your post for all the reasons mentioned above. To that I may add that both you and Rafat have been pathbreakers, changing something and chronicling that very change yourself rather well. I would like to call this “living the disruption”…some close to Mahatma Gandhi’s saying: “Be the change you want to see!”
    I wish you both good luck. I am also reminded me of a saying by Infosys chairman Narayana Murthy: “It is like changing the tyres of an aircraft midflight!”
    Some of the insights you offer in the post and by recollection need some more fleshing out for a larger evangelisation..but surely that gives us all something to do?:)

  3. Hey Om
    Thanks for your nice words…and everyone’s well wishes here. Sorry I couldn’t jump in here earlier, with all the whirlwind yesterday. Someone even told me a new iPhone launched yesterday…i missed that one :)

    The standards Om and his team has helped define are worth all the value they will get, I have no doubt. Om’s own journey, especially in the last year, is inspiring.

    Om, you better take me to the best damn Indian restaurant next time I am in SF….I will pay :)

  4. It is surprising the UK based GMG paid $30 mill for a site which has most of it’s visitors are from US. According to Alexa traffic details United States counts for 76.1% of hits, India with 4.3 % and UK with only 3.9 %.

  5. It is true that the internet is completely changing the media business, not just in distribution but eventually the form itself will change in major ways. However, right now it is like trying to grow a plant in fertile soil (the internet) with plenty of sunlight (online readers) but no water. The water is micropayments and until a working system is deployed, the field will be relatively barren compared to the forest that will grow once we have micropayments working.

  6. Good for Rafat and Kara. PaidContent and the family of GigaOmniMedia sites have done a superb job of chronicling the stunning transformation that digital distribution models and broadband have imposed upon so many businesses – with a special callout for traditional media.

    It is a great milestone for those of you who have worked so hard, under the near constant deadline and have done so in a fair, balanced and frankly relentless manner – calling BS where it needed to be called and praising innovation where praise was deserved.

    Good on ya!

  7. @worth

    Rafat is one man who deserves it. He has worked hard for it. I think the big issue that people don’t seem to realize is the fundamental nature of the media business, the economics around it and deal with the new consumption patterns. We all – Rafat, Mike, Matt, Kara and countless others are finetuning this new model.

    Rafat’s exit is a good validation for all.

  8. Om, it clearly comes through that you’re happy for this guy, rather than jealous – good stuff!
    There’s a Seeking Alpha commentary on the future of news (print vs. online) and journalism, and to me, the advantage that online content creators/journalists like yourself have over print is that you never sleep and you have 24 hour access to distribution. You seemingly live and breathe this stuff every moment of your existence. We know that if it happens, we’ll see it from you or Arrington (or Swisher?) first.
    Keep up the good, hard work!