Lesson from Ziff Davis: A whole new buyer market

Nov. 14, 2012 -- On Monday, news broke that Ziff Davis Media (ZDM), owner of brands such as PCMag.com, ComputerShopper, Geek.com and more, had been sold to j2 Global Inc, a cloud computing service provider with brands including eFax, Campaigner and FuseMail, for $167 million. Earlier this year, another service provider, lead-gen marketing company QuinStreet, bought the Ziff Davis Enterprise (ZDE), the b-to-b magazine unit of the company.

Instead of being gobbled up by other media companies in b-to-b or in technology, ZDM and ZDE were both sold to two vendors. Is media M&A changing? John Wickersham, partner at Atwood Capital Partners, believes so.

"The landscape of buyers for nearly all segments of media and information continues to change rather dramatically," said Wickersham. "In business media, for instance, formerly go-to strategic buyers like Reed and Nielsen have certainly narrowed their target range away from advertising-driven assets. In the case of j2 Global, they must believe that the addition of a more business-oriented media company will broaden their customer base. J2 already has limited efforts to sell digital ads and the ZDM addition will definitely give them a greater capability."

Sources say ZDM was an attractive buy for j2 Global because of its ad targeting platform, BuyerBase. In a press release, j2 Global CEO Hemi Zucker wrote, “We have years of experience and significant interest in the digital media and online marketing space, both as a large scale consumer of advertising and as a seller of advertising on our ad-supported properties and a provider of marketing and advertising services through Campaigner.” FBR Capital's Daniel Ives believes j2 will also use ZDM to market its services.

Another reason might be the commonality of the companies' customers. Both of the companies are deeply involved in the tech industry. "Service providers might be interested in media companies if the audience of the media company overlaps with the customer base of the service company," said Reed Phillips III, managing partner of DeSilva + Phillips Investment Bank. "Service providers are looking for better ways to communicate with their customers and owning a media company could be the answer."

Phillips notes that it is much more likely that a service provider would hire a media company to work on their behalf instead of acquiring.

The lesson from Ziff Davis is if a company expands to become more than "traditional media," it can potentially open doors to a new buyers. "I think smart business media companies will continue to work their way toward what we term at Atwood to be 'advanced media models,'" said Wickersham. "That is to say value will continue to move toward market focus strategies and creative, complimentary media forms. Highly profitable enterprises can be built with both marketers/advertisers and subscribers/buyers in mind. Such enterprises will surely attract PE sponsors and a new wave of strategic buyers."

By Elizabeth A. Reid