Now that the presidential elections are over, sites typically devoted to politics, such as Huffington Post, are focusing on accelerating the growth of their celebrity and entertainment news. HuffPost will be yet another contender in the battle for eyeballs interested in celebrity and gossip. It's a very crowded field. There's popular online sites, such as Perezhilton, Yahoo's OMG, and TMZ, as well as traditional rags, such as People and US Weekly, vying for the same audience. The competitive landscape is just one of challenges celebrity and pop culture sites, such as Buzznet, face. Buzznet was the highlighted company of discussion in this Vator Box segment, in which Brian Ascher, venture capitalist of Venrock, was our guest host.
Buzznet, which is backed by Universal and is a pop culture and music social media site, is definitely feeling the pinch. In mid-November, Buzznet laid off 10 employees, more than 10% of its 89-person workforce.
In this segment, Brian and Ezra Roizen (Vator Box regular and digital media investment banker) offered up advice, observations and commentary, including:
- It's unclear whether the company is an advertising network or a content network
- Building multiple brands may be a difficult strategy as building one brand is tough enough
- Traffic numbers appear to be declining this year. And, according to Quantcast, 78% of users are passers-by and 1% are addicts vs. Perezhilton.com, which has 35% passers-by, and 14% addicts
- Having an ad network and a destination site to showcase your advertisers and publishers is a good strategy. But you have to strike a balance between building the publisher brands and going aggressively after advertising dollars
- Combining user-generated-content with professional content is the direction that many media companies are going. The challenge for these hybrid models, however, is that the advertisers still have yet to fully embrace UGC
- The company should consider a catalog, much like People's shopping magazine, which is essentially a catalog showcasing what stars are wearing and where you can buy the products
Now, here's our Liquid Scenarios Minute. (The text below is an exit and liquidity scenario analysis provided by our sponsor Liquid Scenarios)
Buzznet has raised $7 million in its previous rounds and $25 million in its most recent round. Unlike most other venture deals in the past two years, we believe Buzznet is better poised for an IPO rather than an acquisition. Based on the company's most recent financing, it appears that existing venture funds have already earned unrealized appreciation of 4x to 5x their original investment based on Universal's investment in the company this year. The best analog for why, and how Buzznet should wait for a receptive IPO market is a classic brick-and-mortar ad model versus the power of the Internet.
Clear Channel, recently valued at over $23 billion, like Buzznet relies on engaging eyes and ears based on location and preferences. The difference is that for every extra $10 million Clear Channel currently gets in revenue, its market cap actually only gains half that amount, due to an onerous cost structure.
By contrast, if Buzznet's investors can wait until it grows revenue to between $150 million and $200 million, it could potentially end up with a market cap well over $1 billion in the next couple of years. The Buzznet team is only growing in its experience and knowledge of highly-coveted niches, such as gaming and gaming's increasing connection to music monetization, along with social music and video properties acquired, like Idolator, stereogum, Qloud and Absolute Punk. As an investment, Buzznet would work out much better for Universal if it goes public, adding $225 million to its balance sheet almost as much to their 2010 earnings. Venture investors would see top quartile return multiples and founders could liquidate the 10-digit-paper returns they've realized thus far.
That's the Liquid Scenarios' Minute.
(Programming Note: We are now focusing on one company per each Vator Box. Upcoming companies highlighted, in which Venrock's Ascher is our guest host include, Yollege, and Glam Media. Past companies reviewed by Ascher include Lyricfind and Glam Media. Be sure to check in to see when those episodes go up. And, our upcoming guest hosts include Google's Marissa Mayer, EBay's head of M&A, Erik Stuart, and Zynga founder and CEO Mark Pincus)
Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.
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Bambi Francisco Roizen
Startup/Business
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Since founding bpCentral, our focus has been on increasing each user's competitive advantage each and every time they interact with one of our applications. Naturally, this involves more than simply enabling complex calculations to be performed accurately. In fact, during the first 12 months of developing our new technologies and applications, we put an inordinate amount of resources into discovering how to transform the relationships between idiosyncratic decision-makers and financial information. Our premise was that if that human to data relationship could be elevated to a new standard, then the relationships of those professionals with the entities and individuals they interact with could be more efficient and therefore more valuable.
In response, we developed CIMPA, the Carver Import Algorithm, a system that allows any electronic financial information, data or reports to be interpreted by a receiving system without the need for XML, XBRL, tagging approaches or extensive manual data entry. As a result of this technology, the Company's systems for private equity and venture capital professionals are able to import data in a matter of seconds, instead of a matter of hours.
Similarly, the Company noted that when users attempted to calculate the outcomes of complex liquidation preferences, anti-dilution provisions and other complex terms that are common to VC/PE transactions, any output was virtually impossible to verify without a costly audit of the formulas. Since the formulas were generally based in excel, this meant that few if any partners or other key investment professionals could afford to expend the effort to verify how amounts were arrived at. Upon further consideration, the Company realized that, to a certain extent, this was true of all financial reports. For traditional financial statements, this point is evidenced in the fact that notes to financial statements typically occupy several times more pages than the actual financial reports do. This realization inspired the Company to develop a system it calls OferX, which presents all financial information in a manner that allows any user to audit and see how amounts were calculated (in an easy to understand, quantifiable manner) without the need for extensive textual descriptions.
Together these unique tools form the foundation for the Company's offerings, which are backed by over 29 patent pending technologies.
Startup/Business
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The founders of Glam Media created a new media model to bring brand advertisers to vertical audiences online: vertical content networks. Today, Glam Media—with its Glam.com (women) and Brash.com (men) networks—is the fastest growing Top 10 media Web property in the U.S. with a total reach of 52.3 million unique monthly visitors in the U.S. and approximately 90 million uniques globally. Glam Media recently entered the comScore Top 10 Web properties list and is also a Top 10 Display Ad Publisher. With 700 sites total, Glam Media is composed of: Glam.com—a carefully curated network of popular and influential lifestyle women’s Web sites, blogs and magazines; and Brash.com—the newly launched all men’s network. Glam Media is backed by Hubert Burda Media, GLG Partners, Accel Partners, DAG Ventures, Draper Fisher Jurvetson, Walden Venture Capital and Information Capital. Glam Media is headquartered in New York City and Silicon Valley, California, with international offices in London, Munich, Berlin, and Tokyo.
Startup/Business
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Buzznet.com is a vibrant social media destination representing the next evolution of social networking.
Buzznet distinguishes itself from traditional media sites and social networks that are focused on profile pages and communication tools by enabling Web users to program dynamic multimedia communities around the music and pop culture topics they are most passionate about.
More authentic, content rich and frequently updated than a website, and more interactive than a blog, Buzznet's integrated media and community platform allows its users to network like never before with leading bands, trendsetters and their peers through self-created content, videos, photos and journals. This unique user-centric approach has attracted more than 10 million users who program, by contributing, combining, providing context and connectivity, making Buzznet a top destination for people seeking the most current and authentic content and news.
Startup/Business
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YOLLEGE is an exciting student driven college review site that empowers college students across the nation to finally have a voice. With current and relevant reviews on a wide range of topics for every College, you’ll be provided with true perspective.Startup/Business
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LyricFind provides song lyrics content to digital music services, web sites, mobile services, and more. LyricFind has aggregated licensing from over 2,000 music publishers (including all major publishers), resulting in a catalogue of over 1,500,000 available tracks.
LyricFind provides both Lyrics Search and Lyric Display services to companies of all sizes and types, in both free and paid models.
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Joined Vator on
Advisor-to and commenter-on emerging ventures
