Content and media companies are in high demand. And not just with aggregators building media empires, but also with companies outside of the media space, primarily software businesses.
Why? Because companies with a product need an audience to sell to. And it’s typically more cost-efficient for those companies to sell to an audience they own, rather than paying a third party regularly for access.
It’s a good time to build in this space. If you’re operating a content or media company that’s valued by its audience, that asset is likely ripe for a strategic acquisition.
Why a strategic acquisition might be your best deal
Two types of buyers exist in the world of mergers and acquisitions. The first is a financial buyer, who will typically replicate the monetization strategies used by the seller pre-acquisition, with a goal of increasing revenue over time. This type of buyer pours gasoline on the seller’s fire.
Then there are strategic buyers, who leverage your assets against their own to increase the overall value of both companies. In these situations, one plus one equals three.
For example, if you run a media company that serves an audience of runners, it would make strategic sense for a company that sells running shoes to purchase your business. They would then own that audience and could sell their running shoes to those runners, likely bringing in more revenue than either company did on their own.
This makes your company incredibly valuable to a strategic buyer, and it’s why sellers generally prefer strategic buyers, regardless of the type of company they’ve built: because “strategics,” as M&A advisors call them, are typically willing to pay a higher price than financial buyers.
Plus — and here’s where this gets juicy — content companies in particular are ripe for strategic sales.
CBInsights wrote about this phenomenon with a focus on large deals, such as JP Morgan Chase’s acquisition of The Infatuation, a restaurant discovery site, in 2021. But smaller content companies are primed for these types of exits as well.
Why content sites are well-positioned for strategic acquisitions
In 2021, I sold a content site that catered to writers called The Write Life.
If you follow talk of acquisitions online, you’ll hear content companies typically sell for a certain multiple. Empire Flippers, for example, says in their State of the Industry Report 2021 that content sites sold on their platform in 2020 for an average of 31.6x monthly revenue.
Here’s the thing: I hadn’t monetized The Write Life particularly well. It had always been a side project for me, and I didn’t rely on it for income. So if I’d pegged a valuation based on revenue or profit alone, the site wouldn’t have been worth much.
Fortunately, I knew from selling a previous company to lean on common multiples as nothing more than a data point. As a leader in the online writing niche, my company’s value to a strategic buyer was far greater than the revenue it produced. The value was in its audience — its email list and SEO traffic — because an acquirer could use that audience to sell its own products.
I ended up selling the company for mid-6 figures.
Of course, brokers hear this all the time from hopeful sellers: My company is worth way more than it looks! It has so much potential!
Most of the time, this simply isn’t true. Not for content companies, and not for other types of companies. You can’t sell based on a vague notion of potential.
But an audience itself is an asset. It has value, even if it’s not fully monetized.
That’s why you can sell an audience that has revenue potential. Because once you’ve built an audience, there are myriad ways you — and your buyer — can use that audience to generate revenue.
So-called “owned” audiences like email lists are far more valuable than social media followings that are at the mercy of platforms. And a brand that doesn’t revolve around you is more sellable than a personal brand.
Many content operators haven’t fully leveraged their audience for revenue generation. Often that’s because they’re more skilled at audience growth than monetization. Or maybe the ways they could make money through their audience don’t appeal to them, so they use a monetization strategy that’s not as lucrative.
Even if you believe you’ve maxed out on revenue for the audience you’ve built, a strategic acquirer might see a way to squeeze out more value, especially once they combine your assets with theirs.
So ask yourself…
If you have an email list: How much could an acquirer make by sharing their event or product or service with that audience?
If you have traffic from Google that converts into subscribers: How many new people will a buyer be able to market to over time because of that growth?
If you have a list of people who once received your emails but have since unsubscribed: How much could an acquirer earn by retargeting that list on social media with their flagship product?
The ideal scenario: Bring revenue and audience
I don’t mean to diminish the importance of revenue for a content company. The ideal scenario is to maximize both audience and revenue. Do that, and you have a slam dunk: a healthy revenue multiple, plus the added value of the audience.
That was the case for The Hustle, which sold to a strategic acquirer in 2021. The newsletter business had 1.5 million email subscribers when it was bought by HubSpot, a marketing software company.
As founder Sam Parr explained on our podcast, The Hustle had monetized well through events and its flagship product, Trends. But it could bring in far more revenue when combined with HubSpot, because HubSpot could also sell its product to The Hustle’s audience.
In this scenario, both assets became far more valuable when combined. HubSpot ended up paying more than $20 million for the media company, Parr said on our podcast. (The exact sale price was not disclosed, though it’s rumored to be $27 million.)
In contrast, consider the sale of CSS-Tricks to DigitalOcean in 2022. At the time of the sale, this content site for developers saw about 7 million pageviews per month and had 9 million email subscribers. It sold for $4 million.
We don’t know for sure since he didn’t share revenue numbers ahead of the sale. But we do know the buyer wanted to expand its reach into the development community — DigitalOcean’s CEO said so on the company’s Q1 earnings call. DigitalOcean bought CSS-Tricks for its audience; now the cloud computing business can market its platform to those people.
If you read closely into these sales, you’ll notice another common thread: in most of the strategic content and media acquisitions we’ve covered, the buyer approached the seller about an acquisition.
Of course, this doesn’t mean you shouldn’t be proactive about selling. If you’re ready to exit, create a strategy. Figure out who your potential buyers might be, and reach out to them. Engage an M&A advisor to guide you.
Sell based on the value of your audience, not revenue
In the best-case scenario, you have great revenue and profit. Bootstrappers typically need revenue along the way anyway, both to fund their site’s operations and to support themselves. In many ways, that’s the dream for a content operator, to grow an audience that brings in good money.
But say you don’t have great revenue, either because it wasn’t your priority or because you’re stronger at building community than monetizing. So long as you attract the right strategic acquirer, you can likely get a healthy sale price based on the size and quality of your audience.
That’s what makes content companies different.
That’s what makes them ripe for a strategic acquisition that’s based on far more than a revenue multiple.
Content companies bring value not just in their bottom line, but also in their audience.
Next steps for selling a content company
Want some practical help positioning your content or media company for a strategic acquisition?
A few resources:
Find a buyer for your company:
Need an M&A advisor or broker to support you?
We’re happy to recommend a broker we trust who specializes in selling content companies.
If you’re looking to buy a media company:
Kyle Poyar at VC firm OpenView offers insights on how to think about buying a media asset to grow your SaaS