Consolidation is one of the things that happens in a mature industry like publishing. Firms buy out rivals for a larger share of the market. Small firms capture a lucrative niche or develop an important technology and are then bought out by larger firms to build capacity and scale. As the recent acquisition of About.com by the New York Times Company [see related OJR story] demonstrates, online publishing is no different.
But what about the millions of micro-publishers operating online? Do these small firms engage in the same kind of merger and acquisition activity as their giant cousins?
Not as much as one might expect, according to Peter Schiable, president of the Subscription Website Publishers Association (SWEPA). “I’m a little surprised that we haven’t seen more of it,” he said. “Many publishers have floundered, so you’d think they’d be more receptive to a buyout offer. Buyers are there, but sellers aren’t necessarily interested.”
There is some acquisition activity among medium-sized publications, such as the acquisition of ClickZ by Internet.com, but the truly micro-sized publishers don’t often sell their publications unless they plan to leave the business entirely. Rather, they tend to move into cooperative audience-sharing arrangements and mergers. More often than not, what inspires the smaller publisher to move in this direction is a desire to increase productivity.
Jake Ludington got started in online media by publishing the Digital Media newsletter for Chris Pirillio’s Lockergnome and eventually struck out on his own to launch MediaBlab in 2003. Now, he has reached the same point in his business growth that inspired Lockergnome to expand from a single voice with a single newsletter, and he is considering using the same method to expand his own enterprise.
“I know that I’m hitting a point where my available time to create is reaching its finite limit,” Ludington wrote in an e-mail. “The only way to grow the business beyond where I can take it is to bring in more talented writers or to merge with other independent voices who may have strong traffic but haven’t figured out how to turn the traffic into a viable business model.”
These small publishers will often expand from a single newsletter to several newsletters published by various writers under a single media brand. The larger entity functions as a sort of publishing cooperative. Each writer brings an existing audience to the collective, gets reciprocal exposure from the other newsletters in the group and may engage in revenue sharing or may keep the income generated by his or her own newsletter as part of the deal.
That can be a very attractive offer for a micro-publisher that produces great content but has not been able to turn popularity into dollars. “Many independent publishers have traffic that is worth considerably more than what they are current generating in revenue because they are focused on publishing information and don’t have the time to properly address the business aspects of what they are doing ,” Ludington wrote.
As attractive as such a merger might be for publishers that are generating disappointing revenues, persuading them to enter into the agreement is not as easy as one might expect. While some micro-publishers combine forces to grow their audiences and build scale, others are more interested in their subject and the relationship they’ve built with their audience.
One such publisher is AuctionBytes.com, operated jointly since 1999 by the husband and wife team of David and Ina Steiner. Theirs is a micro-publishing venture with an impressive record of success, as they have made AuctionBytes.com the pre-eminent authority on buying and selling on E-Bay. The Steiners have firmly established themselves in their chosen niche, and, according to Ina Steiner, they have little interest in either merger or acquisition.
“We really don’t want to scale. We like being independent and we know that if we wanted to scale it would put us in a different business,” Steiner said.
There are a number of elements that can make selling a niche publication difficult for its founder; first and foremost is deciding the value of the business. Because so many micro-publishers lack a business background, they do not tend to keep the kind of metrics that make it easy to put a dollar amount on the assets of their publishing business.
“For independent publishers, especially smaller operations consisting of one or two people, the valuation process is complicated. Accurate traffic statistics are tough to come by,” wrote Ludington.
In addition, independent publishers will tend to place value on aspects of the publication that make it rewarding for them to produce it. Ina Steiner describes her goals as a publisher as increased credibility, reputation and expertise in her niche. “I see our value as documenting an industry,” she said.
Many niche publishers shy away from mergers and acquisitions because they fear the new ownership will impact the relationship they have developed with their audience. Will the founder of the publication continue to be its principle content producer? How much editorial freedom will they have? Will the new owners bring the same kind of commitment to the subject that the founder does? Will they have the same kind of respect for the publication’s audience?
Additionally, independent publishers place tremendous value on their independence, sometimes more value than may seem objectively reasonable to someone making a cash offer. Many subscribers will agree that independence is the publication’s most attractive feature, and some will abandon an online newsletter they feel has “sold out” and “gone corporate.” The new owners will lose at least some percentage of their newly acquired subscriber base, which isn’t usually a problem. But as the publication grows larger and achieves scale, it will invariably be wholly unable to replicate the unique voice that originally made it popular.
This is a scenario that keeps many independent micro-publishers away from the bargaining table. As Ludington put it, “If you’re independent and making a comfortable living, it can be difficult to accept that by giving up some amount of control you may end up with a bigger audience and more money in the long run.”
In the end, merger and acquisition activity among online micro-publishers comes down to motives. For some of those smaller content producers, the revenue is secondary. The real value of the publication lies in the doing. By staying small, the niche newsletter or Weblog is less like authoritative lecturing and more like an interactive community. The connection between writer and reader can then be closer and much more personal than what most journalists experience writing for The New York Times.
“It’s really about lifestyle. It’s much better to focus on what you do and do it well,” says Steiner. “We really have such a great gig and, if you’re really happy doing what you’re doing … in negotiations, that’s going to up the ante.”
About Dawn Rivers Baker
