I had the following thoughts when I was preparing for the Red Herring panel “what are the big boys buying?” – I didn’t get a chance to say them though – so to the blog it is….
It seems to me that uncertainty must be just about at an all time high in old media board rooms around the world. For sure we are in the midst of a period of rapid change, but for me it is the combination of growth rate of new sites/companies, changing consumer behaviour, and shifts in the buy v. build dynamic that set this time apart from others.
If I was a director at a company like Viacom, or ITV I might sum up my dilemma like this:
- Traditional markets are declining as media consumption moves to the web – so I need to play in the new areas
- New companies are reaching critical mass (and huge value) with unprecedented speed,
- But, the monetisation potential of these new properties remains unclear
- And, to make matters worse consumers are becoming more difficult and demanding new types of services that I’m not 100% sure I could build if I had all the time and money in the world
- So I have to play, but I really struggle with the valuations and I’m not confident I can build something on my own
The exit theses of most successful consumer internet properties reflects this uncertainty. They have enough people talking with them that they feel confident they will get a good result, but under close scrutiny the logic for any individual acquirer is weak. I guess what I’m saying is that the emotions of fear and greed are an unusually large component of acquisition rationales in this space – for now at least.
These problems are all compounded by uncertainty over copyright enforcement and monetisation potential of social network traffic. On this last point I am hearing worrying rumours that less than half of MySpace profiles belong to true members (as opposed to corporates and spammers) and that MySpace is even encouraging corporates to set up fake profiles (usually of pretty girls) that make lots of friends and recommend their products.