Contact Us Advisory Services

Blog

Sports and Social Media

July 1st, 2012 4:01PM by Brendon Kensel

Sports fans are increasingly consuming scores, news and athlete updates via social media. Globally there are over 460 million fans who ‘like’ sports teams on Facebook and almost 100 million fans ‘follow’ teams on Twitter according to Sports Fan Graph.

JockTalk” width=

JockTalk is a sports social network created by professional athletes for fans.

In 2012 twenty-six percent of sports fans will use social media to follow leagues, teams and players according to a survey conducted by Perform sports media group. Twenty-two percent of sports fans polled indicated that they use connected mobile devices to get breaking sports news. A study by brand engagement firm GMR Marketing found that 41% of sports fans check Twitter and Facebook for breaking sports news compared to just 13% for television.

Sports fans are frustrated with the lack of social engagement tools available to them to engage with their favorite athletes. Professional athletes have been adopting social media en masse, particularly Twitter, but athletes are seeking better engagement with fans and opportunities to monetize the social media content they are currently giving away for free. Twitter is great for one-way communication, but engagement falls short for what is possible with athletes and fans. Twitter recently launched a new effort to promote hastags in sports, such as the hashtag #NASCAR. These hashtags offer the ability to better curate conversations.

A new sports social network, JockTalk, facilitates deeper engagement between fans and professional athletes. JockTalk enables fans to easily interact with their favorite athletes, and get rewarded for being a great fan. Athletes can answer questions from fans and can quickly sort top fans by market. All text, photo and video posts on JockTalk are automatically published to both Twitter and to Facebook. JockTalk is built into the ecosystem of these social media leaders and is complimentary, not competitive. The platform also enables athletes to generate income and awareness for the causes they support, and easily engage their fans in new and impactful ways. JockTalk features professional athletes from the NFL, NBA, MLB, NHL, MLS, PGA, Olympic sports and several international sports leagues. Athletes include Paul Pierce, Kevin Love, Wes Welker, Warren Moon, Heath Bell, Aaron Boone, Ryan Kesler, and Matt Carle. “I am excited to use JockTalk so I can more easily communicate and share content with my fans,” said Matt Carle, NHL defenseman for the Philadelphia Flyers. “JockTalk enables me to generate income for the causes I care about and facilitates deeper engagement with my fans through tools such as fan rankings and a Q&A section.”

JockTalk launched in beta in April and an iPhone application will be released in the summer of 2012. Game on!

What to Expect from Social Media in 2012

January 2nd, 2012 9:42AM by Brendon Kensel

Social media is experiencing exponential growth in the U.S. and worldwide and this growth is expected to continue in 2012. Social networking sites now reach 82% of the world’s online population and account for about 20% of time spent online according to comScore. In the U.S. 98% of the online population uses social media. As mass social networks such as Facebook and Twitter are nearing saturation points in the U.S. it is leading to new user behavior and new social platforms that are focused on particular topics and market segments.

Mobile Social Activities Among Mobile Social Networking Users” width=

Source: comScore, December 2011

Social media user behavior seems to be changing as saturation points near. People are becoming less engaged in creating content and instead are increasingly sharing existing content according to a recent report from GlobalWebIndex. The report notes that a huge exception is the growing propensity for consumers to post images and video to their social media profiles. Consumers are also increasingly using mobile devices to access social networking sites. comScore notes that in 2011 80% of consumers used their smartphones to check posts by people they knew, and 70% posted a status.

The lifecycle of social media often follows a path of from niche market to mass market. Facebook went from targeting college students to allowing the general market to sign-up. MySpace has gone full circle by launching as a social network focused on the music niche, morphing into mass market site, and now returning to its music roots under the stewardship of Justin Timberlake. LinkedIn is a scaled example of a social network that launched with a focus on a niche audience, business professionals, and retains that focus today.

As mass social media platforms mature it is expected that new entrants will emerge and focus on particular topics and market segments. While Google’s G+ is focused on the mass market, consumers appear to be picking their favorite platform and spending their social media time there. Consumers also appear to be seeking out specialized social communities. Niche audiences of highly active participants will continue to emerge as consumers seek more tailored experiences and advertisers look for specific audiences.

New niche social media sites to keep an eye on in 2012 include: Chime.in, an interest network, where people share, connect with others, and build communities around their favorite topics; Pinterest, an online pin board to organize, share and follow collections of shared items and interests; and Jock Talk, a social media publishing platform that provides professional athletes and fans a single location to post conversations, videos and photos, and enable richer engagement.

Smartphones will also play a large in how consumers use social media in 2012. While Facebook and Twitter are forces in mobile social networking there a few emerging companies worth noting. These include: Path and Milk with its first app, Oink. Several additional specialized mobile networks that will ride on top of Facebook are expected to appear this year.

Social media will be fun to watch and socialize about in 2012!

Private Equity Investing in Digital Media Expected to Increase in 2011

April 9th, 2011 8:27PM by Brendon Kensel

Digital media companies are reinventing traditional business models and transforming the distribution of media content, services and applications. The global growth of emerging digital media channels and the convergence of media, marketing and technology are challenging traditional business models and compelling companies to explore alternative revenue models. Advertising remains the leading revenue generator for many digital media companies, but these dollars are often being generated in very creative ways. These rapid and dynamic changes in digital media have also impacted private equity firms and how they evaluate new platform and add-on acquisitions.

Private equity groups are expected to boost their level of investment in digital media in 2011 as they work to protect existing investments, unlock new economic opportunities, and open new markets. The top verticals that will likely attract interest are social networking, mobile/location-based services, niche Internet sites, videogames, and online advertising/technologies. According to the PricewaterhouseCoopers/NVCA MoneyTree Report, $11.6 billion flowed into 2,266 Internet-specific companies from 2008 through 2010. In 2010 $3.8 billion was invested in 729 deals. This robust early-stage to late-stage venture investing in digital media over the past three years indicates that there will be an emergence of category leaders operating in new verticals and leveraging disruptive business models.

Digital Media Companies - Recent Funding & Estimated Value” width=

Source: CruchBase, April 2011

This trend has already become apparent with companies such as Facebook, Twitter, LinkedIn, Groupon, LivingSocial and Zynga. Private equity firms will likely actively pursue established late-stage category leaders as they look to establish positions in market-defining companies before IPO’s. As the public equity markets continue to improve and as IPO’s become a viable path to near-term liquidity, private equity investors will be attracted these companies. As an example, in January 2011 Demand Media (NYSE: DMD), run by former MySpace Chairman Richard Rosenblatt, went public and sold 8.9 million shares at $17 each. Since it was founded, Demand Media had raised approximately $375 million in financing from investors that included Oak Investment Partners, Spectrum Equity Investors, Generation Partners, 3i Group and Goldman Sachs. As of April 9, 2011 Demand Media had a market cap of $1.9 billion.

Recent noteworthy investments in digital media companies include:

LivingSocial – In April 2011 the company raised $400 million from Amazon (NASDAQ: AMZN), Lightspeed Ventures, T. Rowe Price, and Institutional Venture Partners which valued the company at approximately $3.5 billion.

Facebook – In January 2011 the company raised $1.5 billion from Goldman Sachs and DST in a deal that valued the company at $50 billion.

Groupon – In January 2011 the company raised $950 million from Andreessen Horowitz, Battery Ventures, DST, Greylock Partners, Kleiner Perkins Caufield & Byers, Maverick Capital, Silver Lake and Technology Crossover Ventures in a deal that valued the company at $4.75 billion.

Twitter – In December 2010 the company raised $200 million from Kleiner Perkins, Benchmark Capital, Union Square Ventures and Spark Capital in a deal that valued the company at $3.7 billion.

Zynga – In June 2010 the company raised $300 million from Softbank Capital and Google (NASDAQ: GOOG) which valued the company at approximately $4.5 billion. As of February 2011 it was rumored that Zynga was raising another $250 million at a valuation of $7 to $10 billion.

Digital Media and the Social Web

January 9th, 2011 1:26PM by Brendon Kensel

Digital media will continue to be heavily influenced by social media in 2011 and the social web will likely facilitate increased cross-channel engagement. Digital media has expanded from an online medium into mobile, and is now rapidly expanding to connected TV’s. Key lubricants to integrating these channels are the social media and marketing platforms that track and influence consumer behavior. And in a new twist advertisers are now leveraging groups of digital-based social influencers to help market products.

In 2010, Facebook grew to more than 500 million users and pushed past Google (NASDAQ: GOOG) to become the most popular site on the Internet for the first time. Nearly one in four page views in the U.S., or just over 24%, took place on Facebook in 2010 according to Experian Hitwise. Additionally, 23% of all online display ads in the U.S. appeared on Facebook according to comScore, however, Facebook accounts for just 9.5% of the spending on display ads in the U.S.

But beyond Facebook as the 800-pound social networking community there are several underlying trends that should be noticed. The ever-expanding world of influence via social media is exploding. Marketer’s efforts to analyze, track and manage influence across a social graph will continue to mature. A social graph is an individual’s online community or communities.

One company taking advantage of this emerging trend is XGraph. This company provides brand marketers with online ad targeting that is tied to deep audience insights. XGraph’s targeting approach is based on the premise that people who are connected through online graphs share similar lifestyles, interests and purchasing habits. Another player in the space, 33Across, provides technology to track possible customers among friends and identifies possible purchasers and shoppers that are socially connected. A different approach to tracking social influence is being pursued by Klout, which identifies influencers on topics across the social web. Klout lets users track the impact of their opinions, links and recommendations across a social graph. Markers are now learning how to tap in to groups of influencers to help market products. Leveraging social graph information is becoming extremely important to marketers as they track and rank influencers and brands attempt to affiliate with their online credibility. These are trends that extend far beyond just using Facebook and Twitter.

Another trend driven by the social web is “social commerce.” This involves an e-commerce experience where shoppers’ friends become involved in the shopping experience. An interesting example of the movement towards social shopping is WeShop. This platform blends the daily deals phenomenon and social influencers and allows consumers to share purchase information on an anonymous basis. Unlike Groupon and some of the other services which are only deal alerts, WeShop also enables customers with similar interests to build virtual and anonymous marketplaces that have the potential to attract better offers from vendors depending on the number of potential buyers. Blending social influence, mobile and bricks-and-mortar shopping is Shopkick. This company is built on the belief that as the proliferation of smart phones and the concept of social sharing increases offline shopping as an experience can and will mimic that of the online world.

While we are clearly seeing social networks influence online and mobile environments the next frontier will likely be connected TV’s. This past November Google chief executive Eric Schmidt said at the Web 2.0 Summit that Google TV will liberate companies to create a whole new set of applications that will generate revenue. While this may be true, it appears that Apple (NASDAQ: AAPL) is taking a more integrated social approach with an all-in-one Apple TV scheduled for debut in 2012 which could incorporate built-in Apple TV, MobileMe and iTunes. A small company attempting to harness social interaction across mobile devices, online and connected TV’s is Ultralivetv. This company wraps social interaction and games around live sports events.

Expect to see many more companies emerge that integrate social engagement across legacy and emerging channels.

Acquisitive vs. Organic Growth

September 13th, 2010 8:07PM by Brendon Kensel

Digital media and marketing companies have slogged through the recession and are now hoping to see a rebound in 2011. While there is still macro-economic uncertainty, trends in the digital media and marketing sectors are moving in the right direction. Next year marketing expenditures on digital and online media in the U.S. is expected to surpass the marketing budget allocated to print for the first time.

As senior executives at digital media and marketing companies begin to plan their corporate strategy for 2011 many are trying to determine the right growth strategy — acquisitive or organic. Many CEO’s are now recognizing that their optimal corporate growth strategy will likely include a combination of acquisitive and organic growth. While most companies in the media and marketing sectors have been growing organically, now may be a good time to accelerate growth through acquisitions.

Successful corporate strategies incorporate organic growth fostered by the pursuit of operational and financial strategies along with select acquisitions that dovetail to the company’s key strengths. Executives that decide to pursue acquisitions should be able to identify the strategic reasons why they want to acquire a particular target.

The primary drivers of an acquisition typically include one or more of the following: a) acquire new distribution channel/customers; b) acquire key technology; c) expand or add a product line; d) gain executive/technical/creative talent; e) gain expertise and entry in a new market; f) gain a time-to-market advantage; and/or g) increase profitability.

Ultimately, acquisitions are made because companies believe it is a more effective means of meeting a strategic need and increasing shareholder value than organic growth. While any of the above attribute will enhance value, capturing proprietary technology or products with a significant competitive advantage, or gaining market leadership in a fast-growing market segment can dramatically enhance value. The merger and acquisition market in the media and marketing services sector has been brisk this year. Recent examples include:

In June GSI Commerce (NASDAQ: GSIC) acquired FetchBack, an advertising startup that specialized in retargeting, for about $40 million according to reports. This acquisition is very complimentary to GSI’s other marketing service offerings since retargeting will allow GSI to drive customers back to their clients’ websites.

Broadcaster and publisher Meredith Corp. (NYSE: MDP) acquired mobile agency The Hyperfactory in July. This acquisition provides Meredith with a strong mobile foothold and enhances its marketing services group.

Google (NASDAQ: GOOG) acquired social applications developer Slide for $182 million in August. The acquisition gives Google a seasoned team that knows social, something Google is working diligently to get right.

This month blog network Glam Media acquired German men’s online media company Fantastic Zero. This acquisition expands Glam’s efforts to reach males and will help broaden its overall demographic and geographic reach.

To further fuel your creative M&A juices check additional deals at CruchBase.

Is it Time to Invest in Online Advertising Firms Again?

July 10th, 2010 7:11PM by Brendon Kensel
U.S. Online Advertising Growth 2009-2014E” width=

Source: Barclays Capital Internet Deal Book, April 2010

The U.S. turned in a fairly robust quarter in Q1 2010, with a GDP increase of 3.2%. Personal consumption expenditures also increased 3.6%. In May 2010 the unemployment rate decreased to 9.7% and personal consumption expenditures increased $24.4 billion, or 0.2%. Greater consumer activity is typically a prime motivator for greater advertising spending. Online advertising revenues in the U.S. were $5.9 billion in Q1 2010, representing a 7.5% increase over the same period in 2009, according to Interactive Advertising Bureau.

Online advertising is the fastest growing segment of the advertising industry. Online advertising spending in the U.S. is expected to reach $24.9 billion in 2010, representing 8.9% growth over last year according to Barclays Capital Internet Data Book. Economic gains, increased broadband Internet access, along with the continued shift of advertising budgets from traditional to digital media is expected to drive online advertising revenues in the U.S. to $37.5 billion by 2014, a 10.5% compound annual growth rate (CAGR) from 2009, which totaled $22.8 billion.

In 2009 online media represented 14.0% of the total U.S. advertising spending while average consumers spent about 22.0% of their media time online. This gap represents a significant opportunity for acquirers and investors of online ad firms as online advertising budgets are increased to bring them in-line with online media consumption. The popularity of social media is increasing this consumption – three of the world’s most popular brands online are social-media related: Facebook, YouTube and Wikipedia.

While online advertising did not fully escape the impact of the recession, its decline in the U.S. was much less severe than that of other advertising media. Online advertising expenditures are expected to surpass newspaper advertising for the first time in 2010

U.S. Ad Spending Across Media 2009-2012E” width=

Source: Barclays Capital Internet Deal Book, April 2010

Search marketing has continued to fuel the growth of online advertising. Search revenues are expected to increase from $11.0 billion in 2009 to $21.3 billion in 2014, a 14.1% CAGR. The $12.8 billion marketers will spend on search in 2010 represents 52.0% of the total online ad spend.

Online video advertising and mobile advertising are expected to further drive digital advertising growth in the coming years. Online video advertising is expected to reach $3.7 billion in 2014, a 32.7% CAGR from 2009 revenues of just under $1.0 billion according to Barclays Capital.

The mobile advertising market also is poised for growth as wireless networks are upgraded and more Internet-enabled smart phones arrive in the market. Mobile advertising in the U.S. is expected to grow from $414 million in 2009 to $1.6 billion in 2014, a 32.0% CAGR.

It is time for investors to update their investment thesis for online advertising firms.

How to Raise Venture Capital for a Tech Start-Up

March 2nd, 2010 8:35PM by Brendon Kensel

I recently chaired a venture capital event focused on how to raise VC funding for tech start-up’s that was hosted by Pepperdine’s Graziadio Alumni Network of Orange County. The panelists included: Eghosa Omoigui, Director of Strategic Investments at Intel Capital; Marc Averitt, Managing Director at Okapi Venture Capital; and Stuart MacFarlane, Investment Committee Member at Momentum Venture Management and CEO of iChange.com. The panel was moderated by Alexander Haislip, Senior Editor of Thomson Reuters’ Venture Capital Journal and Private Equity Week.

Entrepreneurs seeking venture capital are facing the most difficult funding climate in over a decade. In 2009 venture capitalists invested $17.7 billion in 2,795 deals, a 37% decrease in dollars and a 30% decrease in deal volume from 2008, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association (NVCA), based on data from Thomson Reuters.

Both Okapi Venture Capital and Momentum Venture Management funded about 30% fewer deals in 2009 vs. 2008. Marc Averitt of Okapi Venture Capital noted that they are, “currently focused on existing portfolio companies, but expect to start looking at new opportunities in 2010.” Stuart MacFarlane of Momentum Venture Management had similar sentiments and indicated that in 2009 all of their funding activity was in support of current portfolio companies. Both Mr. Averitt and Mr. MacFarlane also expressed a keen awareness of the pressure to deliver solid returns to limited partners.

Eghosa Omoigui of Intel Capital indicated that while their investment activity slowed in 2009 they were still very active. According to TechCrunch Dealmaker Rankings, Intel Capital was the fourth most active investor in 2009 investing $429 million in 46 deals. As a strategic investor Intel Capital does not have to live within the same 10-year fund boundaries of traditional venture capital firms. Intel Capital is able to make a broad range of investments and Mr. Omoigui indicated that their oldest portfolio company received funding in 1993, however, this company is preparing to file a S-1 for an IPO.

A video of the event can be found here: http://www.youtube.com/watch?v=MDKxy-lG2CQ

DOE Announces $100 Million in Funding for Cleantech

March 2nd, 2010 5:30PM by Lisa Mazur-White

On March 2, 2010, at the ARPA-E (Advanced Research Projects Agency – Energy) Energy Innovation Summit in Washington, D.C., U.S. Energy Secretary Steven Chu announced that $100 million in Recovery Act funding will be made available to accelerate innovation in green technology. This is ARPA-E’s third funding opportunity of this kind.

There are three areas of focus for this program:

  • Grid-Scale Rampable Intermittent Dispatchable Storage (GRIDS)
  • Agile Delivery of Electrical Power Technology (ADEPT)
  • Building Energy Efficiency Through Innovative Thermodevices (BEET-IT)

ARPA-E’s first solicitation, announced in early 2009, was highly competitive and resulted in funding 37 projects aimed at transformational innovations in energy storage, biofuels, carbon capture, renewable power, building efficiency, vehicles, and other areas. ARPA-E’s second solicitation announced in December, 2009 – which has yeilded nearly 500 concept papers – focused specifically on three areas of technology representing new approaches for biofuels, carbon capture, and batteries for electric vehicles. Here is a complete list of ARPA-E’s funded projects.

The objective of the ARPA-E funding is to give innovative ideas that are too risky for traditional venture investment an opportunity to get beyond the concept stage. ARPA-E funding “is about unleashing the American innovation machine to solve the energy and climate challenge, while creating new jobs, new industries and new exports for America’s workers,” said Secretary Chu.

Renewable Energy Grants through ARRA

March 2nd, 2010 5:13PM by Lisa Mazur-White

In August of 2009 the Treasury began accepting applications for the 1603 Grant. The 1603 Grant was enacted as part of the American Recovery and Reinvestment Act and its goal was to provide a 30% cash grant of total renewable energy property installed. The grant was in lieu of the then-existing Section 48 tax credit, which provided a 30% tax credit for owners of renewable energy property (as it is defined in Section 48 of the Internal Tax Code). The goal of the program was to uphold renewable energy incentives in an economy where fewer applicants could take advantage of tax credits due to the overall state of the economy.

But how is the 1603 Grant program doing? To date, Treasury has issued $2.6 billion in grants under the 1603 Grant in Lieu of Tax Credit. The majority of recipients are solar and wind energy applicants. Click here to view a list of recipients of the 1603 Grant to date.

Strategic Buyers will lead M&A Activity in 2010

January 30th, 2010 3:12PM by Brendon Kensel
M&A Activity” width=

Source: Dow Jones VentureSource

The M&A market the past twelve-months has been weak, but strategic buyers will likely lead an increase in deal activity in 2010. Financial buyers have continued to be challenged with the lack of credit availability while many potential strategic buyers are sitting on cash or have some access to existing lines of credit. We saw an increase in M&A activity in Q4 2009, but I expect deal makers to very creative this year to get deals done.

Since the economic crisis began many firms have streamlined operations and increased their cash positions. This improvement in financial health is expected to produce an increase in mergers and acquisitions as firms try to kick-start their growth.

While venture-backed companies may seek an IPO exit in 2010, I expect strategic buyers to emerge as the more likely exit. According to Dow Jones VentureSource there are 25 venture-backed companies currently in IPO registration, but there were 86 M&A transactions in Q4 2009 generating $7.3 billion. Amazon.com’s (NASDAQ: AMZN) $847 million purchase of Zappos.com was the largest deal of Q4 2009.

Mergers and acquisitions are off to a brisk start in Q1 2010 with several transactions in the media and marketing sectors. A few deals follow: Dentsu, Japan’s largest ad agency, acquired Innovation Interactive, the parent of digital ad shop 360i; AOL (NYSE: AOL) acquired StudioNow, an online platform for content creation and distribution, for $36.5 million in cash and stock; and LivePerson acquired web analytics company NuConomy for $3 million.

I contacted Alexander Haislip, senior writer at Thomson Reuters’ Venture Capital Journal and a columnist for Private Equity Hub, to get his point-of-view on the M&A outlook for 2010, particularly in the cleantech sector. “There’s a great opportunity for innovation in the cleantech M&A where startups license their technology to big manufacturers who can put it directly into production,” commented Mr. Haislip. “Project financing for cleantech is way off levels we saw just a few years before and it is harder for ever for entrepreneurs to connect with expansion capital. Investors may find their best hope for at least partial liquidity in 2010 is through licensing. That’ll mean tangoing with the likes of The ABB Group (NYSE: ABB), GE (NYSE: GE), First Solar (NASDAQ: FSLR), and a host of other biggies that have yet to make their intentions known.”