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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!

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.

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

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.”

What to Expect from Digital Media in 2010

December 31st, 2009 5:06PM by Brendon Kensel

Most entrepreneurs and operators of digital media and marketing firms are glad 2009 is over and they are looking forward to an improved 2010. Though mid-2009, U.S. digital advertising revenues were down 5.3% from the same period in 2008 according to the IAB Internet Advertising Revenue Report. As of the third-quarter 2009 Forrester Research was forecasting a 13.7% increase in 2010 for digital advertising revenues. Key segments that will likely drive growth in 2010 include:

Content Platforms – We will likely continue to see content aggregators grow both organically and through acquisition in 2010. But the real growth will come through the continued advancement of automation technologies that will produce content people are seeking and deliver advertisements that reach desired audiences. Large-scale players include Demand Media and Internet Brands (NASDAQ: INET). A smaller, emerging player includes Mail.com Media Corporation (MMC), which was founded by Jay Penske in 2004.

Mobile – Yes, this category has made the list of “emerging trends” each year for the past decade, but what was not in the aughts will begin in the tens. U.S. mobile marketing expenditures are expected to grow from $1.7 billion in 2009 to $2.2 billion in 2010 according to the Mobile Marketing Association. Google’s (NASDAQ: GOOG) recent aggressiveness in the mobile space, whether its pending acquisition of mobile ad network Admob or the launch of its Android mobile operating platform, will have significant ripple effects in 2010. Combined with Apple’s iPhone and RIM’s BlackBerry platforms, consumers are making a meaningful shift to smartphones which will allow advertisers to deliver more targeted advertisements.

Social Engagement – This is the bucket for social games, networks and other points of engagement. While social gaming company Zynga is a great example, there are multiple emerging companies with innovative approaches. A couple of examples include digital agency Zugara’s augmented reality games/applications for marketers, and mobile social network FourSquare that awards points to consumers for broadcasting their location to a network of friends via their mobile device.

The next decade should be fun.

Digital Content at the Piper Jaffray Global Internet Summit

November 13th, 2008 3:15PM by Brendon Kensel

I spent the last two days at the Piper Jaffray Global Internet Summit in Laguna Beach, California. The conference covered Internet, online content, media and enterprise software (particularly SaaS).

An area of particular interest was content distribution and the rapid change that is occurring. According to the Piper Jaffray research team many companies are poised to take advantage of a shift towards digital delivery and away from physical delivery. We have seen a massive shift in music distribution with the emergence of the iPod and video is next. The FCC mandate that all television stations cease analog broadcasts on Feb. 17, 2009 will also likely help accelerate this shift. It is estimated by the U.S. General Accounting Office that 28.0 million U.S. households will need to purchase a digital TV (DTV) or a converter box. This will ultimately open the door to real adoption of digital delivery of video since consumers will not have to change behavior, just TV’s, to receive digital content.

The snake pit of digital distribution continues to be rights management and the content owners balancing act between piracy and usability. With no standardized digital rights management (DRM) technology in use it is hit-or-miss for consumers. In September of this year a group led by Fox, Microsoft, NBC Universal, Paramount Pictures, Sony, and Warner Bros. formed Digital Entertainment Content Ecosystem (DECE) to address growing consumer confusion around buying, downloading and playing digital content offered by multiple services by working toward a simple, uniform digital media experience. We shall see…we are still in the early rounds of a long fight.

While there were many interesting panels and some very good presenters including Neil Ashe, President of CBS Interactive, and Jason Kilar, CEO of Hulu, the “ahha” moment came during a panel of young consumers that shared their Internet and mobile usage habits. They asked a room full of 30 and 40-somethings why they needed a TV. The shift to digital is being fully embraced by the next generation…time to catch up!

Trends in Digital Media Advertising Panel Discussion

November 1st, 2008 1:52PM by Brendon Kensel
Trends in Digital Media Advertising Panel

From left to right: Brendon Kensel, Managing Partner of Kensel & Co.; Peter Horan, CEO of Goodmail Systems; Safa Rashtchy, former Managing Director & Senior Internet Analyst at Piper Jaffray & Co.; Richard Rosenblatt, founder, Chairman & CEO of Demand Media; and Peter Adderton, Founder & CEO of Agency 3.0

This summer I chaired a panel event that was focused on trends in digital media advertising that was hosted by Pepperdine’s Graziadio Alumni Network of Orange County. The panelists included: Peter Adderton, founder and CEO of Agency 3.0; Peter Horan, CEO of Goodmail Systems; and Richard Rosenblatt, founder, Chairman and CEO of Demand Media. The panel was moderated by Safa Rashtchy, former Managing Director and Senior Internet Analyst at Piper Jaffray & Co.

The shift of advertising budgets from traditional to digital media is expected to drive digital advertising revenues in the U.S. to $42.0 billion by 2011. With a convergence of media underway, advertisers face the challenge of identifying effective advertising models for emerging forms of digital media whether delivered by computer, mobile device or digital television. Despite the already staggering spend Safa Rashtchy’s opening question for the panelists was, “Why isn’t digital advertising growing even faster?”

Richard Rosenblatt offered a social media-centric view. He viewed social networks as, “the best use of the web,” and marveled at how much time users invest in social media tools. The former MySpace.com chairman, who helped sell the company to News Corp., pointed out that despite numerous emerging user-generated social platforms and outlets, a lack of great programming on the web still prevails. “Ninety-nine percent of it is junk; it’s your dog walking backwards,” he joked.

Peter Adderton focused on his vision of the three screens – television, computers and mobile devices. However, the mobile pioneer and founder of Boost Mobile and Amp’d Mobile felt that, “Mobile will ultimately deliver the most personal interaction point with consumers.”

Peter Horan felt that digital advertising to date has not always played to the strengths of digital channels. He stated that the web is overspent right now, and that low barriers to entry cause a bevy of marketers to try to deliver the same type of “many to many” messages that are more effective on broadcast channels. The former CEO of IAC Media & Advertising held up search as the more effective approach to digital saying that, “Search was a new way of distributing attention.”

The panel shared another reason that digital advertising hasn’t grown even faster – fear. Rosenblatt noted that advertisers are still afraid of making a mistake. “Media buyers don’t get fired for buying (in traditional channels).” Adderton said that in allocating ad budgets to digital channels, there is still “Distrust among advertisers that you’re (just) buying traffic.”

Rashtchy, whose 400+ page report “The User Revolution - The New Advertising Ecosystem and the Rise of the Internet as a Mass Medium” is still seminal in the industry, brought the evening to a fitting, forward-looking conclusion by citing emerging trends.

A video of the event can be found here: http://bschool.pepperdine.edu/images/alumni/events/digitalmedia/digital.wmv

Welcome

November 1st, 2008 12:50PM by Brendon Kensel

Welcome to the Kensel & Co. blog. This blog will provide insights and analysis on mergers and acquisitions, private equity investments, venture capital, business strategy, and emerging trends in the media, marketing and technology industries. The authors bring a wide range of expertise on these subjects and I encourage you to visit this site regularly for recent posts.