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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.