German publishing giant Axel Springer is buying a 93 percent stake in New York City-based eMarketer for $242 million. It's a significant deal — albeit overshadowed by yesterday's news of Microsoft's surprising $26.2 billion plan to buy LinkedIn — that in the long run could prove to be very significant to both the publishing and e-commerce industries.
Aiming for Global Powerhouse Status
Axel Springer, for those unacquainted with its background, has been on a purchasing spree of global digital publishers, clearly bent on becoming a global force in the industry.
Last year, it acquired a majority stake in Business Insider for $343 million. It also has stakes in Mic.com, Thrillist.com, social video news company NowThis Media and the virtual-reality platform Jaunt.
In Europe it owns or has stakes in the German publications Welt and Bilanz, the Swiss publication Handelszeitung as well as special-interest offerings like finanzen.net, BI Intelligence, and POLITICO Pro. Missing from that lineup is the FT Group, which Alex Springer also tried, but failed to acquire.
An Obvious Synergy
There is another aspect to the deal's synergies, beyond Axel Springer’s global publishing designs: eMarketer has broadened its international coverage over the past several years, providing data, analysis and proprietary forecasts for markets in Asia-Pacific, Europe, Latin America, Africa and the Middle East. This data will surely be used to help the Berlin-headquartered publisher expand and deepen its advertising offerings.
Indeed, CEO Mathias Döpfner noted that the acquisition checks off more than one box for Axel Springer, strengthening both its paid models and its subscription-based business lines. "The convincing growth and margin prospects for eMarketer make this transaction another element in Axel Springer's successful digital transformation," he said.
A Portfolio Beyond Publishing
Axel Springer's portfolio holds more than just digital publishing assets, it should be noted. The company also owns a stake in the mobile shopping platform Retale and Airbnb.
Now it's time to think just a bit out of the box.
Those E-Commerce Revenues
The New York Times recently made an interesting observation about Gawker Media's assets as the publisher heads to bankruptcy court, following its $140 million legal judgment from Hulk Hogan's lawsuit.
Gawker Media has been trying to increase its e-commerce revenues over the years from referrals to sites like Amazon. The plan was to build up an alternative revenue stream to act as a buffer against the changing and ever more competitive online ad environment. It came close enough. Gawker's founder, Nick Denton told the New York Times in April that its e-commerce revenue "now covers our editorial spending."
Ditto Ziff Davis, the publisher that is vying to acquire Gawker's assets has similar aspirations, according to the New York Times, which reported CEO Vivek Shah wrote in a memo to staff that "like us, GMG is heavily active in driving commerce-based revenues, and has an impressive publishing and commerce platform with Kinja."
Denton also referred to the e-commerce synergies in his own memo. A combination between Gawker and Ziff Davis, "would marry Ziff Davis’ strength in e-commerce, licensing and video with GMG’s premium media brands," he wrote.
Granted, Axel Springer's and Gawker's respective situations are more different than alike but the entree that eMarketer could give the German publisher into global e-commerce cannot be ignored. Nor can Gawker’s reasoning about needing an alternative revenue stream. "We — the freest journalists on the planet — were slaves to the Facebook algorithm," Denton wrote his employees two years ago.
Consolidation is Good
Okay, I admit it. If Axel Springer is thinking about building an e-commerce stream using eMarketer as a stepping stone, it is not the main reason for the deal. What is clear, though, is that consolidation and the resulting synergies (even if those synergies are just reduced costs) will be the way many companies in many industries will survive in our low-margin global economy.
That includes publishing and online advertising and, dare I say, sooner or later, e-commerce as well.
"As the internet continues to expand into a vibrant web of commerce, consolidation and the swallowing of smaller companies by giants will continue," Paul Levinson, a writer an and professor of communications and media studies at Fordham University in New York City, told CMSWire.
"This has always been the way of corporate business and always will," he continued. "The smaller company gets a big payday and a new lease on life and business, and the bigger company gets another hand in the game."
Both eMarketer and Axel Springer will benefit from their acquisition, he said, as would Gawker if it is acquired by Ziff Davis.