MarketingSherpa Blog

It’s M&A time! I’m considering buying an ad-based email newsletter from one publisher, and a friend of mine is considering buying a print subscription newsletter from another publisher.

Both of us have been trying to determine fair valuations this week. In general (and this is so broad a statement as to be taken with a giant grain of salt), an actively published newsletter in this economy is worth about 1.5x annual revenues.

Factors that can lower this value:

– If the publication is on hiatus or only rarely published, thensubscribers/advertisers are less likely to be intensely loyal
or to spend money on it in future.
– If there were any peaks on the income chart in the last year that will not be repeated easily, such as a one-time deal for something or other
– If lots of buyers have already paid the current publisher in advance for services that you’ll have to provide.
– If buyers have been contractually locked into specific pricing schemes that are lower than you’d like.
– If you’ll have to pay any sales reps or affiliates commissions on income that’s not been realized yet (such as renewals, or scheduled ads)
– If sales were based on tactics that your privacy policy does not allow (such as renting lists, promo broadcasts, etc.)
– If the current publisher wants to split off any ancillary products such as reports, teleseminars or events and continue publishing them. Many newsletter’s profits are based on
ancillaries
– The letter itself is a loss leader or break-even without them.
– If the current publisher intends to stay in the field and could launch a competing product at any time.
– If renewal rates are on a downward trend.

Factors that can increase the value:

– If buyers are intensely loyal fans. High renewals, high open and click rates, high ancillary product sales
– If the product is highly profitable (more than 20% EBITDA profits per year) and does not require significant additional investment
– If editorial is easy to hire for so if you lose your writer he/she is replaceable with a minimum of effort (harder than you think)
– If the product has a site with high traffic for its niche
– If the product has pre-existing marketing partnerships such as co-registration deals and strong selling affiliates
– If you’re in a highly competitive-niche and this acquisition could make a real difference to helping you be #1
– If you have complimentary publications already and this would fit nicely as a sibling and allow for cross-sells.

One last tidbit:
If you are buying to merge a competitor’s publication in with your own file, you may base part of the price on a per-name basis. In that case you’ll want to know how much overlap there is between the two files before you make a firm financial offer.

If you happen to be a member of the Newsletter & Electronic Publishers Assn (NEPA: www.newsletters.org) they will compare the two files for you at no charge in a secure place where nobody who shouldn’t can see the names on either side.

(Note: Aside from being a member, I have no connection with NEPA.)

Harry Schuhmacher, Editor & Publisher of Beer Business Daily just emailed in asking what he can do to stop paid subscribers from forwarding their emailed issues to all and sundry for free.

My quick potted reply: As a publisher you have several choices on the security front:

1. Use a digital rights management system such as Congressional Quarterly does, that may require the user to download some software to be able to open their issues. They use SealedMedia’s tech.

You’ll have more customer service problems because downloads = problems for a lot of people. At least you can send out
issues in their entirety.

2. Create your own password protected site that IDs each user’s PC so only people using the right PC can get in. We do this with
our reports, and there are still customer service issues, but thank goodness no download problems as it doesn’t require one.

Your renewal rates may go down because some people will never get around to clicking through to the site to read issues, so their
impression of your value diminishes.

3. Send issues in the open without any protection except for a clear note at the top of the page saying something like, “This
issue prepared for ‘Name.’ If you are not ‘Name’ you are not authorized to read it, please contact XX for your own subscription.”

I call this psychological DRM and it works very well for the 80% of people who didn’t think about copyright before they clicked on
“forward” in the past.

4. Give up and accept reality and call it a marketing cost. Each person who gets forwarded copies is a potential subscriber and you are reaching them without having to buy mailing lists or create a marketing campaign.

Perhaps insert a regular “Renew your subscription today and get a special gift!” note in the issue to catch the possible orderers in the crowd. (Yes it’s a new sales pitch disguised as a renewal effort so it looks like you’re not assuming anyone is forwarding issues, but the gift report is so sexy that they end up ordering to get their own copy.)

Link to my Case Study on Congressional Quarterly email delivery:

http://library.marketingsherpa.com/barrier.cfm?ContentID=1936

Recently I moved from the city to the seaside, so it was time at
the age of 40 to finally buy my first car.

I figured it would be easiest just to surf classifieds on the
Net. It was a horrible experience. Listings are left up on most
classified sites for the whole “term of the ad” even if the car’s
been long sold.

The dealer sites weren’t much better. Most car makers won’t let
you surf a data across all their dealers. You’ve got to click
in to each individual dealer and then click, click, click until
you see the list of available used cars. Many of which say,
“Call for price.”

Yeah, like I’m shopping online due to a strong desire to call a
car salesmen on the phone.

Frustrated and fed up, I finally called my sister-who-knows-
about-cars. “Did you look on eBay?” she said. Oh. Duh.

Which is how I found myself at 7:16 last night staring at my PC
screen while the final seconds of an auction for a cute ’96 VW
Golf ticked away. It was pulse pounding. It was seriously fun.
It was reasonably priced. It was safe due to services from
Escow.com and 1SourceAutoWarranty.com.

It was everything I’d ever been told used car buying is not.
Go eBay.

Oh, one last thing. Very cool item at Geico.com when I was
filling out the form to get an insurance quote for my new car.

They cleverly put a customer testimonial next to the submit
button on each page of the looong form. I’ll bet that reduces
form abandonment rates. Totally a stealable idea for online
merchants worried about their shopping cart abandonment rates.

Notes from my interview with Alacritude’s CEO Patrick Spain on the Windows Office 2003 content deal:

1. Factiva, Gale Group and Alacritude’s eLibrary are the 3 content providers to Office 2003’s new reference section.

2. Users will have to be plugged into the Net to be able to use the reference service because obviously all that content can’t sit in everybody’s PC.

3. When users decide to search on a term, they’ll click on a tab that will appear at the right side of their screen and highlight
the term in their text they want to search on. They’ll then see a list of headlines and “abstracts” from eLibrary. Spain’s hoping
they will be so enthralled with the content that some will pop for a $14.95 monthly or $79.95 annual subscription to access
entire articles.

4. Spain says his team have tested that price point extensively and it works the best for them. I was slightly surprised about
the $79.95 because many print subscription people have told me that “If you can get $70, you can get $90. There’s virtually no
difference in response.”

Spain added that he picked the .95 endings to prices because, “somebody who I respect said ‘don’t question it, don’t try and
research it, it works if everything ends in a 5.'” Which I completely respect.

5. So far eLibrary subscription buyers have been “pretty evenly split” between the month-to-month and annual subs, which is
unusual in the word of esubs where, if offered, annual almost always dominates monthlies. Spain says this is probably because
they are purely a reference product vs something relied on for new content through the year.

6. All the eLibrary content that will be available through Office 2003, is fed to eLibrary from ProQuest.

If you are a publisher who sells to Proquest (and thousands of print periodicals and newspapers do), and you fear that eLibrary’s $15/mo subscription offer might undercut your own online subscription offerings for more money for the same content, Spain suggests that you revisit your Proquest contract
and change the resale rights they have. Most contracts specify whether they can sell your content as an aggregated feed into library, education, business and consumer markets. eLibrary only carries the stuff that’s ok for resale to consumers.

7. Aside from offering subs to its own database of articles, eLibrary will also be offering its subscribers search capabilities across all the other sites they subscribe to. You can go to one eLibrary panel, input the sites you subscribe to and your password to those sites, and whenever you run a search,
results will show up from everything.

Which is handy for serious research hounds who don’t want to have to go to say WSJ.com and Economist.com and search separately for
the same topic.

Spain says to make this work, “we have to write a script based on the way each site operates.” They’ve done it for “several
hundred” subscription sites so far. They don’t want to do it for teeny sub sites that they’ll have very little call for articles
from, but if you want to make sure your site is on the list, contact VP Marketing Kathy Greenler at greenler@alacritude.com .

8. Aside from his high hopes for the Office 2003 deal, Spain says his best marketing campaign to drive new eLibrary subscribers so
far has been paid inclusion with search engines using inktomi’s service.

Recently I moved from the city to the seaside, so it was time at
the age of 40 to finally buy my first car.

I figured it would be easiest just to surf classifieds on the
Net. It was a horrible experience. Listings are left up on most
classified sites for the whole “term of the ad” even if the car’s
been long sold.

The dealer sites weren’t much better. Most car makers won’t let
you surf a data across all their dealers. You’ve got to click
in to each individual dealer and then click, click, click until
you see the list of available used cars. Many of which say,
“Call for price.”

Yeah, like I’m shopping online due to a strong desire to call a
car salesmen on the phone.

Frustrated and fed up, I finally called my sister-who-knows-
about-cars. “Did you look on eBay?” she said. Oh. Duh.

Which is how I found myself at 7:16 last night staring at my PC
screen while the final seconds of an auction for a cute ’96 VW
Golf ticked away. It was pulse pounding. It was seriously fun.
It was reasonably priced. It was safe due to services from
Escow.com and 1SourceAutoWarranty.com.

It was everything I’d ever been told used car buying is not.
Go eBay.

Oh, one last thing. Very cool item at Geico.com when I was
filling out the form to get an insurance quote for my new car.

They cleverly put a customer testimonial next to the submit
button on each page of the looong form. I’ll bet that reduces
form abandonment rates. Totally a stealable idea for online
merchants worried about their shopping cart abandonment rates.

Michael Herman of Christianity Today just sent in this data on his paid Google text ads using the new system where they are distributed against supposedly relevant content on content sites.

“Both of my Google AdWords accounts are getting a fair amount of impressions in the new third party program, but that’s about it.

My first account has had 73,550 impressions and only 462 click-throughs for a wimpy 0.63% click-through rate.

My second account is even worse. 90,159 impressions and only 242 click-throughs for a microscopic 0.26% click-through rate.

I’ll take the free clicks, but I don’t plan on participating in the program once they start charging. My regular accounts for those same keywords and campaigns are seeing 1.5% and 1.6% click-through rates.”

Why such a difference in performance? Well people using search engines are actively looking for links to click on. People on content sites may or may not be.

UPDATE: Ed Kohler of Haystack in a Needle wrote in, “I thought it might be worth clarifying that Google doesn’t use or plan to use the click through rates from syndicating when determining the CTR for competition, pricing, etc. So someone like Michael Herman shouldn’t consider click through rate when determining whether or not to syndicate. A better focus in on the quality of that traffic.” Good point.

BTW: If you’re interested, here are links to my Case Study on how Christianity Today makes money online as a free content site, and another Case Study on how its sister-site PreachingToday sells subscriptions.

1. http://library.marketingsherpa.com/barrier.cfm?CID=1490

2. http://library.marketingsherpa.com/barrier.cfm?CID=1491

http://www.HaystackInANeedle.com

Per my Blog last week about Google selling text ads to be placed contextually on 3rd party content sites (vs. other search engines), they have at last officially posted the info on this new program.

To qualify you must have at least 20 million pageviews a month, which leaves just about every niche site on the Web out of the picture. It makes sense from an implementation perspective; doing deals with a zillion little sites would be a royal admin pain. The fact is Google already sells to a zillion little advertisers who buy through its automated system, so I guess I expected the brand to serve their small publisher counterparts on the other side.

Silly me.

http://www.google.com/services/ct.html

Clever new content-> Commerce site out from online marketing consultant John Lawlor. BlogAnswerMan is created in Blog format with each entry answering a visitor’s question about how they can market their business with a Blog. The form to collect questions is on the home page, as well as a phone number to call for personal for-fee consulting on the topic. If your question is answered in the Blog you get that answer gratis. If it’s not chosen for public consumption, Lawlor tries to convert you into a paying consulting client.

To encourage people to give their real names (instead of Mickey Mouse) when filling out the question form, Lawlor presents the opportunity to get your name on the published question as a benefit, which appeals to visitor’s egos.

He doesn’t have enough data back yet to learn if it will be a good business model, but he’s happy to report that his search engine rankings are incredibly good “I went from zero to top 10 on Google in less than 72-hours. By Sunday evening I was in top ten positions on my targeted keywords on Google, MSN, AOL and Overture.” The terms his Blog is optimized for include: b-blog, “blog consultant,” blog consultant, “business blog,” business blog, and business-blog.

As I’ve mentioned before, Blogs are a great way to get high rankings quickly if you copywrite them using search terms. Normal sites can take up to 30 days or more to get noticed, but for reasons I don’t understand (but no doubt many of you do) Blogs tend to get picked up more quickly and more easily.

http://bloganswerman.com

Adam Cohen of Media Professional Newsletter, spotted a New York Post story (link no longer good; sorry) that reveals Saddam Hussein owns 2% of Hachette Filipacchi’s parent company Lagardere SCA. His stake is worth about $90 million. In the US Hachette publishes Elle, Car & Driver,and Women’s Day. Lagardere claim to be stuck with it because they say any transactions are frozen under legal sanctions. They’ve known about this since 1990 and haven’t managed to wiggle out of it yet.

“Are we done with the interview now? Got five minutes?” asked
Seth Brenzel at Atomz after we chatted for my new Case Study on
his marketing. “Let me show you something.”

It was *so* cool.

Seth’s testing adding his own relevant text-ads at the top of his
own site’s search results. It’s like taking the paid listings
you’re putting on outside search engines such as Google, and
putting them on your own site’s search function too.

Three data points make me suspect this will be a successful test:

#1. A certain segment of the Net population invariably use sites’
search functions to navigate. They don’t use your nav bar or
your lovely merchandise graphics. They skip that stuff and go
straight for your search box. If the results don’t please them,
they bail on your site.

#2. Most sites’ search results alone aren’t all that great. It’s
like the marketer assumed everyone would use regular navigation
and search is an afterthought. The chances visitors will find
useful results can be slim.

#3. About 22% of all clicks generated from search results on
Google and Yahoo are from searches clicking on paid text
listings. That means almost one out of every four searchers is
happier to click on the sponsored link instead of the actual
search results.

Put those three facts together and you’ve got a strong case for
sticking little text-listings in your own site’s search results.
I know we’ll be testing it in a few weeks ourselves.

P.S. Link to Case Study on Seth’s lead gen marketing:
http://library.marketingsherpa.com/barrier.cfm?ContentID=2276