Why Turner's Likely Deal for Bleacher Report This Month Could Make Sense

New Scale in Sports After End of Deal With Sports Illustrated

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Turner's much-rumored but still-not-consummated acquisition of the young sports website Bleacher Report is "very likely" to be announced this month, Ad Age has learned. A source confirmed that a framework of a deal is in place, as has been reported by AllThingsD and others.

"It's well beyond the stage of 'Hey, does this deal make sense for us to acquire you?'" this person said. "All those questions have been answered. Things are on a glide path to close."

This person cautioned that nothing is final until it's final, but said Turner is finishing up its due diligence and characterized the chance of a deal being announced this month as "very likely," with an expected price tag of at least $200 million.

A Pizza Hut takeover on Bleacher Report
A Pizza Hut takeover on Bleacher Report

A Turner spokesman said the company does not comment on speculation. Bleacher Report CEO Brian Grey also declined to address the proposed deal. "We're just focused on continuing to build the Bleacher Report brand and audience and continuing to do what we're doing in the advertising marketplace," Mr. Grey said.

But should a site full of amateur content really command more than $200 million?

Bleacher Report, which has raised $40 million in venture capital since its arrival in 2007, seems to be the latest new-media upstart to make good on user-generated content, although contributors do need to pass an application process, combined with search-engine optimization, slideshows and the occasional photos of scantily-dressed women. (Unlike Sports Illustrated, which, well, nevermind...) All that has made Bleacher Report the target of ridicule among some competitors, who argue that the site relies on gimmicks to boost traffic. But Bleacher Report continues to get love from its thousands of contributors, who look to it as a platform with a real audience that lets them write about their favorite teams and sports topics no matter what their day job is .

And from a revenue perspective, Bleacher Report seems to be hitting its stride. It collected less than $5 million in revenue in 2010, according to people familiar with the company. This year it is on track to take in $30 million.

Part of that owes to the 2011 hire of Rich Calacci, a 15-year veteran of CBS Interactive, to build out a sales force and convince big-name advertisers that Bleacher Report was a safe home for their brand. The results can be seen on the site's homepage, which in recent weeks has featured ad takeovers from Pizza Hut, Red Bull and Muscle Milk, among others.

Bleacher Report is bringing in this kind of revenue on 9 million average unique visitors a month. Compare that to the 25 million-plus monthly unique visitors that the Huffington Post was registering in 2010 when it hit $30 million in revenue (right before its sale to AOL for $315 million). It's true that sports properties typically command higher advertising rates than general news properties, but Bleacher Report's revenue is still impressive for a young site.

Still, it's not clear that Turner, a unit of Time Warner , would cough up so much money strictly for Bleacher Report as a standalone property. Traffic growth, for one thing, is no longer exploding. The site registered 9.2 million union visitors in May, good for 10th place in Comscore's monthly sports rankings but only 7% higher than May of last year.

As an owner with broad resources of its own, Turner would undoubtedly concentrate on beefing those numbers up again. Through its rights deals with certain sports leagues, Turner could help Bleacher Report ink more content partnerships -- perhaps in video -- sending more traffic to BleacherReport.com. Bleacher Report has signed on some known contributors in the past year who write or blog for online publications full-time, but Turner could give it the financial backing to add further professional writers to its contributor mix.

But Turner may also see Bleacher Report as one of its only options to replace the 9 million-plus monthly unique visitors its digital ad network lost when its ad-sales pact with Sports Illustrated ended in the spring. (Turner's ad-sales deal with PGATour.com will conclude at the end of this year as well.) Bleacher Report is the only independent property in ComScore's Top 10, following Big Lead Sports' sale earlier this year to USA Today Sports Media Group, so acquisition targets with big audiences are in short supply.

And some of the potential it sees in Bleacher Report might have nothing to do with its current traffic or revenue. Bleacher Report is among a new set of online media properties that tout their in-house publishing technologies almost as much as the content they produce. Others include The Huffington Post and Vox Media, a venture-backed startup that operates the SB Nation sports blog network, tech-news site The Verge, and the forthcoming gaming site Polygon. One could envision Turner giving Bleacher Report the resources to launch a Bleacher Report-style property in another vertical -- perhaps entertainment -- as has been part of the Bleacher Report vision off-and-on in recent years.

Add up the pieces -- revenue potential, the loss of Sports Illustrated web traffic and a flexible and powerful publishing platform -- and the potential deal starts to make more sense for Turner than it might at first look.

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CORRECTION: An earlier version of this article erroneously said Turner's ad-sales pact with PGA.com will end this year. That deal will continue.

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