That's no longer an issue. In a small-scale answer to big-bang deals such as the pending AOL-Time Warner marriage, Primedia last week announced it will buy with About Inc., the parent of the about.com Web site. And while the stock market showed little initial enthusiasm for the deal, it could pay off for Primedia in terms of extending its brands to new platforms and tapping into new sources of advertising and subscription revenue.
Mr. Rogers said at a news conference announcing the deal, "This is a transforming event for Primedia. . . . What we are creating here [is] the single largest player in niche media."
Through the first nine months of 2000, Primedia had revenue of $1.23 billion. For the same period, About had revenue of $62.8 million.
Primedia publishes 250 consumer and business magazines, most of them narrowly targeted titles such as Street Rodder. About.com runs sites on more than 700 topics moderated by expert guides.
$690 MILLION DEAL INITIALLY
The deal, which swaps 2.34 Primedia shares for each About share, was worth $690 million based on closing stock prices the Friday before the deal was announced. Following the announcement, investors trounced Primedia, driving prices down 25% to $11.44, and briefly bottoming it out at $10.75 -- a level it hadn't visited in more than a year. About.com rose 31› to $24.19.
"In general, I guess it's a nice exit for about.com shareholders," said Greg Kyle, president-CEO of Pegasus Research International, a research service for institutional investors. About.com bottomed out at $16 Oct. 18. "There are a lot of cross-marketing and cross-selling opportunities, but at the end of the day, [the deal's potential] remains to be proven."
As of mid-day Oct. 30, the value of the deal had slid substantially, but Mr. Kyle nonetheless expressed some concern over the valuation.
"As a straight price, it can appear pricey," Mr. Kyle said, but about.com "has shown very strong traffic and revenue growth." According to Media Metrix figures for U.S. Web users, about.com was the seventh-most-visited site on the Web in September, with 20.6 million unique users. Mr. Kyle said the stock decline "reflect[ed] the dilution in the transaction."
"It's a tricky market," Mr. Rogers said at the news conference, referring to investor concerns about print advertising and Web businesses in general. But, he added, "whatever the nervousness is about the Net model, no one is suggesting that Net use is going down."
Mr. Rogers said the deal to combine the companies will produce positive earnings (before interest, taxes, depreciation and amortization) within the first 12 months.
The biggest driver of the revenue synergies, Mr. Rogers said, was cross-media ad selling opportunities. Such sales, he admitted, "have been tricky" for traditional media companies. But he laid blame at the feet of ad agencies, which aren't always structured or authorized to implement such programs. And he noted that many of the small, niche-oriented advertisers in Primedia's titles don't even use ad agencies.
Primedia employs a total of about 1,600 ad sales staffers across its titles, while about.com's sales staff is less than 100. In theory, the Primedia sales force can begin pitching about.com to many more advertisers than the site was able to reach as a stand-alone business.
About.com was formed in 1996 by media veteran Scott Kurnit, who will continue as chairman of the service and will take the new role of chief Internet officer at Primedia. (See profile, Page s14)
The deal could provide highly targeted opportunities for subscription sales for Primedia magazines on the Web. More importantly, the merger could clear up concerns about how Primedia will execute Mr. Rogers' new-media strategy. "Primedia does not have a meaningful e-commerce or Web site strategy," Mr. Kyle said.
The company has made more aggressive moves of late, launching auto enthusiast site gr8ride.com in June. Fifty percent of the site's revenues are projected to come from building Web sites for auto parts manufacturers.