October 7, 2007

Bilddagboken Acquisition Makes Sense For Lunar Group

Lunar Group's/LunarWorks' acquisition of the remaining 60 % of Bilddagboken makes a lot of sense strategically. Acquiring additional sites let Lunar Group use its established sales force to sell premium priced brand advertising to advertisers, even if the number of vistors to LunarStorm declines.

The reason I think it makes strategic sense, especially compared with launching LunarStorm in other countries, is the following:

Before a site/publisher has grown large it is very difficult to sell premium priced brand advertising to, primarily, media agencies. Once entrepreneurs have built a popular a site, they will have to build a sales force that can sell to the media agencies etc. Building the sales fore takes time and often requires additional capital. Selling to an industrial buyer, like Lunar Group, will often make sense.

Lunar Group, and other media companies, can by snapping up sites like Bilddagboken (not that such sites come along that often) add value to an acquisition by accelerating the move from response-based advertising to higher priced branded advertising. It is not a pure financial acquisition, as there are very real synergies. The strategy also lets the media company partly mitigate the risk of a specific site losing popularity by building an organization where advertising sales for a bouquet of sites and smart acquisitions are the core competencies.

1 comment:

Anonymous said...

Agree completely with your analysis of the advantages for Lunar Group to acquire additional sites to get synergies.

However you miss to point out that this acquisition (M&A) strategy has been driven by Swedish Studentis Group, http://www.studentis.com, since more than a year ago, along with Belgian Netlog http://www.netlog.com and of course by IAC (Interactive Corporation) http://www.iac.com listed on the NYSE.

IAC is a global leader, but Studentis was perhaps the first to use this methodology in Europe for social networks and was followed this spring when Netlog merged their platforms to a European one. As Netlog received investment from among others Index Ventures it will be interesting to follow the investment trail for the others.

What Lunar seem to be poor at is to handle international expansion, which has been tried and failed in both the UK and Denmark.

This is where the other IAC, Studentis and Nelog seem to succeed and that it is where the long term revenue generation lies.