LinkedIn Purchase Will Spark Brands into Buying Media Companies
In December 2013, CMI released its annual content marketing predictions report (as we do every December). That year, my first prediction was as follows:
Microsoft will buy one, maybe two, media companies in certain industries. The outcome of these moves will pave the way for further media purchases throughout the year by non-media companies.
So, I was a mere 30 months early with that prediction. Correct, but two years early.
Microsoft acquires LinkedIn
A few weeks back, Microsoft agreed to acquire LinkedIn for $26.2 billion in cash. LinkedIn CEO Jeff Weiner talked about the synergies between the two companies, from scaling MS Office to online training to redefining social selling. Other media outlets discussed how LinkedIn is THE key tool in the professional workspace, and combining LinkedIn’s 433 million members with Microsoft’s 1.2 billion Office users is a powerful combination. The acquisition could also be seen as a defensive move by Microsoft to keep Google and Facebook out of the B2B workspace.
Microsoft bought a media company
As Robert Rose and I discussed quite extensively on our This Old Marketing podcast, we were amazed at what was NOT being discussed by others. Whatever you think of LinkedIn (a job board, a B2B social network, a training company, etc.), at its core, it is a B2B media company.
If you look at this list of media companies by revenue from Business Insider, LinkedIn would be a top 30 worldwide media company by revenue at $2.99 billion USD, making it larger than Time Inc. and Gannett (owner of USA Today).
From an audience standpoint, LinkedIn is the 13th most-visited digital property in the United States (according to ComScore), making it larger than Time, Hearst, Conde Nast, BuzzFeed, ESPN, and The New York Times.
Did you notice that combining Microsoft and LinkedIn numbers puts Microsoft at the No. 1 overall spot, ahead of Google and Facebook?
And the revenues are media-company-esque as well. In 2015, LinkedIn saw $589 million USD in sponsored updates (native advertising), $532 million in member subscription revenue, and $107 million from learning subscriptions. LinkedIn creates mass amounts of content, mostly from its community, it attracts an audience to that content, and then it monetizes that audience through subscriptions and advertising. It’s a textbook media company.
Microsoft just purchased a media company for $26.2 billion. To be more specific, Microsoft paid around $60 per subscriber for LinkedIn and, looking at nothing else, believes it can dramatically increase the value per subscriber by adding Microsoft products and services.
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Get ready for the media-buying spree
Now let’s go back to my little prediction in 2013. It’s the second part of this prediction that I believe it critical to understand:
The outcome of these moves will pave the way for further media purchases throughout the year by non-media companies.
The Microsoft-LinkedIn deal will go down as the bellwether event that spurs a series of brands buying media companies. And you may not be looking, but the movement has already started.
Just a week before the LinkedIn announcement, Arrow Electronics, a global electronics, design, and supply-chain company that’s No. 119 on the Fortune 500 list, agreed to purchase a portfolio of technical and electronic media properties from UBM (parent company of Content Marketing Institute). Overnight, Arrow Electronics has become the leading media company for electronics technical decision-makers.
Matt Anderson, chief digital officer of Arrow Electronics, stated that “(Arrow’s) internet media is guiding innovation forward by making technical decision-making easier for designers, R&D groups, and engineers. This is a step forward in our digital transformation, positioning Arrow as the preeminent, unbiased technology internet media, design, and e-commerce option for companies, from those on Indiegogo all the way to Fortune 500 global leaders.”
Sounds like a media company executive, right? Right!
Why now is the time
I’ve been in the media industry for almost 20 years now, and I’ve never seen quite such a perfect storm for brands to buy media companies.
Buy versus build
Before launching a new media property, smart media companies analyze the market to see if there is anything worth buying. As any CMI reader knows, it takes time to build a loyal audience through content. That means buying an existing content platform may make more sense than starting from zero. We’ve seen this before with L’Oreal with Makeup.com, as well as Johnson & Johnson and BabyCenter.
It’s been two years since I sat down with one of the largest consumer-packaged goods (CPG) companies in the world to discuss a plan for it to buy a series of media companies in its markets. After that point, the conversation died. But in the last month, we’ve had three such conversations with larger brands. Chief marketing officers are now serious about speeding up their content marketing approaches to buy their way into markets.
In the last few weeks, both Pepsi and Mondelez proclaimed their intentions of creating a media company arm in their organizations. Don’t be surprised if that ends up looking like a combination of organic launches and strategic purchases. Why? Because that’s how media companies grow, through new, internal launches where existing and newly hired talent is leveraged, as well as by acquisitions of outside properties.
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Availability of cash
Corporate balance sheets are flush with cash. For example, Apple has over $200 billion in cash and securities sitting on the sidelines. As I’ve said before, Apple could buy The New York Times 60 times over and still have plenty of money to take over the world.
The same situation exists at Cisco Systems ($63 billion), Oracle ($50 billion), and many, many others. At some point, these organizations need to put that money to work. With money-market rates and bonds near all-time lows, and the stock market in a constant state of uncertainty, you can expect that money to go elsewhere.
At the same time, if cash is needed, borrowing money is still at its lowest levels since … well, forever.
Better use of advertising dollars
In 2015, the top 10 advertisers in the world spent a combined $30 billion on advertising. At some point, these smart brands are going to realize that some of that money should be spent building audience assets instead of interrupting the audience, which is almost impossible to measure (speaking of television advertising). Look for companies to take a serious look at strategically purchasing media properties instead of spending $100 million plus on an advertising program. Will they continue to rent or would they like the option to own?
Whatever the individual reasons for brands to make these moves, they are going to happen, and that right soon. I believe right now presents an amazing opportunity for your company to purchase either media assets, or the assets from blogs or influencer sites in your core markets.
But if you don’t get around to it, that’s OK … I’m sure your key competition will be glad to take the first step in becoming the leading informational expert in your key markets.
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Cover image by Joseph Kalinowski/Content Marketing Institute