Market Intelligence: Valuation of Hispanic Media Companies, What you Need to Know [2-A]
Portada’s editorial team tried to answer some of the most important questions driving financing, funding and valuation of Hispanic media properties by answering the following questions:
Why is there such an overwhelming interest in Hispanic media properties?
The sheer growth of the Hispanic demographic is very compelling. A week ago the Census Bureau reported that the U.S. Hispanic population hit 45.5 million on July 1, 2007, or 15.1 percent of the total population of 301.6 million. Some forecasters predict that the Hispanic population will grow to 150 million by 2050. Experts in the mergers/acquisitions and private equity community agree: “The Hispanic demographic is growing at a tremendous pace, and all advertisers (and publishers) will accelerate efforts to reach this substantial population niche,” says John Cribb, managing director of newspaper brokerage firm Cribb & Greene and Associates.
What is the hottest area in Hispanic Media right now?
The hottest area in Hispanic media at present is clearly online, due to the 30%-40% annual growth rate in Hispanic digital media advertising. Batanga’s recent acquisition of online ad-network HispanoClick and Punto Fox’s acquisition of online video Ad-Network UTarget reflect the M&A activity in the digital media market.
Having a strong digital presence, including a mobile platform strategy, increases the valuation of a company. Batanga is focusing its main efforts in the digital expansion.Undoubtedly, a strong digital presence provides a premium to the valuation. John Cribb, Managing Director of newspaper brokerage firm Cribb & Greene and Associates, thinks that having a strong online presence can provide a premium valuation of between 5% and 15% to an off-line media property (e.g. print media or radio).
What sales multiples can Hispanic digital media properties fetch?
Digital media companies valuations vary a lot. However, it can be said that the sales multiple (value of the company over annual sales) tends to be high. Microsoft's recent bid for Yahoo! valued the company at six times sales and in 2005 Newscorp bought MySpace for $580 million, for a sales multiple of twelve. These multiples are much higher than those in more mature industries, with slower sales growth or even negative sales growth, as is the case with the newspaper industry where valuation multiples tend to lie between 1 and 3 times sales.
For the Hispanic digital media market, the valuation multiples are also high due to the strong growth of the category. However, the smaller overall revenues of the Hispanic digital media sector and smaller economies of scale can weigh on the value of Hispanic digital media companies.
What about Hispanic Social Networking websites?
An analysis of urban and African American broadcaster Radio One’s recent acquisition of social networking website Community Connect provides some clues. Community Connect claims to make $17.5 million in annual sales and to have 16 million registered members across its three sites: AsianAvenue.com, BlackPlanet.com and MiGente.com. Radio One bought Community Connect for $38 million. In this case, the valuation multiple is only 2.2 times sales, perhaps showing the lower valuation social networking websites tend to have. This lower valuation level is associated with the difficulties social networking sites tend to have in order to monetize their traffic with advertising revenue.
Is the amount of investment in Hispanic digital media properties going to increase over the short and medium term?
Mitch Posada, Managing Director of Grupo Entrada, a consulting and communications company, expects a few but deep investments in Latino Media start-ups launching digitally first, starting heavy on the web 2.0 side, and likely expanding to grow into more traditional mediums such as Print and TV. “ I don¹t think you¹ll see new investments in Hispanic Ad Networks as many only require bootstrap funding Many new ones have launched this year (Alcance for example) and you¹ll see interactive agencies launching them trying to increase their relevancy. Big Fuel and Latin3 are good examples of this,” Posada adds.
For more information read our interview with John Cribb, Managing Director of Newspaper Brokerage Firm Cribb & Greene and Associates on www.portada-online.com on Monday May 19th.
December 17, 2007: A Silicon Valley Venture Capitalist looks into Hispanic Media
September 1, 2005: Wanted Newspaper Properties in Second and Third Tier Markets
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