1/ THREAD: @HubSpot's acquisition of @TheHustle is a great example of a niche, vertical media business acquisition.
Here is what that means, why it makes sense, and why it doesn't happen more often.
Here is what that means, why it makes sense, and why it doesn't happen more often.
2/ First off, this trend isn't new. There are a ton of great examples of this:
- Penn x Barstool Sports
- Stripe x Indie Hackers
- Robinhood x Market Snacks
- Penn x Barstool Sports
- Stripe x Indie Hackers
- Robinhood x Market Snacks
3/ So, why would a software business acquire a media business? 2 main reasons:
1. Owning a top of funnel with a trusted audience
2. Multiple arbitrage
1. Owning a top of funnel with a trusted audience
2. Multiple arbitrage
4/ Acquiring customers is hard & expensive. Attention more scarce than ever
Niche media cos have 1 important thing: trusted distribution
By acquiring The Hustle, Hubspot is going to promote its expensive products to The Hustle's audience- an audience that trusts what they say
Niche media cos have 1 important thing: trusted distribution
By acquiring The Hustle, Hubspot is going to promote its expensive products to The Hustle's audience- an audience that trusts what they say
5/ Spending money on a media co compares favorably to spending money on paid acquisition
- Most of these companies are profitable, so you're actually making money vs burning on FB
- Once you spend on FB, you don't keep the audience. But Hubspot owns The Hustle's audience forever
- Most of these companies are profitable, so you're actually making money vs burning on FB
- Once you spend on FB, you don't keep the audience. But Hubspot owns The Hustle's audience forever
6/ Generally, media companies are low LTV companies.
Each customer only brings in a few dollars of revenue per year.
That is the complete opposite for SaaS businesses, who will promote 5 and 6 figure products to the newly acquired audience.
Each customer only brings in a few dollars of revenue per year.
That is the complete opposite for SaaS businesses, who will promote 5 and 6 figure products to the newly acquired audience.
7/ Next is multiple arbitrage.
Media companies generally sell for 1-5x revenue.
The median revenue multiple in the Bessemer Emerging Cloud Index is 23.5x.
You are trading higher valued dollars for lower valued dollars. It's a win win.
Media companies generally sell for 1-5x revenue.
The median revenue multiple in the Bessemer Emerging Cloud Index is 23.5x.
You are trading higher valued dollars for lower valued dollars. It's a win win.
8/ So, why doesn't this happen more often?
First, there aren't that many media companies with a truly passionate audience.
These acquisitions look good on paper, but if you can't ultimately convert the audience (or at least connect with the audience), it's a waste of money.
First, there aren't that many media companies with a truly passionate audience.
These acquisitions look good on paper, but if you can't ultimately convert the audience (or at least connect with the audience), it's a waste of money.
9/ Buying a media co is saying "we think they can market to our audience better than we can"
That is a tough pill for CMOs (and exec teams) to swallow
As it is said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
That is a tough pill for CMOs (and exec teams) to swallow
As it is said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
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