Hubspot, @stripe and JP Morgan Chase all acquired similar companies recently
Really?!
Yup - Tech and financial services are looking to buy media companies and communities
And this type of M&A is going to accelerate
Why?
In 6 letters, the answer is LTVCAC
🧵
Really?!
Yup - Tech and financial services are looking to buy media companies and communities
And this type of M&A is going to accelerate
Why?
In 6 letters, the answer is LTVCAC
🧵
2/ @Chase bought 2 content assets in the last 4 months
In Sept ‘21, JPM acq’d The Infatuation, a publisher with reviews & recs on restaurants in 50 cities.
They also acq’d Frank, an online portal w/ content to help students research and apply for financial aid
What?!
In Sept ‘21, JPM acq’d The Infatuation, a publisher with reviews & recs on restaurants in 50 cities.
They also acq’d Frank, an online portal w/ content to help students research and apply for financial aid
What?!
3/ Yes - that JPM Chase that is single handedly worth almost as much all the fintech unicorns combined is buying media assets.
Why?!
Why?!
https://twitter.com/asanwal/status/1445565000672694284
4/ Will come back to the math
First, worth noting that this idea and its implementation is not new
Folks in tech have been discussing for a while
Co-founder of @hubspot @dharmesh said it a while ago
He eventually put his $ behind this as you'll see
First, worth noting that this idea and its implementation is not new
Folks in tech have been discussing for a while
Co-founder of @hubspot @dharmesh said it a while ago
https://twitter.com/dharmesh/status/1313859320493285376
He eventually put his $ behind this as you'll see
5/ In addition, @balajis former CTO of @coinbase and former GP @a16z has discussed
https://twitter.com/balajis/status/1374363031417753609
6/ @brian_armstrong ceo & co-founder of @coinbase has also said
“every tech company should go direct to their audience and become a media company”
He wrote
“every tech company should go direct to their audience and become a media company”
He wrote
7/ Beyond the 2 JPM deals, here’s a list of media & audience M&A transactions
* Hubspot acq’d The Hustle - rumored valuation of $27M and price/revenue valuation multiple of 2.25x-2.7x
* Penn National Gaming acq’d Barstool Sports - $450M valuation and multiple of 4.5-5.0x
* Hubspot acq’d The Hustle - rumored valuation of $27M and price/revenue valuation multiple of 2.25x-2.7x
* Penn National Gaming acq’d Barstool Sports - $450M valuation and multiple of 4.5-5.0x
8/ There’s also
* Robinhood acquired MarketSnacks
* Stripe bought IndieHackers (and also owns/operates Stripe Press
* DraftKings bought VSiN
* Zapier bought Makerpad
* DigitalOcean acquired Scotch(dot)io
* Robinhood acquired MarketSnacks
* Stripe bought IndieHackers (and also owns/operates Stripe Press
* DraftKings bought VSiN
* Zapier bought Makerpad
* DigitalOcean acquired Scotch(dot)io
9/ So why acquire media cos?
Easy answers:
* go direct to its audience/remove gatekeepers.
* build ongoing relationship w/ audience aka “owning” vs “renting”
Certainly true & important but not the primary reason for tech & fin services
The real answer is LTV/CAC arbitrage
Easy answers:
* go direct to its audience/remove gatekeepers.
* build ongoing relationship w/ audience aka “owning” vs “renting”
Certainly true & important but not the primary reason for tech & fin services
The real answer is LTV/CAC arbitrage
10/ First, some definitions for those unfamiliar
LTV refers to lifetime value of a customer
And CAC refers to customer acquisition cost
The sweetspot is high LTV products and low CACs
LTV refers to lifetime value of a customer
And CAC refers to customer acquisition cost
The sweetspot is high LTV products and low CACs
11/ If you’re selling SaaS, fantasy sports/gambling, or fin svcs products, you have:
High LTVs
But acquiring customers is also intensely competitive
So you also have
High CAC
High LTVs
But acquiring customers is also intensely competitive
So you also have
High CAC
12/ What about media companies?
They make $ through non-recurring advertising, events, educational courses, brand partnerships, native advertising (sponsored content), or e-commerce
Hence
Low LTVs
At same time, they’re good at acquiring audience, so
Low CAC
They make $ through non-recurring advertising, events, educational courses, brand partnerships, native advertising (sponsored content), or e-commerce
Hence
Low LTVs
At same time, they’re good at acquiring audience, so
Low CAC
13/ So the big simple opportunity is the arbitrage that exists on both sides
Let’s use JPM Chase’s acquisition of The Infatuation as a high-level case study
The principles are the same for Hubspot, Draftkings, Robinhood, etc.
Let’s use JPM Chase’s acquisition of The Infatuation as a high-level case study
The principles are the same for Hubspot, Draftkings, Robinhood, etc.
14/ What’s the CAC of a JPM credit card?
Between $200-$1000 for affluent, high spending cardholders
Once acquired, they also need to get that customer to use the card
Else they’ll churn
So JPM wants them spending more cuz that is more lucrative today and also increases LTV
Between $200-$1000 for affluent, high spending cardholders
Once acquired, they also need to get that customer to use the card
Else they’ll churn
So JPM wants them spending more cuz that is more lucrative today and also increases LTV
15/ So how does The Infatuation lower CAC/increase LTV?
* Gives cardholders access to food festivals, invite-only events, exclusive content
* 1.5-2M visits/mo who care abt key spend category
Result: attract new cardmembers, build brand affinity & retain existing existing CMs
* Gives cardholders access to food festivals, invite-only events, exclusive content
* 1.5-2M visits/mo who care abt key spend category
Result: attract new cardmembers, build brand affinity & retain existing existing CMs
16/ It’s a killer 1-2 punch that
Lowers CAC AND
Increases LTV
Lowers CAC AND
Increases LTV
17/ The playbook works - whether in SaaS, financial services, online gambling, etc
If you look at what @hubspot has done with @theSamParr and @TheHustle and the MFM podcast (also with @ShaanVP), you see them getting rid of ads and making them all ‘house ads’ for Hubspot
Smart
If you look at what @hubspot has done with @theSamParr and @TheHustle and the MFM podcast (also with @ShaanVP), you see them getting rid of ads and making them all ‘house ads’ for Hubspot
Smart
18/ There's a ton of niche media / community companies being built
If you’re in corp dev, you should be scouting this world
If you enjoyed nerding out to this, a more detailed view along w/ some predictions on who Airbnb, Citi, eBay should acquire >>
cbinsights.com/research/media…
If you’re in corp dev, you should be scouting this world
If you enjoyed nerding out to this, a more detailed view along w/ some predictions on who Airbnb, Citi, eBay should acquire >>
cbinsights.com/research/media…
19/ In financial services, the growth imperative is more acute than ever
While the old guard has seen their market caps stagnate, new entrants have been on 🔥🔥
We break down the "Gradually, Then Suddenly" disruption of financial services here >>
While the old guard has seen their market caps stagnate, new entrants have been on 🔥🔥
We break down the "Gradually, Then Suddenly" disruption of financial services here >>
https://twitter.com/asanwal/status/1445547792181518340
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