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5Min Acquired By AOL, Why Exit So Early?
This morning AOL announced that it has acquired 5Min with the rumor mill suggesting the price is $65 million. For AOL, the deal makes a lot of sense and is yet another building block in its video and niche content strategy. 5Min is especially relevant to AOL since it acquired Studio Now earlier this year. 5Min gives AOL significant distribution reach both for video that Studio Now creates and for other content AOL develops. 5Min has masterfully executed the video syndication opportunity that I've been bullish about for some time and I've been a big 5Min fan for a while.
The bigger question for me, which I've emailed to Ran Harnevo, 5Min's CEO and Co-Founder, is why sell now? While $65 million is certainly nothing to sneeze at, given $13 million was invested in the company the returns for investors are likely in the 2-4x range, again not shabby, but not a grand slam.
Meanwhile, 5Min has been on a tear recently, signing up new premium content partners like IGN and Rodale, while expanding its audience reach through deals with Dailymotion. Certainly with the proliferation of both mobile and connected devices, viewership is poised to grow still further. 5Min no doubt could have raised more money at an attractive valuation and continued riding the industry's overall growth curve. Typically in these situations everyone would agree to stay in the game. Obviously that wasn't the case this time. I hope to have more insight when I speak to Ran today.
Update: I received an email back from Ran, with the following reply:
I think it’s a great question.
I’ll say this: “our goal as founders, from day 1, was to take our vision all the way thru and influence the way people consume video online. We strongly believe in Tim Armstrong’s vision, and see the fit between AOL and 5min Media as a very natural one. This is not about multiples, it’s not the language we speak. It’s all about allowing the business to take off to the next level of growth. I believe 5min Media has a chance to be one of the most important online video properties on the web in the next 2-3 years. For us, that’s what matters”.
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Categories: Deals & Financings, Portals, Syndicated Video Economy
