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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
đ§”
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
đ§”
2/ @Chase bought 2 content assets in the last 4 months
In Sept â21, JPM acqâd The Infatuation, a publisher with reviews & recs on restaurants in 50 cities.
They also acqâd Frank, an online portal w/ content to help students research and apply for financial aid
What?!
In Sept â21, JPM acqâd The Infatuation, a publisher with reviews & recs on restaurants in 50 cities.
They also acqâd 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?!
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
He eventually put his $ behind this as you'll see
6/ @brian_armstrong ceo & co-founder of @coinbase has also said
âevery tech company should go direct to their audience and become a media companyâ
He wrote
âevery tech company should go direct to their audience and become a media companyâ
He wrote
7/ Beyond the 2 JPM deals, hereâs a list of media & audience M&A transactions
* Hubspot acqâd The Hustle - rumored valuation of $27M and price/revenue valuation multiple of 2.25x-2.7x
* Penn National Gaming acqâd Barstool Sports - $450M valuation and multiple of 4.5-5.0x
* Hubspot acqâd The Hustle - rumored valuation of $27M and price/revenue valuation multiple of 2.25x-2.7x
* Penn National Gaming acqâd Barstool Sports - $450M valuation and multiple of 4.5-5.0x
8/ Thereâs 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 âowningâ vs ârentingâ
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 âowningâ vs ârentingâ
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 youâre 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, theyâre 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, theyâre good at acquiring audience, so
Low CAC
13/ So the big simple opportunity is the arbitrage that exists on both sides
Letâs use JPM Chaseâs acquisition of The Infatuation as a high-level case study
The principles are the same for Hubspot, Draftkings, Robinhood, etc.
Letâs use JPM Chaseâs acquisition of The Infatuation as a high-level case study
The principles are the same for Hubspot, Draftkings, Robinhood, etc.
14/ Whatâs 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 theyâll 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 theyâll 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/ Itâs 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 âhouse adsâ 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 âhouse adsâ for Hubspot
Smart
18/ There's a ton of niche media / community companies being built
If youâre 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 >>
www.cbinsights.com/research/media-acquisitions-technology-financial-services/
If youâre 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 >>
www.cbinsights.com/research/media-acquisitions-technology-financial-services/
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 đ„đ„
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 đ„đ„
We break down the "Gradually, Then Suddenly" disruption of financial services here >>
20/ Today, another software company acquired a media asset
@zalando picked up streetwear media company @highsnobiety
They join JPM Chase, Hubspot, Stripe, Draftkings and others who see the math on buying audiences is just too damn compelling
www.cbinsights.com/research/media-acquisitions-technology-financial-services/
@zalando picked up streetwear media company @highsnobiety
They join JPM Chase, Hubspot, Stripe, Draftkings and others who see the math on buying audiences is just too damn compelling
www.cbinsights.com/research/media-acquisitions-technology-financial-services/
Mentions
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Balaji Srinivasan @balajis
·
Dec 28, 2021
Good thread on why tech companies (and companies in general) are buying media arms. There is for sure an economic argument to be made in terms of LTV/CAC. But I think it's worth doing even if it doesn't show up in the numbers. Can't let a disaligned media company speak for you.
Jesse Pujji @jspujji
·
Dec 29, 2021
Must read.
