All media. Future Plc, the UK-based tech and special interest publisher is acquiring SmartBrief, the privately-owned US based B2B digital publisher for an initial sum of $45m and a 2020 performance payment of up to $20m. The price is 9x EBITDA of $5m in the year ended 31 March 2019, when SmartBrief revenue was $35.1m.
The 20-year-old company publishes more than 250 daily and weekly email newsletters distributed free to 5.8m “subscribers” in B2B verticals including education, finance, healthcare, advertising, travel, and retail. The company was co-founded by CEO Rick Stamberger, a former hedge fund manager who was also an assistant to former US Vice President George H.W. Bush, and then President-elect Obama.
The newsletters are published in partnership with some 150 trade associations and professional societies which give SmartBrief access to their membership lists in return for commission, believed to be in the range of 10-25% of advertising revenue for each newsletter.
Future CEO Zillah Byng-Thorne told investment analysts this week that the acquisition was in line with the strategy of building a global platform for media, and diversifying revenue sources under-pinned by proprietary technology: “This acquisition will substantially boost our presence and market position in the B2B sector and enhance our proprietary technology capabilities.” SmartBrief’s tech facilitated the automated curation of content from a thousand different sources and automated RoI reporting based on open rates and click throughs.
The deal sent Future shares climbing again on the London stock exchange where its market cap has multiplied five times in 18 months. This week, it almost reached the magic £1bn – for the first time since 2000. Back then, the magazine company (founded by TED leader Chris Anderson) had IPOd in 1999 at £500k and was riding the crest of video games and the first tech boom. But, within a year, it had collapsed, suffering variously from investor hype, executive hubris, shaky systems and bad luck.
The profit warnings and lay-offs have been consigned to history by Byng-Thorne’s sparkling five years, during which revenue has increased from £60m in 2015 to an expected £205m this year. The market cap has jumped to more than £950m from a mere £30m. Some 70% of last year’s revenue came from digital advertising, events and e-commerce across games, music, home interest, and hobbies. The rest came from the still substantial print portfolio: 80 magazines and 500 bookazines totalling 1.2m circulation. Key digital, print and event brands include: TechRadar, PC Gamer, Tom’s Guide, Homebuilding & Renovating Show, GamesRadar, The Photography Show, Music Week, Top Ten Reviews, Live Science, Guitar World, Total Film, MusicRadar, and Tom’s Hardware.
The CEO’s track record of solid dependability and out-performance helped investors to cheer the SmartBrief acquisition, even though few had expected that Future would expand so strongly into B2B.
There have been no tough questions about why SmartBrief has been growing more slowly than its newer, direct competitor Industry Dive, a near neighbour in Washington DC. In 2019, the seven-year-old rival is expected to match the c$30m revenue achieved by SmartBrief in its 20 years – and with 25% profit margins compared with SmartBrief’s 14%. That may be the price of the trade association deals which provide the short-cut to building an audience.
Future is believed to have been introduced to SmartBrief at an April 2019 conference organised by the US company’s adviser. The technology and skills will be used to turbocharge newsletters in Future B2C markets, notably the market-leading TechRadar site whose current emails are said to be “very small and manually produced”. In practice, that seems less obvious than launching SmartBrief itself in the UK where (unlike the US) there may be less direct competition. But Future’s core is specialist consumer media…
There is no doubt that newsletters are fast becoming major media channels in their own right, rather than just promotional tools for newspapers and magazines – for business as well as consumer audiences. But does that justify Future’s diversification into B2B? Is SmartBrief’s technology reason enough for the move into a “new” world of B2B content, audiences and advertisers?
Over the past few years, Future has capitalised on low UK interest rates, a powering share price and its scaleable systems to produce great returns from successive acquisitions. But last year’s $13.8m purchase of New Bay Media, of New York, may have been the first time Future had declared a strategic interest in B2B media. Even then, it was acquiring broadcasting, music and games media to complement its B2C portfolio. Now, the company (some 65% of whose revenue will come from the US) has gone full tilt into B2B, which may soon account for 20% of all revenue.
No one should bet against Zillah Byng-Thorne who has energetically led the transformation of Future Plc. She’s one of the UK’s brightest young CEOs who’s as good with people as with strategy, systems and numbers. Indeed, the only real concern of Future investors is that she will be tempted away by a larger corporate challenge. We just hope her assertion to analysts that SmartBrief boss Rick Stamberger was “probably in his late 40s” (he celebrates his 60th birthday next month) is not a slip that betrays the speed of this latest deal and its strategic rationale.