Wednesday, August 08, 2007

Big Media Is Buying, Hearst goes Kaboodle

Updated: First it was News Corp., then CondeNast and CBS Interactive. Now Hearst Corp. and Forbes have joined the Web 2.0 party, snapping up tiny start-ups, and trying to capture the ongoing online shift of both audiences and advertising dollars.

Earlier today, Venturebeat reported that Forbes was buying Clipmarks, a social bookmarking and clipping service based in New York. Now The Wall Street Journal is reporting that Hearst has snapped up Kaboodle, another bookmarking service that allows online shoppers to clip and save information, for an undisclosed amount.

According to our sources went for somewhere around $40 million. Manish Chandra, founder and CEO of the 18-month old start-up based in Santa Clara, Calif., declined to comment on specific terms of the deal.

When I asked him why he decided to sell the company, he candidly replied, that “the stakes are getting higher, and others [competitors] are raising a ton of money.” What do that say, any exit is a good exit.

The company had about 2.2 million unique visitors in June 2007, having grown 20 fold since its launch. It had raised about $5 million in venture capital, and was in the process of raising another round when the exit opportunity emerged.

Chandra said that since a large percentage of Kaboodle users are women, and the site has an e-commerce/shopping component, it fit nicely with the larger goals of Hearst. He also added that the deal doesn’t impact its deals with Conde Nast properties.

There is an interesting pattern in some of the buys by big media corporations. They are not just buying pure-content, but instead seem to be interested in content-enhancing tools that rely on communities than individual content creators. Newroo, Photobucket, Reddit, Last.fm, Clipmarks and now Kaboodle fit that profile.

This is a strategy not without risk. Big media companies have to leave the acquired-and-their communities alone. Back in June 2007, Liz wrote about this trend of big media companies leaving the “kids” alone.

Acquirers, despite their enormous and asymmetrical audience, money, and power compared to their purchases, seem like awkward first-time parents afraid of hurting a baby. They are more than conscious of their status as old farts swooping in and quickly turning cool to lame.

From a Silicon Valley perspective, emergence of buyers outside of the G-Y-M (Google, Yahoo, Microsoft) triumvirate is a good thing. Sure it rules out billion dollar exits, but it ensures that there are more buyers with cash.

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