By Julie MacIntosh
PHILADELPHIA (Reuters) -
The New York Times Co. on Thursday said it will buy online
information portal About.com for $410 million from publisher Primedia
Inc. as it looks for new ways to build advertising revenue over the
Internet.
The Times Co., whose newspapers include The New York Times and The
Boston Globe, said it will expand About.com's content and visibility
and use the site to market its products and those of advertisers.
Primedia bought About.com for $690 million in stock in late 2000,
as it worked to meld its traditional publishing business with online
media. But the publisher struggled to steer About.com through the
Internet downturn and noted on Thursday that the portal is "completely
distinct" from its other Web sites.
About.com provides consumers who search its database with information
from expert "guides" on topics including health, finances, food, and
travel.
Some investment banking sources suggested in recent weeks that
About.com could sell for considerably less than $410 million. The
sources named Time Warner Inc. and Ask Jeeves Inc. as other parties
that might have been interested in the company.
But Reed Phillips, a managing partner at media banking firm DeSilva &
Phillips, said that while the price was a bit higher than he had
expected, "it's not out of the ballpark."
Phillips pointed out that Internet companies have started trading
again at significantly higher multiples, and said The Times Co. would
be able to use ad revenue from About.com to make up for the flagging
classified ad sales that have plagued the industry.
However, one investment banker who follows the industry closely said
The Times Co. could find it challenging, as Primedia did, to mine the
more niche-oriented consumers who use About.com.
"The Times certainly has greater reach, though, and maybe that's the
theory behind it," the source said.
Primedia, majority-owned by private investment firm Kohlberg Kravis
Roberts & Co., has sold several high-profile magazines and its Sprinks
online advertising service in recent years in an effort to whittle
itself into a special interest and business-to-business publisher.
Primedia revamped About.com last year after appointing a new chief
executive, Peter Horan, to the unit in late 2003. The company noted
that the sale of About.com would strengthen its balance sheet.
The New York Times Co. said About.com would not start adding to its
earnings until 2007. The company said that for tax purposes, it plans
to treat the acquisition similar to an asset purchase, leading to tax
deductions worth over $80 million.
Online advertising executives said the purchase would open the New
York Times and its advertisers to a much broader consumer
audience. About.com has more than 22 million visitors each month,
nearly double the 13 million visitors to the NYTimes.com and related
sites combined.
"This is one of the best-kept secrets in our business ... but
(About.com) hasn't had the resources to really promote themselves,"
said Jeff Lanctot, vice president of media at online agency Avenue
A/Razorfish.
"It's a good reach and a diversified audience," he said. "We've spent
an increasing amount of money with them in the last two years."
Lanctot likened the site to a smaller version of dominant Internet
portals like Yahoo or Microsoft's MSN, where Internet users can be
directed to specialty interests off a well-trafficked home page.
The site's main page can be used for mass marketing while niche
areas can help advertisers target their commercials to the appropriate
audiences.
The New York Times has more than 40 web sites, including the NYTimes.com.
NOTE: For stories from New York Times, Christian Science Monitor,
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