The Right Type of Strategic Buyer

Most of the M&A I write about on A Media Operator deals between media or media-like companies. Informa bought Industry Dive. NewsCorp buys OPIS. These are all deals where the media company thinks it can better run or operationalize another media company.

But the other major buyer is the strategic one. In this situation, a non-media company sees the media asset and imagines it is an excellent part of the go-to-market strategy. This is likely the thesis behind HubSpot buying the Hustle back in early 2021.

The Hustle had 1.5 million newsletter subscribers who were psychographically more inclined to be entrepreneurial. HubSpot serves multiple departments in a business, including sales, marketing, and customer service. So if you’re a reader of the Hustle and want to start a business, HubSpot wants you to use their free sales CRM before going anywhere else.

That’s the thesis behind a strategic acquisition: it’s less about the immediate revenue and more about the potential for unlocking that audience. More specifically, why should a company like HubSpot continue to buy ads to promote their software when they can, instead, invest that same budget in growing an owned media asset? It’s better to own an audience than rent it.

And yet, many of these deals are often not discussed. The team over at They Got Acquired put together a great report that digs into these acquisitions (it’s $299 until Saturday). They analyzed 25 different content & media companies that sold for 6-8 figures.

Some of them are the obvious media-to-media deals. But there were also a lot of them that strategic partners acquired in various industries, including SEO and web development. And for many smaller media entrepreneurs—creators, if you will—that are looking at what they’ve built over the past couple of years, there might be some legitimate opportunity here.

Naturally, one of those deals is The Hustle’s acquisition by HubSpot. As CEO Sam Parr explained it to the They Got Acquired team:

“They emailed me saying they want to do a partnership,” he said. He replied, asking them to be clear: “Just tell me, are you trying to buy us? Because if you are, maybe we can have a conversation, but don’t waste my time. And they go, ‘Yeah, we’re trying to buy you.’”

Sometimes, it is that easy. But the question is whether this sort of deal is the norm. Unfortunately, my suspicion is it takes a very particular kind of company. And where that starts is with the CMO. So before we jump in, I want to share a unique statistic. According to a WSJ piece published in May:

Chief marketing officers’ average tenure in their posts held steady last year at 40 months, according to the latest annual research from executive search and leadership advisory firm Spencer Stuart. That’s still the lowest level in more than a decade.

That’s 3.3 years. And that’s important because most CMOs are given a short period to succeed. And so, CMOs are either very risk averse—because they are trying to keep their jobs as best they can—or they go all out on massive ideas that are either quick to work or fail.

Neither of these scenarios works well for strategic acquisitions.

Let’s look at The Hustle deal in more detail. First, I suspect that HubSpot was already advertising in The Hustle, so it could easily articulate the quality of the audience. But more likely, the CMO at the company could advocate for the acquisition because he could tell how it fits within their broader strategy.

Kipp Bodnar joined HubSpot nearly 13 years ago, first as an inbound marketing strategist, then as Director of Marketing, then as Vice President of Marketing, and finally, as CMO starting in July 2015. That’s nearly 7.5 years as the top marketing executive at HubSpot.

And during that time, HubSpot invested a ton of money in content. Honestly, it’s irritating how good HubSpot is at creating content. It often ranks in one of the top spots for most terms that marketers might search for. That’s HubSpot’s thesis: create great content so that people grow to trust you, and then they’ll buy what you’re selling. Inbound marketing at its finest.

But because HubSpot was already in the content business, its tenured CMO could advocate investing a chunk of its marketing budget into an atypical move. Instead of just buying traffic, it would buy the audience directly.

Or let’s look at another deal I’ve written about in the past: Mailchimp buying Courier. The CMO at the time was Tom Klein, who had been CMO for four years before buying Courier Media. It also went the same way. Mailchimp ran ads with Courier, saw how it performed, and decided to buy the entire thing. But again, it took a CMO who likely felt stable in his job.

According to a Forbes piece:

In an interview with Forbes about the deal, Mailchimp Chief Marketing Officer Tom Klein described Courier like another piece of Mailchimp’s existing body. He said if Mailchimp itself and its distribution channels are the hands and its content production division Mailchimp Presents is the heart, then Courier is the head or the “business smarts” teaching small businesses how to be successful.

“We’re not afraid of the weird,” Klein said. “We’re a purpose-driven company and we really mean it which means we are very much dedicated to making our customers more successful. The way I think about how all this fits together, it’s a little old change-management theory where we feel like to help our customers be successful, head, heart and hands.”

Again, that takes a special kind of company. And while CMO longevity is one of the reasons, it may not be the only one. There are some companies discussed in the They Got Acquired report where the CMOs had only been there for a year. But I suspect that the more confident the CMO feels in surviving, the more likely a deal like this makes sense.

And there’s a straightforward reason for this: content never stops. Unlike an ad campaign with a beginning, middle, and end, you can never stop creating content. That’s what is both exciting and sometimes exhausting about being in media.

When I am writing this, it’s Thursday night. My team at Morning Brew sent a total of seven newsletters today. Tomorrow, another bunch of newsletters will go out. And the same on Monday. And Tuesday. It never ends. The team has to show up every single day to create more content.

And to make matters worse, you don’t get instant gratification. I get something flashy if I spend $1 million on an ad campaign. Heck, a Super Bowl commercial costs $7 million. And yet, it sells out yearly because the marketer is immediately rewarded. They can go into their boss’ office and show them the ad. It feels great.

So, a marketer comes along, buys a media asset, and then has to continue funding that media property. That means continued costs after you’ve already laid out a significant chunk of cash. That’s hard to stomach, especially when marketing is one of the first things that gets cut at a business if things go wrong.

But this sort of strategic acquisition is such an amazing opportunity for businesses that are investing for the long term. First, since you’re buying an existing media asset, you cut out much of the waiting around. It may not be as instantly gratifying as a Super Bowl ad, but it’s close. Second, the content you create today will continue working for you for years. And third, it brings people to you rather than you having to seek them out.

All this is to say there are serious complications with strategic media acquisitions. And it takes a very particular CMO willing to stake their careers on it. But for those committed to content, acquiring a loyal audience that is psychographically related to what you are trying to sell is a no-brainer.

As for the seller, it’s important to think about your goals. If you want the asset to continue thriving, ensure the buyer understands the investment doesn’t start with the buy. I spoke with a media founder yesterday, and he said, “I just want to know that the company won’t be a shell of itself in 5 years.” Of course, you don’t always have control of that, but carefully picking your buyer can help.

Thanks for reading. If you have thoughts, hit reply or join the AMO Slack. I hope you have a great weekend!