The Wall Street Journal
by JESSICA E. VASCELLARO And AMIR EFRATI
February 11, 2011
Internet companies are stepping up their race to gain scale in media, as slower growth forces them to hunt for visitors and advertisers.
Google Inc. is in late-stage talks to acquire video website Next New Networks Inc., according to people familiar with the matter. A deal could be unveiled in the coming week, these people added.
The Internet giant is expected to pay in the tens of millions of dollars for the New York-based company, seeking to acquire some expertise in landing more professional content for its video site, YouTube, these people said.
Google is already dominant in Web video through YouTube.
An acquisition of Next New Networks would mark YouTube's latest effort to encourage and maintain a steady stream of videos to keep viewers on the site longer and to better compete with Hulu LLC and Netflix Inc., which offer more content from big media companies.
A deal would also put YouTube into the business of overseeing creators of digital content in addition to aggregating videos created by others. However, a person familiar with the deal said YouTube isn't expected to invest in being a studio.
The news comes as AOL Inc. said Monday that it would pay $315 million to buy news-and-opinion website the Huffington Post, acquiring a cadre of free-to-consumer content to sell advertising against. AOL pursued the deal as a way to create a flood of articles and videos to lure people to its properties; some investors are skeptical the combination will dramatically grow AOL's business.
A number of companies, including Yahoo Inc. and AOL, have made overtures to a range of other online-media sites. Those sites include sports blogging site SB Nation, Sugar Inc., a network of sites targeted at women, and Howcast Media Inc., which creates original how-to videos, according to people familiar with the matter. But those people said nothing serious has emerged from the talks so far.
A spokeswoman for Yahoo declined to comment. A spokeswoman for AOL didn't respond to requests for comment.
Large Internet properties have been forging partnerships with media companies for years, seeking a steady supply of content to satisfy users' interests in topics as granular as local news and obscure health conditions. But they are contemplating closer tie-ups as they seek to keep users on their sites longer, luring them back from social media sites like Facebook Inc., where users scroll through content generated by their friends as well as content from traditional media companies.
At the same time, advertisers are seeking ways to reach more users than one particular site can provide, prompting Internet properties to team up and aggregate as many pages to show ads on as they can.
Industry executives speculate that online-media companies focused on niche areas like business, fashion and pop culture could draw interest.
Still, "traditional buyers in the media business are still looking for companies which are actually making money, which has been a problem for them," said Seth Alpert, managing director at AdMedia Partners, a New York investment bank that specializes in mergers and acquisitions in the media business.
"There's been a frustration that there hasn't been anything great to buy . Given that, finding someone else that would pay the multiple that was paid for the Huffington Post would be really hard," he said.
Founded in 2006, Next New Networks creates its own shows, but today a greater amount of its content comes from teaming up with other web-video creators, distributing shows through YouTube and other partners.
Despite some hits, the company has struggled to generate meaningful amounts of revenue from advertising, according to industry executives, and recently raised $1 million in debt financing.
Its investors include venture capital firms Fuse Capital and Spark Capital, private investment group Saban Capital Group as well as Goldman Sachs Group Inc.
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