M&A Alert - January 19, 2010
Stylefeeder Acquired by Time Inc.
Transaction Overview
On January 19, 2009 Time Warner Inc. (NYSE: TWX) agreed to acquire StyleFeeder.
Stylefeeder is a personal shopping website which makes purchase recommendations based on aggregated shopping preference data from you and shoppers with similar tastes. Stylefeeder’s model combines social networking features with data mining to help people choose clothes, shoes, accessories, and other consumables to buy and then generates revenue through both advertising and by sharing in the profit from StyleFeeder-facilitated purchases. Competitive websites with similar functions include TheFind.com and Covet.com. Stylefeeder has received $3.5mm in funding since 2007, including $1mm in seed funding from Highland Capital and Schooner Partners, $2mm in series A funding from the same group in 2008, and an additional $500k from Highland Capital Partners in April of 2009. Dan Nova and Gaurav Tewari of Highland Capital Partners led the investments. Philip Jacob founded Stylefeeder in 2005 in Cambridge, MA.
Buyer Description
Time Warner Inc. is a public international media and entertainment company anchored by five core businesses; cable, filmed entertainment, television networks, publishing and AOL. Time’s cable business offers content to residential and commercial customers over broadband cable networks for a subscription fee, sells advertising time to local and
national businesses, and offers a wide range of services for the cable business including phone service, high definition TV, Internet access, and set-top boxes. Its filmed entertainment division produces feature films and TV programming on it networks, including the CW network and the HBO and Cinemax pay-television networks. Warner faces competition from traditional media companies such as Viacom, News Corporation, and CBS. Time Warner’s publishing group produces a wide variety of magazines such as People, Money, InStyle, Entertainment Weekly, Time, and Sports Illustrated. Time Warner Inc. is headquartered in New York, NY.
Transaction Parameters
The financial terms of this deal were not disclosed, although the Wall Street Journal reports the price to be “well into eight figures”. Stylefeeder has over 1mm registered users, and facilitates the purchase of over 2mm items per month.
Strategic Rationale
Time Warner Inc.’s publishing business has seen a significant and protracted drop in advertising revenue during the current economic recession. In the first nine months of 2009, Time saw a 26% drop in advertising revenue compared to the same period in 2008. Time Warner is incorporating Stylefeeder into its magazine assets, Time Inc., as a way to generate a third revenue stream in addition to its advertising and subscription revenues.
Architect Partners’ Observations
As the publishing industry struggles to find its footing amid fractured audiences, on-line competition and a poor advertising market, the incorporation of retail product sales profit sharing through online social-shopping is an interesting experiment. This transaction clearly betrays the intense pressure being felt across the traditional media industry as it searches for sustainable revenue model adaptations.