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Deals in the Digital Media (Internet, Paid Content, Digital Marketing, Digital Media/Commerce, Gaming, Mobile/Internet Applications) sector for Q3 2010 slightly pulled back from Q2 2010, but were still quite active for the quarter. We tracked and noted just over 200 deals announced for Q3 2010. Valuations were up 41% from Q3 2009 where there were $10.9 billion total announced transactions for the quarter.
Q3 2010 ended with AOL announcing three acquisitions, including: TechCruch, Thing Labs and 5min on September 28. Google continues to be very active having made eight acquisitions in search or social media and is rumored to have made a $100 million investment in leading social gamer, Zynga, during the 3Q 2010. The most active sectors overall include social gaming, mobile technology and analytics.
Mobile Technology was one of the most active sectors with 10 deals announced, including 4 acquisitions and 6 investments worth $108 million. Transactions included Motorola’s acquisition of 280 North for $20 million, Walt Disney’s purchase of Tapulous and WebTrends’ acquisition of Transpond. Among investments, PocketGear raised $15 million from Trident Capital, Shopkick raised $15 million from Kleiner, Perkins, Caufield & Byers and Ngmoco raised $5 million from Google Ventures.
Digital Media/eCommerce was the second most active segment. There were 53 deals announced for Q3 including 33 acquisitions and 20 investments valued at roughly $2.5 billion. Within that industry, e-commerce led the way with 19 transactions for $416 million.
In third place behind eCommerce in terms of activity was Social Media, with 13 transactions worth $231 million. Dividing the category further, there were 10 deals in the Social Games sub-segment for nearly $939 million.
Within the Digital Media/eCommerce sector, there was Hellman & Friedman’s purchase of Internet Brands for $640 million, Walt Disney’s acquisition of Playdom for $563 million, Google’s acquisitions of Slide for $228 million and Like.com for $100 million, and OpenTable’s acquisition of TopTable.com for $55 million. Among investments, Etsy raised $20 million from Index Venture Partners, BuyWithMe raised $16 million from Bain Capital Ventures, Hi5 Networks raised $14 million from Crosslink Capital, Beyond the Rack raised $12 million from Highland Capital Partner.
Despite the continued economic volatility, M&A deals are not slowing down. Volume will likely hold steady or continue to rise further as buyers’ and sellers’ expectations match up. We see 2011 becoming a healthy M&A market and forecast the number of deals announced and valuations will rise further.
IPO Market - Slow and Steady:
The number of venture-backed IPOs, however, dropped from 17 in the second quarter to 14 in the third quarter, with their total value easing from $1.27 billion in the second quarter to $1.25 billion by the end of September 2010. But the 14 IPOs in the third quarter 2010 well outpaced the 3 IPOs a year earlier — there were only 12 VC-backed IPOs in all of 2009. The $1.25 billion value of IPOs in the third quarter of 2010 also more than doubled the $572 million value of the three deals a year earlier.
More than half, 8 of the 14, IPOs involved information technology companies, with the remaining 6 divided between life science (4) and non-technology (2) companies.
Up and coming digital media IPOs include: Demand Media, Skype, Hulu, Nielsen, and Mail.ru Group (formally Digital Sky Technologies).
The complete report can be downloaded (free) here: www.generationequityadvisors.com/files/GEA_Quarterly_Digital_Media_Update_Q3_2010_.pdf
Generation Equity Advisors, LLC
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