Wednesday, March 08, 2006
Converting Stakeholders to Shareholders
The potential VNU deal has me thinking again about the negative effects of debt on the quality of b2b media. And the potentially negative effects of shareholders. Shareholders naturally want what's best for them, regardless of the consequences to the company they're invested in. So a sell-off that returns a nice ROI, but leaves the company swaying under a ton of interest payments, makes sense to shareholders. They've achieved their goal, and have moved on.
But marketplaces need information and analysis--lots of it. Markets react to any information, regardless of how poorly thought out it is. Look at the way the housing market is being talked into a downturn. Whether or not there's really a housing bubble, what's important is that investors, home buyers and sellers, reporters and market analysts think there's a housing bubble, based on the information they have. And so the market reacts accordingly.
B2b media, done well, provides better (though far from "perfect") information that helps marketplaces thrive and prosper. It's in the interests of b2b media's stakeholders--readers (buyers) and advertisers (sellers)--to have the best information possible. It's certainly not in their interests to see their information vehicles loaded up with debt and cut to the bone in terms of editorial and circulation resources. It's not in their interests to have less information from which to make decisions.
So b2b media's stakeholders have a far different set of interests than b2b media's shareholders.
Perhaps its time for these stakeholders to become our shareholders and owners, in the same way that the Associated Press is owned by its member news organizations, or the New York Stock Exchange is owned by its member brokerages (and as of today, the general public, which is a huge stakeholder in the NYSE's activities.)
Sure, I can anticipate the reaction to this idea. "Advertisers owning us? What about our credibility? Readers owning us? What do they know?" But I'd rather be owned by advertisers and readers than by a P/E firm. At least their self-interest (in the need for good, reasonably accurate market information) would tend toward aligning with my self interest.
Frankly, when I look at the P&L of any b2b media property, I know that our readers and advertisers already "own" us. Without them, there'd be no revenues, no profits, no jobs for all of us. But it's the part of the P&L that includes corporate overheads like interest payments (way down there after the contribution margin) that concerns me most.
For more debt-related musings from this blog, see The Perils of Debt, M&A Mania, At the Bottom of the List, and others.
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But marketplaces need information and analysis--lots of it. Markets react to any information, regardless of how poorly thought out it is. Look at the way the housing market is being talked into a downturn. Whether or not there's really a housing bubble, what's important is that investors, home buyers and sellers, reporters and market analysts think there's a housing bubble, based on the information they have. And so the market reacts accordingly.
B2b media, done well, provides better (though far from "perfect") information that helps marketplaces thrive and prosper. It's in the interests of b2b media's stakeholders--readers (buyers) and advertisers (sellers)--to have the best information possible. It's certainly not in their interests to see their information vehicles loaded up with debt and cut to the bone in terms of editorial and circulation resources. It's not in their interests to have less information from which to make decisions.
So b2b media's stakeholders have a far different set of interests than b2b media's shareholders.
Perhaps its time for these stakeholders to become our shareholders and owners, in the same way that the Associated Press is owned by its member news organizations, or the New York Stock Exchange is owned by its member brokerages (and as of today, the general public, which is a huge stakeholder in the NYSE's activities.)
Sure, I can anticipate the reaction to this idea. "Advertisers owning us? What about our credibility? Readers owning us? What do they know?" But I'd rather be owned by advertisers and readers than by a P/E firm. At least their self-interest (in the need for good, reasonably accurate market information) would tend toward aligning with my self interest.
Frankly, when I look at the P&L of any b2b media property, I know that our readers and advertisers already "own" us. Without them, there'd be no revenues, no profits, no jobs for all of us. But it's the part of the P&L that includes corporate overheads like interest payments (way down there after the contribution margin) that concerns me most.
For more debt-related musings from this blog, see The Perils of Debt, M&A Mania, At the Bottom of the List, and others.
