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Wednesday, February 07, 2007

Web Ethics 

Paul Conley has a series of posts on those annoying IntelliTXT ads (the ones that provide contextual advertising by linking key words within editorial to advertisers) and how they compromise editorial ethics on the web (and how one user of these ads--Ziff's eWeek--has been nominated for a Jesse Neal award).

From my recent cruise of the eWeek site, it looks as though Ziff has now eliminated most--if not all--of the IntelliTXT ads from its site. But interestingly, the site is still so junked up with ad links that Internet Explorer 7.0 flags many of the pages as potential scams, and warns that I should "proceed with caution." It's ironic that a web site devoted to eMedia earns scam ratings. I wonder if eWeek's advertisers like to be associated with that.

Paul has rapidly become the editorial and ethical conscience of our industry, and I applaud his efforts. And his results. Nice work, Paul.

Read his posts, below:

http://paulconley.blogspot.com/2007/01/eweek-crosses-ethical-line.html

http://paulconley.blogspot.com/2007/01/and-award-for-most-egregious-violation.html

http://paulconley.blogspot.com/2007/01/violating-our-ethics-policy-doesnt.html

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Penton is Dead...Long Live Penton 

As most of you know by now, Penton (that is, the publicly-held version of Penton) is dead now, and Penton (the merged old-Penton and Prism Business Media) is now alive and, I hope, well. The press release is here.

For those of you who have been playing along at home, you know that I've posted a lot about Penton on this blog. And I committed to holding my meager Penton stock after blundering a bit about valuation (since this blog is not a stock shill). Ultimately, I lost money on my Penton investment, but not as much as I might have, since I kept buying shares as the stock dropped in value.

I'm not a good stock market investor--just ask my wife. But I really believed that at its core, Penton was a worthwhile company that just happened to be straddled with outrageous debt. So the shares I bought at 45 cents and 25 cents helped make up for the losses I incurred by buying shares at $3 and $1.50. (Thankfully, I was never in at the higher levels that Penton briefly achieved--if I remember correctly, the stock flirted with $30 levels for a while).

So what about the new Penton? Well, it's certainly become an 'old-style' portfolio b2b media company. According to the press release: "Its market-leading brands are focused on 23 industries. The company’s growing portfolio includes 113 trade magazines, 145 Web sites, 96 industry trade shows and conferences and more than 500 information data products."

I say 'old style,' because these kind of companies seemed to fall from favor over the past few years, driven primarily, I suspect, by the flood of private equity cash we've experienced. Market focus has become almost a religion for b2b media, as P/E backed companies have backed tightly focused companies like Hanley Wood (to great success) and P/E backed portfolio companies like Advanstar have trimmed themselves to focus on just a few markets, but more deeply. I think the theory is that this kind of market focus allows for a cleaner exit for the P/E money.

But this kind of market focus is also somewhat risky, because some markets rise and some markets fall. In the good old days of b2b, the big strategic media companies were omniverous in their acquisition strategies: a good media business, whatever the market, was a good media business. And if some markets rose, and some fell, the theory was that a balanced portfolio, like a mutual fund, ought to be able to continue to fuel growth.

With the new Penton Media (and with the new Nielsen Company), we're seeing some significant private equity money backing this latter approach. Exit strategies are less clear with a portfolio company--especially with very large portfolio companies:

1. Find a buyer who will buy the whole thing under the greater fool theory.
2. Take the company public (while this seems unlikely given what's happened with Penton and Primedia, who knows how things will change in the IPO markets?)
3. Break it into pieces.

There may be a fourth approach: maybe these companies are actually contemplating staying in for the long haul, paying down their debt and paying out their investors through cash flow. Given Wasserstein's long history in media, and its patience with its current investments (and the fact that it laid off half the acquisition of Penton to another P/E company) this may not be so far-fetched. And if that's the case, it's a good thing. Intelligently created and run strategic media companies did very well in our business for a very long time.

But enough of this ill-informed speculation. For whatever reason, Penton Media lives, as a large strategic b2b media company that happens to be owned by some P/E firms. Yes, there's debt, but there's also the imperative to create value, so I expect to see continued investment in the company's properties, and continued acquisitions of new properties. That's good for the employees, for the media properties themselves, for the readers and for the advertisers.

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