I know I’ve waited a long time before commenting on PRIMEDIA’s purchase of About.com.
PRIMEDIA offered what was then $690 million in stock (and was $576 million less than a week later) for About.com. Upon the announcement, PRIMEDIA’s shares “dropped off the table,” as they say on Wall Street, shedding a fifth of their value within minutes. They have recovered a bit since.
So the consensus on this deal is negative, and I’m going to go along with that consensus. But I have a different set of reasons.
I’m not concerned about PRIMEDIA putting its magazines into the B2B slots About.com announced early in October. I’m not concerned about the valuation or the problems of integrating the sales staffs or executive teams. I’m not worried about how About.com founder Scott Kurnit will do in the new structure, whether he will leave, and how he will be replaced if he does.
I’m wondering whether PRIMEDIA is buying a real business.
I was asked a number of times to join About.com as a “guide” over the last few years. I even considered it seriously, especially after I lost my job in early 1997. But I always rejected the offer.
Here’s why: I never saw a revenue-sharing model I could live with. Sure, there are some guides who do fairly well. But very few ever got a proper amount of compensation for their work. It can take many hours to create a guide portal (here’s the one on Internet commerce), but I could never justify the time based on the share of future revenue About.com was able to pay.
Maybe it was because I’d been down that road before. My first online job was for a publisher who paid me a pittance but promised, “When our ship comes in, everyone will be a winner.” It turned out that publisher had what I call “small success” syndrome. At the first taste of career, “we” became “I,” and it remained that way. The writers who were most loyal were let go first because they remembered the promise that was broken. (No, you’ll just have to guess whom I’m talking about.)
Well, Kurnit has just hit that wall. About.com now has a half billion dollars and a lot of hungry mouths to feed. Most of those mouths don’t belong to full-time employees but to contractors who have been betting on the come. Integrating a ton of people who were betting on the come with a staff of journalistic wage slaves is the kind of task I wouldn’t wish on my worst enemy. (Well, maybe my worst enemy…)
About.com is faced with hard choices. It can pay people well and turn them into salarymen and salarywomen. It can try to do business the same old way. Or it can do a little of both.
Either way, there’s bound to be resentment, some of which will land on a discussion board near you. There is bound to be a major financial cost. That’s a cost that won’t appear on PRIMEDIA’s balance sheet for many months. Investors were right to dump the stock.
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