Media giant Viacom (VIA), which owns Comedy Central, Nickelodeon, and the MTV cable franchise, has taken a step toward extending its influence in the crucial youth market. It said on Aug. 2 that it acquired Y2M: Youth Media & Marketing Networks, which publishes 450 online college newspapers. Terms of the sale weren't disclosed.
The deal was struck by MTV's mtvU unit, a channel that is distributed over campus cable TV networks. The broadcast also streams over the Web at www.mtvu.com. The broadband version is known as mtvU Uber.
MTV was a pioneer in the youth cable TV market in the '80s. But it has faced challenges of late, as its core audience has expanded its interests to digital media. While Viacom maintains a big presence on the Web, it lacks the online scale of rival News Corp. (NWS), which last year acquired the social-networking sensation MySpace. Viacom also bid on the property, but lost out to News Corp.
NEW TACK. The Y2M deal shows that Viacom is taking a different approach when it comes to reaching a younger audience on the Web. There has been speculation that Viacom would take on MySpace by acquiring another large social-networking site such as Facebook, a site for college students. Viacom even opened talks with Facebook after News Corp. cut its deal to acquire MySpace. But the prices of Facebook and other social-networking sites have surged in recent months. In March, the founders of Facebook were hoping to get as much as $2 billion for their company (see BW Online, 3/28/06, "Facebook's on the Block"). So Viacom has looked for smaller, less expensive companies that are flying under the radar.
MTV has made several other acquisitions in the digital realm. It bought Neopets, a site that's popular with small children. It also acquired gaming sites Xfire and Gametrailers, as well as IFILM, a site for independent film.
Viacom appears to be targeting its audiences first, and then offering them a range of products across several platforms. For example, mtvU is available via cable TV and wireless phones. The Y2M deal creates another avenue for reaching mtvU's college audience. "Bringing mtvU and Y2M together is another avenue for us to be everywhere our audiences are, deepening our relationship with them and connecting with them across every platform and device, all the time," Chairman and Chief Executive of MTV Networks Judy McGrath said in a statement.
Y2M has a much lower profile than MySpace or Facebook, but is in a profitable market nonetheless. Mark Kingdon, CEO of multimedia ad agency Organic, said he knew this from experience, having worked as an ad manager for the Daily Bruin, the student newspaper at UCLA. "It's a lucrative business," he said.
PRUDENT PARTNERSHIP. The deal is likely to help boost growth at Y2M. The company will have access to mtvU's 120 major advertisers, as well as some new content and Web functionality from MTV. "We're looking forward to supporting them with new tools and advertising opportunities, empowering them to expand their offerings and audience as well as improve their financial performance," said Stephen Friedman, general manager of mtvU.
One media banker said the targeted nature of the deal bodes well for its success. "It doesn't have the reach or cachet of MySpace or Facebook, but at the same time I have to believe this is a strong, credible, well-received product for the college market. If that is correct, this is an excellent acquisition," said Jay MacDonald, a digital media and technology banker at investment bank DeSilva & Phillips.
It may be that the moment for a major Viacom acquisition in digital media has passed, at least for now. The price of companies like Facebook and the video site YouTube have increased because they're beginning to figure out how to generate revenues from their popularity (see BW Online, 7/12/06, "Big Media Just Wants to Relate"). In addition, MacDonald says there are signs that the growth at Facebook is slowing down. The risks for Viacom of a huge deal may have outstripped the potential reward.
STILL A FORCE. Prudent as the Y2M deal may be, it won't neutralize the risk posed by News Corp. MySpace generates more page views than any site on the Web, with the exception of Yahoo! (YHOO). That gives News Corp. a tremendous opportunity to forge unique relationships with millions of kids.
While critics argue that the supposedly fickle youth audience could leave MySpace for another popular site, there's no evidence that the slowdown has arrived (see BW Online, 7/25/06, "The MySpace Ecosystem"). And with a foothold in the music market where MTV once reigned supreme, MySpace remains a fundamental threat to the MTV franchise.
Rosenbush is a senior writer for BusinessWeek Online, based in New York
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