Canadian Media Companies; Revenue Per UV and Thoughts on the Bell – Astral Deal

In the past 2-weeks some interesting news in the Canadian media space has happened. First, on March 16, BCE announced the purchase of Astral Media for 3.38B and second Borrell Associates has released its 2011 Revenue Survey, Benchmarking Local Online Media. There are 4 Canadian companies listed in the Borrell revenue survey which are Yellow Media Inc, Transcontinental, TorStar Digital and PostMedia and their ranking by north american digital revenues are #7, #14, #21 and #24 respectively. The largest 3 players in terms of revenues where AutoTrader.com, AT&T YellowPages.com and Groupon.

Borrell does some interesting comparisons in their report such as average online revenue per site by operator and average per-market ad revenue for local pure-play internet companies. In the latter category Groupon leads followed by Craigslist.org and AutoTrader.com. However, I wanted to take a more CDN view of this data.

First, I decided to take a look at the past 6-months average ComScore UV’s for each of the networks listed above.

The data is as follows;

Yellow Media – 9.1M, Transcontinental – 4.4M, TorStar Digital – 5.8M, PostMedia – 6.8M

Second, I decided to look at the revenue earned by network based on the previous 6-month average and the 2011 reported digital revenues. Here is the monetization by UV for these top companies;

Yellow Media – $39.43, Transcontinental – $44.47, TorStar Digital – $18.89, PostMedia – $13.17

What is interesting and seems to be validated by the Borrell US data is that the transition of the traditional directory players have ramped up monetization quite a bit more than the newspaper traditional media companies. This is related to the fact that the directory players have a broader base of customers and in terms of the pricing, a placement model yields a higher value than CPM based advertising. In the US, most newspaper organizations are generating between 15-20% of their revenues from digital. PostMedia is around 9% and if they can execute on their digital strategy you should expect to see this revenue per UV increase.

This got me thinking about the integrated media companies, players such as BCE, Rogers, Quebecor. It is harder to extract the exact digital revenues from these companies as they tend to report as Media earnings which of course include digital as well as their traditional revenue streams. However, I was curious as to what the results would yield if I looked at the data the same as I did for the above 4 companies.

Here is the 6-month average, via ComScore for these 3 media conglomerates;

Bell Media – 14.7M, Rogers – 8.2M, Quebecor – 9.6M

Here is the revenue / UV generated by these companies, looking solely at their reported media divisions.

Bell Media – $104.97, Rogers – $197.67, Quebecor – $105.66

NOTE: The above revenue / UV numbers include traditional media sources as well as digital.

When you look at the above figures it would appear that Bell is lagging behind, however, when you look at its overall network reach, I think that Bell currently looks to be in a good position going forward to demonstrate growth.

If you assigned digital revenues at 20% and compared these 3 with the 4 companies above, the picture looks like this:

Finally, this got me thinking about the Bell / Astral deal.

If you look at the unduplicated reach between these networks, the uplift for Bell is 843K new additional users to its online reach network. Bell averaged 14.7M, Astral averaged 2.9M and combined their unduplicated reach is 15.5M.

The deal value was $3.38B and if you assign the lift in digital UV’s at 10% this gives a digital only value of $338M. Based on the lift of UV’s at 843K this means Bell Media would have paid $400.71 per UV. At Bell’s current revenue rate of $104.97 per UV this means that the multiple Bell paid for Astral’s UV’s is 3.81.

It would appear to me that in a growing digital revenue environment and more cross-media integrated advertising that this was a pretty good acquisition for Bell, based on the assumptions above.

What do you think?