Ziff Davis Enterprise, Channel Insider, eWeek Sold: Now What?
Ziff Davis Enterprise (publisher of eWeek, Baseline Magazine, CIO Insight Magazine and Channel Insider) has been sold. The buyer has yet to be publicly disclosed but multiple sources on Twitter point to Quinstreet, the lead generation company. Here’s the back story, which was a decade in the making.
Over the past decade, the Ziff Davis Enterprise team transitioned from print publications to web, digital and mobile editions. It was a sometimes painful process, but the ZDE team always seemed to rally. The deeper story here involves important lessons in corporate debt, company valuations, branding, seismic market shifts and the Ziff Davis Enterprise team’s incredible will to fight on.
First, some important notes:
- The sale of Ziff Davis Enterprise allegedly includes significant job cuts, according to those who were briefed about the deal today. The VAR Guy is not in a position to speculate about how Ziff Davis Enterprise’s brands may or may not evolve.
- Today’s news has nothing to do with Ziff Davis (a completely separate company) and ZDNet (the popular blog destination, also a separate business).
Now for the back story on how Ziff Davis Enterprise reached today’s exit sale.
Dot Com Boom Goes Bust
The story starts in December 1999, when Willis Stein — an investment firm — acquired Ziff Davis Publishing for $780 million. At first glance the deal looked promising. Ziff Davis Publishing, after all, produced massive magazines like PC Magazine, eWeek (formerly PCWeek), PC Computing and more.
But the deal was fundamentally flawed from the get-go. Willis Stein over-paid for Ziff Davis Publishing right before the dot-com implosion occurred and print advertising began to dry up. Further complicating matters Ziff Davis Publishing didn’t even control its own magazine websites. Indeed, CNet at the time oversaw the ZD Publishing online media sites. And CNet in 2000 ultimately paid $1.6 billion in stock to gain control of another Ziff Davis online component called ZDNet.
1999 to 2006
To Willis Stein’s credit, the investment firm helped Ziff Davis Publishing — at the time, rebranded as Ziff Davis Media — to shift away from print advertising, regain magazine website control from CNet, and generate new revenue streams from events and other areas. But debt payments continued to choke Ziff Davis Media while revenues spiraled downward. Indeed, revenues fell to $181 million in 2006, down from $535 million in 1999.
Still, there was a glimmer of hope. Under then-CEO Bob Callahan, Ziff Davis Media’s EBITDA actually rose to $27.1 million in 2006 from $17 million in 2005. Based on that uptick, Willis Stein decided it was time to exit the investment.
2006: Up for Sale
By late 2006 or early 2007, Willis Stein had positioned Ziff Davis Media so that it could be sold off in parts:
- The Enterprise Group (now known as Ziff Davis Enterprise)
- The Game Group
- Consumer/Small Business Group (now known as Ziff Davis, including the PCMag.com brand)
But the sale process raised as many questions as it answered:
- Ziff Davis Enterprise: In July 2007, Insight Venture Partners acquired the Enterprise Group and branded it as Ziff Davis Enterprise. But history repeated itself. Sources say Insight paid too much for the enterprise group and the business has since struggled to overcome debt issues. By 2008, Ziff Davis Enterprise had secured another $20 million in funding to set the stage for acquisitions and innovations. But no major acquisitions ever occurred, The VAR Guy believes.
- Ziff Davis: In 2010, Time Inc. Veteran Vivek Shah and Great Hill Partners essentially acquired the consumer/small business group of Ziff Davis, including PCMag.com. Shah has since led an impressive acquisition spree, accelerating the company’s all-digital strategy.
- ZDNet: It remains a popular online destination filled with top blog personalities.
Still: For advertisers, sponsors and readers it became increasingly difficult to track all the different Ziff Davis properties — which ultimately had no real financial or business relationships with one another.
If one Ziff brand suffered from negative news — such as the Ziff Davis Media bankruptcy filing in 2008 — the other, unrelated Ziff companies had to communicate that they were not involved in the bad news.
Multiple sources say Ziff Davis Enterprise considered a complete brand change in 2008 but decided to stick with the good (Ziff Davis universal name recognition) with the bad (brand confusion with the other, unrelated companies).
Repositioning Ziff Davis Enterprise
Initially, Insight Venture Partners’ 2007 buyout of Ziff Davis Enterprise had promise. By January 2008, former CMP Media CEO Steve Weitzner joined Ziff Davis Enterprise as CEO.
Weitzner and his evolving management team trimmed costs and focused on innovation. But sources say Ziff Davis Enterprise was always plagued by that lingering debt. Like a house purchased during the inflated real estate market, Ziff Davis Enterprise was always hounded by those debt payments. In more recent years, sources say, Insight Venture Partners essentially exited Ziff Davis Enterprise, leaving the business for bankers and debt holders to monitor.
Through it all, the ZDE team marched forward and evolved — rebuilding its e-Seminars business and launching an aggressive mobile content strategy. But oh, that lingering debt.
Time to Sell
Judgment day approached in late 2011, when bankers may have ran out of patience and started shopping Ziff Davis Enterprise to potential suitors, The VAR Guy believes. The timing was ironic: Morale seemed pretty high within Ziff Davis Enterprise’s halls in 2011. But at some point today, Ziff Davis Enterprise employees were told the company had been sold and certain staff members were let go. And LinuxDevices.com, part of Ziff Davis Enterprise, leaked news of the sale today.
An official public announcement has yet to surface as of 5:17 p.m. eastern on Feb. 3, but some Ziff Davis Enterprise employees are informing their sources about job cuts and company ownership changes.
Where does the Ziff Davis Enterprise story go from here? Stay tuned.
Several of The VAR Guy’s team members are former Ziff Davis Media employees who worked in the business unit that ultimately became Ziff Davis Enterprise. The VAR Guy sends best wishes to current and former Ziff Davis Enterprise employees.