CNET is reporting that tech-focused advertising network Federated Media (which sells advertising on our behalf) is looking for a new round of financing. CNET is basing this partially on our previous report that they hired investment bank Savvian to represent them after they turned down a $100 million acquisition offer, plus a new source that says the company is looking at term sheets now.
From what we hear, Federated Media is looking at both financing and new buyout offers, but wants a valuation way beyond the $100 million floated to them last year. Founder John Battelle is said to be looking for more of a Glam-like valuation, in the $400+ million range. Glam has a similar business model to Federated Media, but focuses on womens sites. Glam also guarantees significant revenue to its partners, which resulted in a loss last year of $3.7 million on $21 million in revenue. Federated Media doesn’t guarantee revenue, and is reportedly profitable (they better be, with how much of our revenue they keep).
Federated Media is reportedly generating gross revenues in excess of $2 million per month, and they keep 40% of that after the split to partners.
It’s unlikely the company will get buyout offers in the price range Battelle is looking for, so a new financing is likely. But part of me wonders why they’re doing this at all. A new financing means a bigger valuation, which means they need a much higher price down the road when they do eventually sell. And with competitors springing up all over the place, margins can take a hit.
Perhaps Federated Media intends to take the Glam approach and go in the red for the sake of growth and begin to guarantee revenues. That’s a slippery slope, but it may also get Battelle his payday.