Digital media and advertising company Federated Media Publishing has acquired BigTent, a platform that enables local school, community and other shared-interest groups to connect online. Terms of the acquisition were not disclosed.

Federated Media acquired BigTent for its reach within a well-defined target audience: moms.

The media company says more than 8 million moms engage with its authors, and Federated Media President and COO Deanna Brown says the combination with BigTent’s platform for trusted parenting groups will give marketers a “powerful new way to reach the most valuable consumers online”.

Federated Media says BigTent’s thousands of groups will continue to function as before, and that new groups are welcome to sign up. BigTent gives each group its own private social networking environment in addition to a set of related tools.

BigTent says it primarily hosts parent groups, PTAs, schools, neighborhood groups, scouting troops, hobby clubs, alumni associations and other community groups nationwide.

The purchase of BigTent follows Federated Media’s recent expansion of its ability to reach parents online through a partnership with the Clever Girls Collective and the acquisition of semantic-search technology from TextDigger.

BigTent has raised $5 million in funding from Menlo Ventures and Mohr Davidow Ventures.

Mike Maser, currently Digg’s Chief Revenue and Strategy Officer, will change his title to Chief Strategy Officer. He controls Digg’s marketing, business development, corporate development and community management groups.

This is a big blow for Federated Media. Founder and CEO John Battelle recently announced that he’ll be looking for a replacement to run the company, although he’ll remain active with the business. And Edwards, I know from personal experience, is the kind of guy who can sell ice to eskimos and get a sincere “thanks” as he takes their money.

Federated Media raised a big round of financing last year that valued the company at $200 million. Oak Investment Partners, which led the round, must be wondering what exactly they invested in.

Many of Federated Media’s partners have left the network. Digg left in 2007, followed by GigaOm last year. TechCrunch parted ways with Federated Media earlier this month.

Edwards will have responsibility for all revenue streams at Digg, which include some revenue from Microsoft (although that deal is largely over) as well as direct sales. The company is making a push towards profitability, they’ve said in past months. That will likely require about twice the reported $8.5 million in revenue that Digg generated in 2008. Edwards will certainly help them get there.

Update: The Digg blog post.

Federated Media Publishing is looking for a new leader. In a blog post today, founder John Battelle says after four years he is conducting an executive search to find somebody to “take it to the next level.” The blog advertising network is trying to branch out into something called “conversational marketing,” which it is also trying at the same time to invent. After shopping the company around last year and not finding a buyer willing to pay his price, Battelle decided to raise $50 million instead.

With those investors comes pressures for growth and profits. Battelle claims once wrote that he finds the prospect of making ” lots and lots of money . . . uninteresting,” and quotes himself saying so in today’s post. Now, as he notes in the comments, he says that “there is almost nothing I find uninteresting about running FM”. But he realizes it is time to step down, though he writes that he will still be deeply involved with his baby in other ways such as bringing in advertising clients. He also offers these tidbits about FM’s business. It made nearly $40 million in revenues in its third year, 2007 2008. Update: Battelle was referring to 2008 when he mentioned the company’s third year, though this was ambiguous in the post.

Last year, FM distributed $25 million in revenues to its network of blogs. Assuming a 50/50 split that would have generated $25 million in revenues for FM, but it also has other sources of revenues from its newer conversational marketing campaigns, events, and other businesses.

It’s nice to see blogs growing up, even if they are about babies. People.com has bought Celebrity Baby Blog, a fast-growing blog started four years ago by Danielle Friedland. She confirmed the deal earlier this week, after MediaWeek broke the story. The site has an editorial staff of 17 editors, contributors, writers, and reviewers (presumably, not all full time).

The blog is an obvious fit for People, which knows that stories about pregnant celebrities and their babies sell. (Doesn’t it seem like pregnant celebrities are on the cover of People more than anything else?). The price was not disclosed, but Friedland and staff will stay on to grow the site.

But People.com’s gain is Federated Media Publishing’s loss. With this acquisition, FM Publishing is losing yet another anchor blog from its advertising network. Last year, it lost Digg to Microsoft, and earlier this month it lost Ars Technica to Condé Nast. Now, Time Inc. (my former employer) has snapped up Celebrity Baby Blog.

Celebrity Baby is FM Publishing’s top parenting blog, and has recently started to pull in more pageviews (and thus advertising impressions) than FM stalwart BoingBoing. Since February its traffic has shot up—to 6.9 million pageviews and 720,000 unique visitors in April, according to comScore. That month, BoingBoing had more unique visitors (2 million), but fewer pageviews (3.7 million). See the chart below.

Deals like this point to the fundamental weakness of FM’s business model. When a blog in FM Publishing’s network gets big enough or gets bought, FM loses all or part of their advertising inventory. The more profitable a blog is for FM, the more likely it is to try to sell ads on its own or be taken away by a larger media company with its own ad sales force. (Disclosure: TechCrunch is also an FM partner site. They sell a portion of our ads, but we also sell our own).

That said, we hear that FM was actually very helpful in getting this deal done. It knows that its blogs can walk away at any moment (As publisher Chas Edwards told me when FM raised $50 million last month), and the only way to keep them is to deliver higher CPMs than they could otherwise get. FM also wants to be seen as the best partner for up-and-coming blogs. Generating goodwill is always a smart business practice, even if it means having to let go of a rising star.

Update: FM’s Chas Edwards got back to me. He confirms that FM helped Friedland assess the offer from Time Inc., although it did so as a favor. And although “it is not clear” what will happen to FM’s advertising relationship with Celebrity Baby Blog, he suspects that Time Inc. will take over once the current ad campaigns run out. But he says that the revenue impact of losing both Celebrity Baby Blog and the larger Ars Technica will be minimal:

We would love everybody to stay with us for life, but we realize that is not practical. In terms of a business impact, it is very minimal. No one site represents a substantial percentage of revenues.

And here are his thoughts on the importance of being a good partner, even at the end of a relationship:

I think it builds the rest of our partners’ comfort with us and the broader industry gets a better understanding that Federated Media is building almost a talent agency. We want our partners to go deep with us in a collaborative approach to building their business.

A lot of people still confuse Federated Media with an ad network. It is not just that we want to sell your ads, but we want to help you build your business and your brand. And maybe we’ll get the opportunity to participate in these exits in the future.

That’s certainly the right the attitude if he wants to keep or attract more traffic on his ad network (sorry) than will escape whenever a bigger blog graduates from FM.

Today, Henry Blodget & Co. at Silicon Alley Insider try to peg valuations on 25 private Web companies. Facebook is at the top of the list, but it is valued at $9 billion instead of the $15 billion that Microsoft’s investment put on the company. Why? Because everyone knows that the $15 billion is too high, so SAI decided to apply a 25X multiple on Facebook’s 2008 revenue forecast of $350 million. Does that make its valuation correct? Probably not. But in the absence of any true market pricing, anyone can go ahead and make a guess.

The same goes for any of the valuations on the SIA 25 list, which puts Wikipedia’s worth at $7 billion, Craigslist’s at $5 billion, Mozilla’s at $4 billion, LinkedIn’s at $1.3 billion, Ning’s at $560 million, RockYou’s at $325 million, and Spot Runner’s at $250 million. Note that three of the top five (Wikipedia, Craigslist, Mozilla) are essentially not-for-profits sitting on very valuable assets. The valuations for those three are based on what they would be worth if they were run differently with an eye towards maximizing revenues—which, of course, could impact how consumers interact with them, which in turn would impact their valuations.

Another 25 startups make up the contenders list, which includes Federated Media ($245 million), Yelp ($225 million), Meebo ($220 million), Mahalo ($150 million), Digg ($125 million), Etsy ($115 million), Powerset ($80 million), and Twitter ($75 million). A full list that changes dynamically every 20 minutes, based on changes in the Nasdaq, can be found here (although, exactly how the valuations are linked to the Nasdaq is never clearly explained)

Some of these valuations have more merit than others. Some have none whatsoever. For instance, SAI gets at its $125 million valuation for Digg by “splitting the difference” between a $200 million buyout rumor we reported and the $60-to-$80 million that Kara Swisher came up with. Splitting the difference between two rumors is not exactly the height of financial analysis.

But what are you gonna do? At least SAI acknowledges that the list is an imperfect work in progress. Don’t get too caught up in the actual numbers. It is more useful really as a starting point to think about relative valuation between different startups. Is Meebo really worth three times as much as Twitter? Is Ning worth as much as Slide? Let the parlor game begin.

Federated Media acts as the advertising salesforce for about 150 blogs and dozens of online media properties with a collective audience of 50 million people a month. Its blog partners include Boing Boing, GigaOm, Ars Technica, Silicon Alley Insider, and TechCrunch. It even sells ads for video blogs like AskANinja and on some Facebook apps, such as Graffiti and Watercooler.

A Tidy Advertising Business . . .
In 2007, according to Edwards, Federated Media sold $22 million worth of ads across its network, up from $4 million in 2006. It generally splits the ad revenues with publishers, taking 40 percent for itself. Edwards says that Federated Media is able to command between $10 and $25 per 1,000 impressions (CPMs) for the ads it places on the blogs it works with (and $6 to $12 CPMs on its Facebook apps, which is very high for social-network inventory). Edwards says Federated Media has been cash-flow positive for more than a year and EBITDA-positive since September, 2007. The blog advertising network previously raised a total of $7.5 million.

. . . or a Blog-By-Night Network?
The issue, though, is that unlike a traditional media company where content and publishing are under the same roof, FM does not control the sites for which it sells ads. And there is no lack of ad networks that big blogs can work with. Even Technorati is hoping to turn itself into an ad network for blogs. In order to tie its partner sites closer to Federated Media, we’ve suggested before that the company could use this new cash to buy guaranteed ad inventory on the blogs in its network, or buy some of those blogs outright. But Edwards tells me Federated Media will not guarantee advertising under any circumstances, and is unlikely to buy any partner blogs:

Let’s say we bought all the sites that are part of FM. If we don’t deliver value they can walk away. The stability of our relationship with content creators will come from the value we create every day, not from our contracts.

He goes on to qualify this statement this way:

I wouldn’t rule out any scenario. If an author needs $100K. Is there a way FM could help them with that? Absolutely, and it can be structured a thousand different ways. But I don’t suspect that FM’s path is to acquire the blogs we work with.

He also argues that even when blogs get big enough to hire their own ad sales team, they will never be able to cover as many ad agencies and clients as the 25 sales people at Federated Media. That’s true, but it doesn’t take 25 people to sell ads for one blog, and blogs that sell their own ads have a better chance of getting higher ad rates. The type of bundled selling that Federated Media can do will have a place in any given blog’s advertising mix as long as Federated Media can do a better job selling ads to the big brands (which generally require the type of scale and vetting that Federated Media offers).

So what is Federated Media going to do with that $50 million? Expand beyond blogs, expand internationally, help existing media partners expand to new sites (and thus more ad inventory), and help them expand beyond the Web (by selling sponsorships for conferences and other events, for instance). Federated Media is going to have to keep finding new ways to keep the money flowing to its blog and media partners if it wants to keep them from bolting.

The company, which sells advertising for a number of blogs and other websites (including TechCrunch), had revenues of $4.5 million in 2006, its first year in operation. Projections for 2007 were $30 million in sales and “several million dollars” in profit.

Weisberger said “If Federated Media keeps performing the way we’ve predicted in 2007, it would be a really ripe time for a media player who understands this space to buy us now rather than having to buy us for a whole lot more later.” The article also said “While he was unsure how much Federated might sell for, Weisberger said similar companies have gotten 8x to 10x gross revenue…Another possible valuation for a sale of the company is a multiple of 25x EBITDA.”

There was a laundry list of possible acquirers mentioned by Weisberger, including media companies (AOL, CBS, Google, IAC/Interactive, Fox, Yahoo were mentioned) and advertising agencies (Universal McCann, Ogilvy & Mathers, aQuantive, Saatchi & Saatchi, and TBWA/Chiat/Day).

The company is also considering a number of acquisitions, and raising a new round of financing of $3 – 8 million to pay for them. The company previously raised $2.2 million.

Update: I spoke to John Battelle, who says that this interview was done under the impression that it would be used as background material only, and that they have no intention of selling the company in the near future. He also said that the company is not actively fundraising at this time. Battelle also comments below.

I am a member of FM Publishing’s ad network, and have been extremely pleased with their ability to generate revenue as well as their technical assistance and general therapy sessions when I get the blogging blues. Congratulations to John Batelle, Chas Edwards, Andre Torrez, Jason Weisberger, Jennifer Charette and the rest of the team at FM.