In an interesting article by Motley Fool written a few days ago they mention QuinStreet as being a good potential buy-out target for Yahoo!. It has become industry chatter that Yahoo! is looking for large content sites to purchase in order to spread their ad placement reach. The rumored Huffington Post buyout looks to have been shot down recently but they did acquire Associated Content two months ago in an approximate $100 million deal.
Yahoo!, having $4.2 billion in cash and securities on their balance sheet, has announced that they plan to buy back $3 billion of their own stock over the next 3 years. Motley Fool says this is a bad idea as there is not much about their current business that justifies significant future stock growth.
Yahoo!'s stock buy-back approved at a 7% higher price than today
However Motley Fool suggests Yahoo! uses that money to look at five potentially good acquisition matches with that money -
- AOL (NYSE: AOL)
- QuinStreet (Nasdaq: QNST)
- Travelzoo (Nasdaq: TZOO)
- Health Grades (Nasdaq: HGRD)
- WebMD (Nasdaq: WBMD)
Quinstreet caught my attention as an interesting mention because (1) they are trading well below their $15 IPO price 5 months ago and even further below their initially desired $25 price last year which makes them a well priced candidate; and (2) they has healthy profit margins.
QuinStreet's stock price since IPO
However QuinStreet’s business model is too different from Yahoo!’s to be a good acquisition partner. QuinStreet’s model and web properties are based on lead generation and direct marketing in education, home, financial services, B2B, health, advertising, career, insurance and travel. It’s a great model for QuinStreet but does not compliment Yahoo!’s desire for more eyeballs to their ad network.
Another interesting point about QuinStreet’s growth is that it is all acquisition based rather than organic based. For more information on this, you can read a good analysis here.
QuinStreet's traffic growth according to Alexa.com
Some homerun properties in QuinStreet’s portfolio include:
- SureHits.com – One of the biggest CPC insurance advertisers.
- Insurance.com – Purchased for $16 million.
- Insure.com – Purchased last week for an undisclosed price.
- WorldWideLearn.com – Purchased years ago for their organic education traffic.
- Chef2Chef.com
Acquisition Growth
Acquisition Growth can be great for companies as seen by QuinStreet’s 100 acquisitions in the last three years accounting for annual revenue growth from $167.3 million to $260.5 million but similarly to too many “middlemen” getting involved between CPA advertiser and affiliate, the same can be true for when acquisition growth (QuinStreet) meets acquisition growth (Yahoo!).
Of course there are exceptions to everything and both Yahoo! and QuinStreet are well positioned in the near future with great businesses but I can’t see an acquisition being the way to go for Yahoo!. Same for QuinStreet who raised around $160 million from their IPO giving them enough funding for any future desired acquisition.
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I have a slightly different twist to how this story could play out – With Yahoo!’s huge content network and portal sites, they may be working towards more directly monetizing these channels via lead generation companies like Quinstreet, instead of solely via CPM ads. Yahoo’s Hot Jobs portal, for example, is an obviously choice for leveraging the Quinstreet EDU platform – and already features third party ads promoting education. If other companies are able to successfully arbitrage Yahoos inventory and be profitable on their end, it’d make sense for Yahoo to cut them out and work directly with end partners, especially when they are a good acquisition value which you mention above. With that said and as someone who deals directly in the EDU space myself, it is somewhat unsettling to hear rumors of one of the biggest content sites partner with one of the biggest EDU sites…
I’ve looked into Quinstreet for my boss before – do you know if they get majority of leads from their own sites or buy from publishers?