July 25, 2023

$125 Million for CoinDesk is Very Rich

Years ago, I referred to Digital Currency Group’s ownership of CoinDesk as the equivalent of Goldman Sachs—or any highly regarded financial institution—owning The Wall Street Journal. It was a weird concept, but by and large, it worked out for all parties involved. 

However, if what The Wall Street Journal reports is true, it seems that CoinDesk might finally be finding a new home.

But first… A message about our sponsor, Omeda

Do you know how your email matches up to your competitors? If you don’t, you might be underperforming on the various types of emails that you send. 

Omeda has just released its Q2 Email Engagement Report, which analyzed 1.8+ billion emails sent through its platform in Q2 2023, focusing on open, click, and click-through rates. 

The report also returns some of the early results from Omeda’s testing on iOS17, which is introducing Link Tracking Protection. This could have a big impact on publishers depending on how they track clicks. 

Download the full report here

According to The Wall Street Journal, CoinDesk finally has a consortium interested in buying the company. 

The investor group is led by Matthew Roszak of Tally Capital, a private investment firm focused on crypto and blockchain-based technologies, and Peter Vessenes of Capital6, a venture-capital firm and family office, people familiar with the matter said. 

The transaction would have an enterprise value of about $125 million. 

I’ve got a number of thoughts on this deal. 

First and foremost, if CoinDesk was going to be purchased, it had to be from someone or a group within the crypto community. I was convinced it was going to be either Zhangpeng (CZ) Zhao of Binance or Justin Sun of Tron that would buy it. But when it comes to old school crypto money, it doesn’t get much more legacy than Roszak or Vessenes, who have both been around for over a decade. Roszak might have been the first person I ever interviewed when I was a freelance crypto reporter. 

Because of the state of CoinDesk’s business, I suspect few strategic buyers were interested. And private equity would have wanted to cut deep to get the company to profitability, which would have been a major disservice to the brand. And so, it makes a lot of sense that it’s a consortium of crypto natives that are leading this deal. 

Second, if we trust the number that WSJ is reporting, it seems like too much of a coincidence that the valuation of this deal and what Blockworks recently raised at are so similar. According to Axios:

Blockworks, a media company that covers cryptocurrency for professionals, has raised $12 million at a $135 million post-money valuation, its co-founder Jason Yanowitz told Axios.

By the numbers: Yanowitz said the company “significantly exceeded” its revenue goal of $20 million last year, which would represent more than double what it earned the year prior.

So, $12 million raised at a $135 million post money valuation is basically what CoinDesk is reputed to be selling for. I would be shocked if the CoinDesk team didn’t use that as an anchor to try and get a similar number. 

And third, which is where I think the bubble bursts… $125 million for CoinDesk is unbelievably rich. Last year, it did $50 million in revenue. This year, I suspect that number is materially lower. And based on what I’ve heard, the company remains unprofitable. It has invested a ton of money into multimedia and its indices business. No other publication has a bigger editorial team and its reporting is truly incredible, having won its first Polk award earlier this year. But that doesn’t pay the bills. 

When Blockworks raised, I said that it wasn’t worth $135 million on $20 million of 2022 revenue. But at least Blockworks was profitable. And I will say the same thing about CoinDesk. Unless CoinDesk has bucked the trend of crypto cycles, it has likely shrunk as a business year-over-year. And so, an unprofitable business whose revenue is down year-over-year does not likely command a multiple that gets you to $125 million. 

I’m not an expert at M&A, though, so I am sure there are ways to make a deal look like it’s worth $125 million without it actually being worth $125 million. For example, maybe the full deal is worth $125 million if the company hits a certain revenue and/or margin target over the next few years. The headline could be $125 million even if the cash paid today is not that. Or maybe the new investors are only buying a relatively small percentage of the company.

This is also the unfortunate reality of CoinDesk being for sale at the absolute bottom of the crypto markets. Crypto media is a monster to operate in. You go through such intense cycles that track the price of bitcoin. As the price rises, marketing budgets come rushing back. If the company could hold out for another year or two, $125 million would likely be reasonable. I suspect in the next cycle, it’ll easily surpass the $50 million in revenue it did in 2022. We barely hit $20 million at the top of the last cycle when I worked there. The timing is just off.

Alas, we’ll have to wait and see. I would love to be wrong and for this operating team to get a big payout. The CEO, for example, has been grinding since early 2017 (having to put up with people like me), so this would be a big win. But if I were a betting man, the report might say $125 million, but the actual number will be materially lower.

Bloomberg’s Results After Cutting Open Exchange

Back in January, Bloomberg Media made the decision to cut off open exchange programmatic advertising from its site. It was an obvious risk because there’s no way the company can sell every last ad impression, so there was the potential for ad revenue to be down.

Adweek spoke with Bloomberg Media last week and the early results are in:

Since the transition Bloomberg Media has seen its average ad-load time reduce by 15%, its page-load time drop by 40% and its viewability across all ad units rise by 20%, according to Beizer.

After replacing select underperforming ad units with recirculation modules, its in-house editorial has also driven clickthrough rates up to four times higher than the ads they replaced, and CPMs are up roughly 20%.

Critically, Bloomberg Media has seen a decrease in advertising revenue, and it has not yet recouped that decline. Its advertising revenues were down year over year in the first half of 2023—the result of both the elimination of open-exchange and the depressed ad climate—but the publisher anticipates that its second-half ad revenues will be up year over year, according to Beizer.

There are a few things to glean from this.

A better site experience (40% drop in page-load time) is going to be better for readers, which will probably both retain users more effectively and encourage more people to sign up. At the same time, it’s getting more people to see more content with the recirculation units, so it can expose the paywall to more people.

In this case, Bloomberg is prioritizing subscription and engagement over maximizing every penny from pageviews.

But more than that, it’s proving that Bloomberg values its audience. The issue with the open exchange is that an advertiser can get in front of an otherwise amazing audience for not a lot of money. My stance has always been that if an advertiser wants a high quality audience like Bloomberg’s, it should have to work with Bloomberg directly.

Then there’s the topic of Bloomberg seeing a decrease in advertising revenue. Unfortunately, it doesn’t say in the story exactly how much ad revenue is down. But as the above quote says, we’re in a depressed ad climate. If the ad markets were as strong as they were in the first half of 2022, would ad revenue be up from where it is today? I suspect the answer is very much yes.

Admittedly, a big reason that Bloomberg has been able to execute on this strategy is because it has invested so heavily in its 1st-party data strategy. In October, Adexchanger wrote a bit about a new product Bloomberg had launched thanks to its 1st-party data.

Dubbed “Audience Accelerator,” the tool was built in house. Bloomberg created its own data lake with information about its 450,000 subscribers and 5 million registered users. The publisher uses that data for its own targeting algorithms and lookalike modeling. A few advertisers have already run test campaigns using the data.

The Bloomberg audience data in its data lake includes self-identified info, such as job title, industry and seniority, along with people’s reading habits, and can be used to target ads on Bloomberg’s sites and for post-campaign analytics.

Bloomberg understands both who a reader is and what they are consuming. The blend of both the declarative and behavioral data is what can provide the company with the confidence to cut out open exchange programmatic. For the rest of us, we should be thinking about how we can do this too. If our audience is highly sought after and hard to find, there’s zero reason to let an advertiser get to it without working with you directly.

As time goes on, I expect to see Bloomberg’s ad revenue increase despite a drop in open exchange because more advertisers will work with the publisher. The audience is simply too valuable.

Thanks for reading today’s AMO. If you have thoughts, hit reply. A few calls to action for you:

  1. Become an AMO Pro member to start receiving a second edition of AMO on Fridays + an invitation to the AMO Slack.
  2. Tickets are still available for the AMO Summit being held here in NYC on October 26th. If you buy a ticket, you get one year of AMO Pro. You can register here.

I hope you have a great week and see you next Tuesday.