John Battelle's incredible denial

Federated Media's chief operating officer tells an M&A newsletter — off-the-record, he thought — that it's a "ripe time" for a media player to buy the ad sales network in 2007, before its price goes up. John Battelle, FM's permatanned founder, issues a clarification, that the company, which is backed by the Pierre Omidyar and the New York Times, among others, has no intention to sell, in the "near future", at least. Here are seven reasons we don't believe him.

1. What's between the lines. John Battelle, a veteran of West Coast publishing, is too sophisticated to lie outright. But FM, which claimed tens of millions of visitors when it showed 5.2m on Comscore's count, is perfectly capable of shading the truth. This near future, in which Battelle has no intention to sell, could mean anything.

2. Credibility. Smooth-talking Battelle told Techcrunch, unwisely, that his COO's interview was meant to be on background. Which gives the report more credibility, rather than less. I'm readier to believe a remarks intended for private consumption than the public exercise in damage limitation that Battelle is undertaking.

3. The advertising climate. Word is that FM is, rather suddenly, performing well for clients such as Gigaom. It, and they, are benefiting from agencies' desire to demonstrate a blog strategy. A buy across a network of sites, such as that managed by FM, allows agencies to satisfy clients such as Cingular without the work of negotiating with individual sites. Advertisers' current preoccupation with blogs may, however, not last.

4. Aggressive behavior. Battelle's ad network is behaving as if it is boosting its growth rate ahead of a sale or, at the very least, a major fundraising exercise. To my knowledge, it's the first ad network to offer revenue guarantees to bring smaller publishers on board. (Not counting deals such as that between Google and Myspace, that is.) That's either a sign of tremendous confidence, or a tactic to make revenue numbers, if not profit, look more impressive.

5. The rehabilitation of ad networks. Ad networks aren't particularly attractive businesses. The most successful publishers tend to build their own independent sales teams, leaving the networks with the sites that are hardest to sell. But, partly because of a shortage of ad sales talent available to individual sites and the fragmentation of blog publishing, networks are less toxic as acquisition targets than usual.

6. One obvious buyer. FM's chief operating officer listed ad agencies as possible acquirers. That's hard to envisage, because FM provides representation to sellers of space, publishers, rather than buyers. Owned by one agency, FM would lose advertising business that comes through their competitors. However, there is at least one obvious buyer: Time Warner's internet unit, AOL, which could bundle FM's partner blogs such as Boing Boing and Gigaom with its own titles such as Engadget and Joystiq, and provide advertisers with the audience reach they need.

7. Battelle's personal finances. John Battelle made a killing on last year's Web 2.0 conference, which he hosted. His deal with O'Reilly, the conference owners, is a rich one; and the conference ticket and sponsorship revenues may have exceeded $5m. But Battelle, founder of the Industry Standard media group during the 1990s, has never successfully sold a business. Like others who held out too long during the last cycle, his experience must be pushing him to cash in while the opportunity presents itself.

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Republished from http://valleywag.gawker.com