Started in 2008, Tsavo Media in Santa Monica was acquired by Canadian advertising company Cyberplex (CX.TO) for $75 million. The breakdown is $40 million in cash and stock ; and $35 million through senior credit facility.
Tsvao, an online media network, operates over 300 properties with some of the larger ones being Twirlit, Manolith and Twithority. To get a better grasp on this transaction it helps to understand Tsavo's roots which come from their prior merge with MoxyMedia which was a company spun off from a failing Geosign. MoxyMedia was operating around 300 media properties at the time that Tsavo, led by founder Mike Jones, took over Moxy's media properties.
Analysis
The business model of both Tsavo and Moxy is to operate websites that appear to be content rich sites monetized by a Yahoo ad feed. This is a similar model to another Los Angeles company, Demand Media, however the main difference between Demand Media and Tsavo is the quality in the sites that appear in their network.
Demand has a reputation for having high quality sites. They focus more energy and resources on building value added user-run communities and user generated sites while many of Tsavo's properties are strictly created to integrate the Yahoo ad feed while typically providing lower quality content in comparison. Of course the quality of content and sites in the Tsavo network varies from but generally speaking many are simply sites that scrape and accumulate data from other sources.
Great Deal for Tsavo
As I mentioned the Tsavo business model is great for a company run lean-and-mean from the ground up. But the addition of such a company to Cyberplex doesn't make much sense at a glance as the model is not very sustainable or reliable when you solely rely on one limited revenue source (see Geosign story for similarities). In this case, Tsavo relies too heavily on Yahoo's ad feed. The combination of Tsavo's heavy reliance on Yahoo, typically lower quality sites within their network, and a portion of their business coming from traffic arbitrage makes for high volatility on this deal.
In summary, this is a great deal for Tsavo and I'm glad to see their work pay off. Mike Jones has a history of successfully starting and growing companies and this adds to his list. As far as Cyberplex goes, they are a public company on the Toronto exchange and may have their own reasons for the purchase such as wanting higher top line revenue numbers, or leveraging Tsavo's relationship with Yahoo to integrate the ad feed to their own properties. Does it have $75 million worth of value? We will have to wait and see.
Comments
Great write up on the deal. Tsavo is clearly overpriced for what they do so I'm not sure what Cyberplex was thinking. Hope it works out though cuz that will lead the way for more deals like this.
Great write up on the deal. Tsavo is clearly overpriced for what they do so I'm not sure what Cyberplex was thinking. Hope it works out though cuz that will lead the way for more deals like this.
I said this on Techcrunch but this is INSANITY. Tsavo is worth S**T. These people have some serious gaps in their due diligence. (???)
Canadian companies should up their due diligence.
Interesting buy for Cyberplex. Thanks for the summary.
wow cool for tsavo
Hey is Tsavo's office still in Santa Monica or did they close it and move the company to Toronto?
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