Facebook, YouTube & Mergers: Warning Sign of Disruption

Media companies are looking at major mergers to boost growth, with speculated deals such as:

• Yahoo or Viacom looking at Facebook for $1B
• Viacom or others looking at YouTube for $1.5B
• News Corp. looking at AOL's European assets for less than $1.9B

This follows other recent alliances like:

• Warner Music Group signing on to distribute videos on YouTube last week;
• McClatchy Co. acquired Knight Ridder, the second largest U.S. newspaper publisher for $4.5B in June 2006;
• News Corp. acquired MySpace for $580M in July, 2005;
• Private buyers are looking at 18 titles from Time Magazine's lineup for between $300-400M;

Rising M&A activity might be evidence of a market facing disruption. When CEOs can't figure out how to deliver growth on their own, investment bankers and shareholders nudge them along to consider big ticket acquisitions.

Other warning signs of disruption which may apply in the media sector:

• Customers stop appreciating and paying for innovations they used to value;
• Strange niche suppliers start gaining share;
• Tried and true management techniques fail;
• A growth gap emerges between shareholder expectations and what management thinks it can deliver;

**Other views **
Wharton: Most mergers fail and here's why

Om Malik lets readers vote on the deal they think most likely to occur

The Wall Street Journal describes a bizarre merger courtship of Facebook by Microsoft and then Yahoo: "During one series of talks with Microsoft, Facebook executives told their Microsoft peers they couldn't do an 8 a.m. conference call because the company's 22-year-old founder and chief executive, Harvard dropout Mark Zuckerberg, wouldn't be awake... In the Yahoo negotiations, Zuckerberg said he couldn't take part because his girlfriend was in town."

ValleyWag describes the YouTube $1.5B-discussion as noise: "That's not even an offer, that's the kind of figure you throw out to stop anyone bothering to buy you." There's also a voodoo-valuation chart.

ZDNet's digital micro-market blog asks if the merger craze is a quest for fool's gold

Mark Evans says the YouTube's copyright conundrum could be a deal-killer

TechCrunch says we've seen all this before.