How Joey Chung of TNL Mediagene acquires media companies… as a media company
We're putting together some of the best sessions from Splice Beta 2023. This episode features Joey Chung of TNL Mediagene in Taiwan. Joey talks to the Beta 2023 crowd about his strategy of acquiring media companies — as a media company.
TNL MediaGene, formerly The News Lens, is a case study in strategic media company acquisitions. Over the past four and a half years, they executed nine acquisitions — averaging one every six months. Originally focused on independent digital news in Taiwan, they expanded across Asia and recognized the need to pivot as growth plateaued.
“Our overarching strategy has resulted in 50 to 60 million monthly unique readers across multiple languages. Regarding monetisation, one-third stems from media advertising, another third from data analytics, AI, SaaS, and tech services, and the remaining third from e-commerce, agency communications, paid events, and memberships.”
The transcript
This audio recording from Splice Beta 2023 was transcribed by OpenAI’s Whisper and turned into paragraphs by OpenAI’s ChatGPT 3.5. These tools can make mistakes, especially when adjusting for and paraphrasing spoken words. Check important information against the actual podcast.
Hello, everyone. I'd like to kick things off by delving into the topic of how media companies can strategically acquire other media entities. Our company serves as an exemplary use case for this discussion. Over the past four and a half years, we've undertaken nine acquisitions, averaging one every six months. Initially, the narrative might seem like a promotional overview, but as we progress, you'll understand the significance.
Let's start with a brief overview of our company, TNL MediaGene. Originating a decade ago as the News Lens in Taiwan, our vision was to evolve into a prominent independent digital news brand spanning Greater China and various parts of Asia. Over time, we expanded our reach, launching editions in Hong Kong, Southeast Asia, an international English edition, and, more recently, a Japanese edition a year ago.
Around four and a half years ago, we recognised the need to pivot as we approached a plateau in the Taiwanese market. This led us to transform into a media group, strategically acquiring smaller media verticals. As our readership reached a substantial scale, we diversified further by acquiring MarTech, AdTech, and data analytics services to monetise the amassed data. Currently, we boast 29 media brands, with the majority being acquisitions, six offices across Taipei, Hong Kong, Tokyo, and Kyoto, and a team of approximately 560, 80% of whom joined us through acquisitions.
Our overarching strategy has resulted in 50 to 60 million monthly unique readers across multiple languages. Regarding monetisation, one-third stems from media advertising, another third from data analytics, AI, SaaS, and tech services, and the remaining third from e-commerce, agency communications, paid events, and memberships.
Returning to our origin in Taiwan, our journey began with the News Lens, emphasising unbiased and newsworthy content, free from political bias or corporate influence. The first four years saw organic growth, but in 2018, we identified the need to pivot, initiating a series of mergers and acquisitions.
Our acquisitions varied, starting with smaller media brands and expanding to include a big data market research firm, a mobile ad tech company, an AICDP company, and e-commerce ventures. Notably, we recently merged with MediaGene, a significant player in the Japanese digital media landscape. MediaGene, operating for 25 years, mirrors our trajectory but without the tech and data focus.
In terms of international investors, we have garnered support from notable entities such as North Base Media, 500 Startups, Steve Chen, Kevin Lin, and Draper Associates. Our merger with MediaGene added influential Japanese investors, including the AC consortium, Hakuhodo's investment arm, Isenton, Shiseido, and Mizuho Bank.
To sum it up, the merger has created a synergy that leverages our strengths in different markets. We now collectively reach 50 to 60 million monthly unique readers, illustrating sustained growth through strategic acquisitions. The journey, illustrated in the accompanying timeline, showcases our evolution from a single brand to a diversified and dynamic media group.
This is how everything now fits together. On the left side are the 29 different media brands. In the middle are Martek, Atik, Big Data Market Research, AICDP, and on the right are agency, communications, e-commerce, paid events, and paid membership. In terms of revenue breakdown right now, roughly, it's one-third, one-third, one-third. Four years ago, for example, it was 99 percent on the left side. Three years ago, maybe 80 percent.
What we've been trying to do right before or right around COVID is as quickly as possible, diversify, diversify, diversify. So, we wanted to diversify from one language, from one market, from one media vertical, and gradually across different services, different tech, different languages, different countries. So, if there's one theme over the past three or four years, it's quickly diversify. That way, whenever there's a COVID, there's a lockdown, borders are closed, something will go down, but something will go up. In our experience, that's how you kind of hedge against all the risks of media.
Just very quickly, the original TNL, that was the original first brand, serious news, no political junk, no corporate agenda, and then we acquired one of the largest tech medias in Taiwan, one of the largest gadget medias in Taiwan, etc., sports media, lifestyle, movie, Korean culture. This is our youngest finance media. At the end of last year, we acquired iCook. It's the largest female interest/food recipe media but also has a huge e-commerce and paid membership service. So, for example, this is the kind of deal that we would do. We originally had very little paid membership. We had no e-commerce, and now that we acquired their team, we're asking their team to create e-commerce across the other brands that are suitable for e-commerce.
On the Japan side, their biggest brands, Gizmodo Japan, they run Lifehacker, Rumi, their own brands. Their flagship brand is Business Insider Japan. So, right now, actually through them, we're applying for Business Insider Global Chinese rights. So, hopefully, we'll get that. I guess we'll know in a few weeks. Mashing up, Digiday, etc., etc. These are the things that we have on the Taiwan side that they don't have on the Japan side. So, we have Big Data Market Research. We have the largest mobile ad tech company in Taiwan, and DataX is our own AICDP firm. On the Japan side, they have an agency communications firm, and we also have an agency communications firm. So, very, very similar.
Just a quick overview of all the different content. So, of course, we're all digital native. So, infographic, more digital storytelling, more interactive content, podcasts, videos, explanatory videos, short-form videos, and different online discussion boards, major paid events, both on the Japan side and on the Taiwan side. And this is a quick summary of all the different tech and data products. So, all of this originally was on the Taiwan side. We spent the last three years being stuck in COVID, basically trying to R\&D all of these different, we think, future monetisation products that will allow us to organise, monetise all of the data points that we're now collecting.
So, from Big Data Market Research to mobile ad tech to AICDP, the different SaaS platforms. These are the things that we think we have on the Taiwan side that, coincidentally, the Japanese side was missing. So, over the past four months, we've been sending our tech and data teams every few weeks to give them this as fast as possible, to allow them to do faster digital transformation, increase their margins, increase their profits. So, this is what we think are the tech and data synergies.
This is how everything basically fits together now. We think the future of digital media, more or less, has to be 50% tech and data company. And that's what we've been growing over the past three or four years. So, on the left-hand side, still, 29 different media brands across different topics, different languages. But that's also a data source for 50 to 60 million, zero-party data, first-party data, third-party data. Everything is GDPR and privacy issue compliant.
In the middle is basically all the in-house tech data AI capabilities that we've been trying to build over the past three years. So, we don't want to give our fate to Facebook or Google. We want to keep everything in-house and be able to actually control our data fate. And on the right side are all of the different diversified data products that we've been trying to build over the past three years. So, AI algorithm engines, big data tracking, market research, consultancy, etc., etc.
Again, the theme was four or five years ago, 99% of all of our revenue was here. We want to quickly diversify as much as possible. So, at some point, I would not be surprised if media advertising in two or three years is only 20% of our overall revenue. That way, again, we hedge, we diversify, we try to keep and protect independent media. Six offices, like I mentioned right now, about 560 people, it's kind of hinted over here. Now that we have most parts of Greater China, North East Asia, our next acquisition target will be Southeast Asia. We're looking at possible targets in, for example, Singapore or Malaysia. We want to, as quickly as possible, finish the Asia story, the Pan Asia story.
So, the pitch is we want to be the largest Pan Asia multi-market, multi-language independent content, tech, data, AI, e-commerce, group of companies. And hopefully, we're going to achieve that in the next one or two years. So, that's roughly where we are right now.
So, to come back, I guess, to the topic at hand. Why, first of all, why must we M\&A?
Going back to the history a little bit, Taiwan is very, very small, you know, population 23 million. Heavy internet users about 80% of that, maybe 70 to 80% actually read news, you know, regularly. So, your regular news audience in Taiwan is about 10-ish million.
By year four, the original independent series news brand hit about 7 million monthly uniques, and you kind of feel like the growth was actually about to plateau out. Something that makes us, I guess, very, very different here is that we took institutional VC money, so-called investor money, very, very early. So, we had our seed, we had our series A, series B, as mentioned before.
We always knew in a way that I could never go back to my board or investors and say, oh, you know, we're now the largest independent series news brand in Taiwan. That's it. We're not going to grow anymore. You kind of have to hit certain growth milestones, certain growth scale every year. In a way, I'm always joking. The past four and a half years, this is more or less kind of become a numbers game. We can kind of guess what the expected growth rate has to be and you have to kind of guess what the end result has to be. And if organic growth is not going to satisfy that, then our only option at the very one was M\&A.
So, it's a classic Asian small market problem. Taiwan in itself is too small. Hong Kong is too small. You know, Singapore is too small. But if we took institutional VC money very, very early on, then we still have to satisfy, you know, return on investment for our investors while still balancing independent media. We're not going to sacrifice the original independent media DNA. So, we're not going to force them to create junk content or create page views for the sake of page views. But that being said, we still have to grow a certain, you know, 30% every year.
Then how do we balance that? So, I guess there are two ways. One is to, you know, continue growing outside of your original home market. So, internationalize your readership. So, we've been doing that. So, hence the Hong Kong edition, the Southeast Asia edition, the international English or the Japanese edition. After looking at those numbers, we realized that, you know, forcing editors to grow 30% every year is not very, very, you know, reliable or not a very good long-term strategy. There's only so much you can grow every year.
Then the second idea was, okay, then maybe it's time to start growing horizontally. So, if we have serious news, then maybe it's time to start growing, you know, tech news, sports news, gadget news. So, that was the original idea. So, five years ago, we were still very, very naive about this. So, five years ago, we honestly thought, okay, then maybe we will create our own TNL sports, TNL tech, you know, TNL gadget.
So, five years ago, if you went to my office, at the very end of the office was an Excel spreadsheet where we did a market research comparable of most parts of Greater China or Asia independent media. So, for example, there might be 30 different independent media companies in Greater China, let's say, you know, across Taiwan, Hong Kong, Singapore, and let's say, you know, five are serious news, five are female interest, five are sports, five are gadgets, et cetera. What's their scale? Who are their investors? What's their revenue? And roughly how much they're valued.
So, you do a rough market research of Asia. And let's say there are 30 of them. I remember the enlightening moment that the pivot was after doing the market research, we were very surprised to find that if there were 30, for example, the first 27 were basically all losing money. So, it was that moment where we realised then why would I spend five years to create number 31 and we would still all lose money.
So, that's the, I guess, the pivot when we realised, okay, then maybe the digital media or the, you know, the so-called new media industry is just like the cable industry or the telecom industry 10, 20 years ago, where no matter what, again, you know, Asia, most parts of the countries are just too small. So, the game is you can be number one, you can be number three, but, you know, if you want to have money and you're still number seven or number nine or number 11, we're all going to die.
Then so why would I create number 31? So, then the idea pivoted to become, okay, then maybe it's time independent media started consolidating other independent media. So, that was the pivot. So, we decided at that point to go from one media brand to becoming a media group. And once we went from 7 million, 10 million, 12 million, 20 million, we started focusing on the next stage. Whereas, okay, we now have enough readership. It's now time to start thinking about revenues. And at some point, after we had enough revenues, it would start time to thinking about profits.
So, there were three different stages of the company's natural expansion. So, we've done this basically, again, nine times of the past four and a half years. The good news is we've never done this before either. So, all of this can actually be learned. You kind of go and learn as you go. So, as a startup, we were about four and a half years old when we started this process. We don't have an investment banking team. There was no real professional, you know, a full-time advisory in the office. You just kind of go as you go.
So, we will continue to do this probably for the next three to five years on average, two deals every year. On average, it's been one media deal every year and one tech or data deal every year. Because we want to get the readership scale from 50 to 70 to 90 million readers. Well, at the same time, we have to make sure hand-in-hand that the tech, data, and AI engineering capabilities to actually monetize these data points grow hand-in-hand as well.
So, the flywheel or the stupid general example is it's very hard for media companies to make money, very hard or too slow. So, we've been trying to acquire other complementary tech and data services that can allow them to connect with the media part of the business but make their services more precise, more accurate, the extra faster revenue that they create and the profits that they create, we will reinvest in independent media in a way protect independent media. So, that's the positive flywheel we've been building over the past three or four years.
So, I guess some technical questions first.
One of the most common questions I get is how do you value a target company? Well, the good news is if you ask them, when was your last funding round? And if they had a funding last year, then that's your basis point.
Technically, if they had a last funding round, it's not too hard. If they said, oh, we just closed Angel Round last year, we were worth one million at one million monthly uniques, for example. And if they now have 1.2 million monthly uniques, then you kind of have an idea, then the evaluation will grow in proportion.
Usually, in my experience, the worst kind of negotiation is when they have never taken any funding whatsoever. They have no market comparable. They have no anchor to discuss this negotiation. That's very, very difficult because you ask them how much are you worth, then they'll give you a crazy number, typically. Typically, it's the two scenarios that are impossible to negotiate. One is if they've never taken money before. And two, it's when the founders are very, very rich themselves. It never works. Because at some point, they will tell you, I don't care about money, then you know this conversation is gone.
If they don't care about money, they'll toss you a number, oh, I think we're worth 50 million. And you do the numbers. It's only worth 5 million. Why 50 million? And they'll tell you a whole spiel for an hour about why we're worth 50 million, but none of it is actually based in reality or numbers.
So if they have a recent fundraising round, it's not too hard. If they have a comparable or industry valuation multiple, it's not too hard. So again, for example, if you're a tech media and on average, all of the world's tech medias trade on a 1 or 2x multiple of revenue, then you already have a rough range. You're somewhere between 1 to 2x revenue. So using comparable is also a very good idea or industry multiple, a valuation multiple.
The three most common multiples to value a media business, number one is sales. So on average, it could be anywhere between 1 to 5x, for example. 1 to 5x of revenue basically means if you're doing 1 million of revenue, then your company could be worth anywhere between 1 to 5 million USD, depending on how good you are up and down.
Sometimes it's based on EBITDA. So EBITDA is basically how much money we're making. Media companies could be anywhere from 30 to 60x EBITDA, but 99% of the time we're all losing money anyway. So it's usually not a use of EBITDA. Or it's a proxy. So what I mean by proxy, it's something to prove our scale, something to prove our growth over the past few years. And within most of the media industry, usually that proxy is monthly uniques. So you have 5 million monthly uniques. This person is worth 10 million. Then it's a 2x multiple. If this person is 10 million monthly uniques, then you kind of have a rough ballpark. They're probably worth about 20 million USD, roughly like that.
Okay. So how much cash and how much equity do you offer them? It depends very much on whether or not you want the original founders to stay. So for most of our deals, it's always roughly been one-third cash, two-thirds equity, because we want the original founders to stay.
Because again, if we buy a tech media or sports media or gadget media, we originally did not have a sports gadget or tech editorial team. So the point was to buy other pieces, missing pieces of the puzzle to add on to our original piece of the puzzle. So we want them to stay. So if you don't want them to stay, for example, then you can all be cash and they can leave. But for us, it's usually a combination of the both.
So just to use our first example, inside at that time was the second largest tech media, kind of like the tech crunch of Taiwan. This actually follows this formula. I met the founding team. I asked them, what was their last round? Their last round was literally one million USD, and they were doing one million monthly uniques. So immediately, okay, that's about one x monthly uniques. Then you ask them a year later, how many monthly uniques do you have? They have about 1.2 million monthly uniques, and your all other of your metrics are more or less roughly the same. Then you can have an idea that the valuation is roughly 1.2 million.
Then once you have the total price confirmed, you actually ask them, how much are you guys willing to accept in terms of a cash payment versus equity payment? Of course, everyone will say we want the more cash as possible.
As the acquirer, especially if we're also a startup ourselves, we don't have that much cash. It's our goal usually to lower the cash as much as possible. So in our experience, the fair offer is you actually ask them in your company's 5, 8, 10 year history, what's the opportunity cost that all of your founders spent over the past seven or eight years?
So in inside situation, there are four founders over eight years put in about 400,000 USD in cash. The company is worth 1.2 million. So our offer to them literally was, okay, if you guys put in $400,000 in cash, that's your expense, we will offer you $400,000 in cash. So the mentality was, we will protect your downside as an entrepreneur. But whether or not you will make any money, you know, be really rich exits, we have no idea. The only way you will know is if you join us and allow us to merge you, and the remaining 0.8 million becomes equity swap, as in their shares are swapped to TNL shares, and we merge to become one entity.
So typically this works. Psychologically, again, eight or nine times, all of our eight or nine founders over the past few years are all still in the company.
None of the founders that we bought have left. Because psychologically, you know, we protected their downside. So as an entrepreneur, at least they haven't failed. But whether or not everyone will make money together, we will have to see all the way until we exit or IPO together.
Okay, so that's the 0.8. Psychologically, it's roughly around one-third cash, two-thirds equity, because if you give them more than 51% cash, psychologically they feel, you know, the company is already more or less sold, I can leave or quit or just be lazy whenever I want. So one-third seems to be a good point or a reference point, at least for us.
So I'm sure the key question is, then as a startup, how do you get the money for the MNAs, right? And the answer is, as a startup ourselves, keep in mind when we started doing this, we were only four and a half years old, we did not have any money. We did not have $400,000. We did not have $1,000,000 or $2,000,000. So we're to get the money for MNA.
So the tricky thing about this is, of course, it's through fundraising. We've done five rounds of fundraising over the past 10 years. So on average, one round every two years. We plateaued out at around Series B. So around Series B, that was when the original TNL was starting to plateau out. If Taiwan was too small, Hong Kong was too small. So starting Series C, we started fundraising for the idea of buying other companies.
Now, it's very, very tricky to balance this because previous investors oftentimes are a little bit hesitant to allow you to buy, to fundraise first because everyone gets diluted. So our way around this was that we actually buy the companies first. We buy the companies first and then we fundraise at a much higher valuation. The existing investors are happy because the pie is bigger and you get the money to pay off for the previous acquisition.
Many people's expressions here are very confused about this. So I'll give you an example. Going back to inside. So the cost for this, this is just like math class, is $1.2 million. I have to cough up $0.4 million in cash. As a media startup, I do not have $0.4 million in cash. At that time, the TNL, let's say, was worth valued at $30 million, let's say. And their valuation cost is $1.2 million. So logically, our cost is $30 million plus $1.2 million. But when I go fundraise, I do not fundraise at $31.2 million. The combined story is bigger. It's a group now. You try to persuade your new investors that the new group is now worth $50 million, for example.
There's a premium for M\&A. There's a premium for being a group. So what happens is this is actually real numbers. We persuaded them to sign the deal January 1st, 2018. They moved into our offices January 2nd, 2018. And on January 3rd, we issued a huge press release that said, for the first time in Taiwan history, independent media has started consolidating smaller independent media. And then based on that press release, we actually started fundraising. And we actually started fundraising not on $31.2 million as a cost price. We fundraise at $50 million. So the pie is much bigger. Your existing investors are very happy because your valuation is going up.
The catch of this is we still have to pay them $400,000 USD. So it's actually written in the contract that we had four months to pay them $400,000 USD. So we started fundraising in January. The deadline was basically April 1st. So you start fundraising. So you try to raise at least enough money to cover their $400,000 within 120 days. You get the money, you pay them off immediately. So it's almost like a leveraged buyout in that sense.
I remember very, very, very well. When we finally raised the money to pay them, the deadline, let's say, was April 1st. We were 10 days away from the deadline. So we got, let's say, $1 million. We quickly paid off $400,000 to them, $100,000 to the lawyer fees or whatnot. We were 10 days away from bankruptcy. And we've done this nine times. And each time gets bigger and bigger and bigger because the deal gets larger and larger and larger. The smallest deal was $1.2 million. The largest deal so far, just within Taiwan, was $18 million. So the cash we had to cough up was about $6 million. So you have four months to raise $6 million. And then you have to persuade them to accept this, merge first, and then you have four months. Whatever comes in through your left hand goes out through your right hand within 120 days. So that's how we did basically eight or nine of these deals. The Japanese deal was the only exception because at that point they were so big and we were big enough that we persuaded that the Japanese deal was a pure merger. It was a pure equity swap.
So far, no. But it does get scarier and scarier, of course, because the size is getting bigger and bigger. And fundraising is difficult, very difficult, especially during COVID, whenever there's a macroeconomic factor or whatnot. So we've been very, very close a few times, 10 days away from the deadline, five days away from the deadline, two days away from the deadline. But I've had five years to think about this, and I still can't find a better way. I mean, disregard a better way. I can't still find another option.
Again, going back to our dilemma. Both. So the first time we had no idea what we were doing. By the third, fourth, or fifth deal, there's basically an operating process. We know what multiple we're looking for. We know what multiple we want to fundraise. We know what we're missing in terms of the next story, and we kind of arbitrage with that. And of course, the numbers are an average of what's the market comp and what we're looking for. So by deals five or six, there's a formula to all this already.
Oh, we now have sports. We're looking for female interest. We now have Chinese language. We're looking for Japanese. We now have Japanese. We're looking for English language or looking for AI or engineers to boost our team. So there's a rough, almost like a supply chain blueprint of how this needs to grow. So for example, we already roughly know what our next, probably four acquisition targets are, and we're trying to time them according to good market timing for a better price or a better cost. So it's an art at first, but at some stage it does become a science. Yes. Have you ever targeted legacy media in the region? What are the upsides or downsides? Yeah. So the funny thing is, the first time this happens, everyone is kind of watching. I remember very
well by the third deal, there became this pattern where every time you announce a press release that, oh, you bought a tech media or sports media, you'd be very surprised. The next day, 10 different media companies will email you saying, do you want to buy us? And you had no idea out of these 10, for example, oh, these five were for sale. Oh, these five were not doing well. Oh, these five are actually looking for a buyer. So out of those 10, for example, yeah, oftentimes, sometimes they're legacy media players. And our short answer is we'll keep an open mind and look at everything. But like I said, strategically, we have a rough idea of who we want to acquire next.
And again, there were, I think, during our third to fifth deals, a few legacy media players in either magazines or newspapers. We traditionally always kind of shied away from that. Because again, we're, you know, eight, nine, at that time, six years old. We have no experience in legacy. We have no experience in print. It's next to impossible for us to reverse and merge or take over a legacy media operation. I think it would be too much trouble for us. And it's not something we're naturally good at doing. So there, of course, there are offers, of course, we'll look at it. But so far, we've never pulled a trigger on legacy media before.
Yeah. So, you know, this is like, you're leveraging more and more, I always call the investors that we take over my in-laws. So within the company, that's my joke. Because when we, when you equity swap with target companies, the funny end result is their original investors become your investors. So in a way, it's really kind of like a marriage. You know, you marry someone and all of a sudden, you gain a lot of in-laws. So because of the Japanese merger, for example, we now have 50 Japanese in-laws. And, you know, half my day job is basically trying to manage all of these different in-laws. So to answer your question, yeah. So now you've kind of inherited so many of these different investors. At some point, everyone needs an exit, right? So let me finish the slide first and I'll answer your question. But again, if this is something people are thinking about, in our case, I think this is the rough principle that we should think about.
So are you in a local market of which the ceiling is coming very, very soon? You know, the market is too small. In our experience, probably if your home population has an online readership of less than 10 million, probably too small. Number two, have you taken outside investor money and you must achieve certain growth or scale in a certain period? So I don't know if most of you have heard, for professional VCs, PEs, or institutional investors, there's a so-called seven plus two. As in when investors give you money within seven to nine years, so let's say it's eight years on average, they have to see that as a return. So to your point, yeah, we knew this going on because I think compared to most media startups, we took money relatively early.
So when we were taking money relatively early in the back of our minds, we already knew, oh, in about eight to nine years' time, everyone needs an exit. Then that means we get big enough that we're sold or we get big enough that we IPO. So we're actually aiming for an IPO next year. So you've promised enough people the dream and sooner or later, you still have to deliver on the dream. And that's also why they join you. If you think about it, two-thirds of it is equity swap. So they expect that equity to be rewarded one day. It's your job to actually find that equity option at the very end. So number three, I think is probably the most direct or serious question we have to ask. As in, is your home market too small for you to achieve operational breakeven? So for us, roughly around the time we were emerging our second or third company, companies, personally, I made this decision that it would be too slow, definitely, for the original core serious news business to breakeven. Even if it did, it would be your classic mom-and-pop shop where, oh, you know, every year, your monthly revenues would be this much, your expenses would be this much. So you have to cut expenses just to breakeven. And you're never going to grow beyond that. So Taiwan is too small. Again, Hong Kong is too small. Singapore is too small.
So if your home market is so small that it has a very little chance of allowing your original serious news or journalism product to actually breakeven, then we have to find another way. And for us, our finding another way was through acquisitions. So I often very cynically say sometimes, you know, after looking back at this over the past five years, I don't think we had a choice. I honestly can't think of a better option, even though I had five years to think about this now. I honestly think this is the only way for us to kind of break through in terms of this plateau. So, yeah, four and five are the same. Is the original media business basically unable to provide the sales and profits necessary for long-term growth? So again, the biggest hint for me was going back to that 30, you know, media companies in Asia, 30 of them at that time, 27 of them were losing money. So if 27 of them are losing money, then from a pure financial standpoint, that means this market is so small that it can only naturally sustain three companies. Then the name of the game all of a sudden becomes, how do I, if I'm number five, how does number five buy number seven buy number nine? And at the very end, we're within the top three. And then we can self-sustain. But if we run out of money, if everyone runs out of money and we're still only number four, number seven, number 10, we're all going to die.
So the game becomes how do we achieve scale together and don't create number 31. Okay, so if most of the answers to the above questions are yes, then M\&A is probably a serious option for us to break through our limited market size of which we had no choice from the beginning. And again, the very cynical part of me actually thinks it might be the one of the very few options or maybe the only option in the stay in age of self-media, Instagram, YouTubers, KOL, there are too many people taking two remaining tiny chunks of media budgets of which 80% are all taken by Facebook and Google. So we have to fight for the final 10% and it's not enough to sustain 30, 40, 50 different media operations. Then logically, I guess the only way is then how do we grow to a certain scale of which we can actually control our fate. And once you control a certain scale of your team, you can build a data team, an AI team, a more tech team, and then you have a much more strong narrative for other people to join you. So I guess the final point is on a bright side, maybe this is not very special, maybe this is not unique. Maybe the digital media industry is just like the cable industry, is just like the telecom industry, where every industry during a middle phase, a chaotic phase, has to go through this. And we're going through it right now. So in many ways, maybe we're not special at all. We're simply going through a normal market consolidation phase, except we just try to, we try this first. And so far we're still learning as we go. Then if that's the case, then logically you will see more and more media consolidation in Hong Kong, in Singapore, in Japan, or across Asia. And that's a natural evolution of this industry. Okay, that's my last slide. So yeah, I still have a few minutes. Any questions? Please.
_Hiya. Other than the valuation that you laid out in terms of when you're considering acquiring a media company, are there any other considerations that you look at, specifically audience based considerations?_
Yeah. So first and foremost, the original DNA was independent media, no junk, no fluff. So that's still the same idea when we acquire other media companies. It can't be too far away from that. It can be tech news, gadget news, but it can't be, you know, content farms or junk content. So the DNA has to mould. So to be honest, when we're ever acquiring other media companies, I actually take it to our editorial team and say, these are the three targets I'm looking for. Veto out the ones that you're not interested in. And if you, for example, this one, this one's the highest quality, but it's the second largest, not the first largest, I will respect our editorial team. So oftentimes I want to buy the largest. But if they think there's something wrong with their content or it's not respectful, there's, you know, plagiarism issues, we can veto off the first one and go after the second one. So that's in terms of media. So the media still has to be someone you're very proud to merge with. It has to fit your original DNA. At a certain point, after you've achieved enough scale in media, your second stage of acquisitions are revenue. So I'm looking for other business models that are complementary to digital media that by merging with them will allow them to make money faster. And when they make money faster, again, we will take the profits and reinvest and protect independent media. So I would say there are three different stages of the criteria. For the first stage, we did not care about revenue. We did not care about profits. For the first stage, it was all about media scale. We were buying monthly uniques. On the second stage, once we had a certain amount of monthly uniques, we were buying revenue. And on the third stage, once we had enough revenue, we were actually buying profits. So it just depends on what was missing during that time. So for example, very, very, very simple example right now. Again, I mentioned we're aiming for IPO next year. So you have to align up your scale, your revenue, and your EBITDA. So the criteria now when we're looking for companies is that company itself has to be profitable. We're not going to buy a company that's losing money now, because we spent the last three or four years cleaning up our financials. We don't want to actually go backwards. But this was not the case three years ago. We could have bought anyone. We don't want to care if they're losing money. We're buying scale at that time. So different moment, different stages, different targets.
For sales or for monthly uniques, for example, sales, sales, sales, right?
Okay. Well, the short answer is that's just the market's average comps. So it could be all investment bankers will give you 30 different examples of all of the public media companies. And they're all trading at, you know, five X revenue, for example, when, for example, New York Times buys a company in three years ago that they might have paid more and it was eight X revenue or some transaction might have happened in Asia during a downtime last year. And that transaction total price over revenue was three X revenue. So the point is when you're doing this research, you will have a range and everyone's looking at the same at the same companies. So there will be a natural range. It's anywhere between one to five or two to four X within that market within that industry, for example. So that you don't control. What you do control is whether now it's a good market or a bad market. So that range in a bad market could be one X in a good market. It could be five X listed valuations in media are say a P of maybe 10 times, right?
Yeah. So that's EBITDA, right?
Yeah.
Well, no, price to equity. I mean price to price to profits or profits to equity.
Yeah, typically media companies don't want to use EBITDA because no one is making that much money. So typically we always try to argue revenue multiple revenue multiple is a better story. It implies future growth. EBITDA kind of implies you're kind of stuck here, you know, and you know, everyone's going to do one or 2% EBITDA. So typically the argument is always for revenue multiple. So we try to go after that. Does that answer your question? So, but as you get more and more dynamic, it becomes an average of different things. So for example, when investment bankers are valuing us, we're not solely digital media comps anymore. Since our revenue now is again one-third digital media, one-third tech data, and one-third let's say e-commerce, then literally they take the average multiple of media times one-third, the average multiple for e-commerce times one-third, and the average comps multiple for AI or tech times one-third, and you average out a rough multiple during that time. And they'll actually tell you, this is a bad time. So it's actually at a 30% discount. In a good time, it's higher. So yeah, there's always a range.
_I'm very curious to know what kind of internal co-op dev team size do you have and what is the ratio of outbound dealmaking towards inbound dealmaking? Outbound dealmaking? As in do you guys actively go out and seek deals or do you receive inbound from bankers, etc.?_
Yeah. We don't really have a co-op dev team. I do 90% of all the deals. I have two, I guess, research assistants that do the market research. And we have like a list of, by this point we've probably looked at over a hundred Asian companies across digital media, tech, data, e-commerce, everything.
So in the back of my office now, there's like a 200 page list of all the different media companies or all the different tech and data companies, what they're worth, what they're sales, who their investors are, everything. And we refresh that, you know, every six months. So my staff helps me do the research. And out of the, let's say, a hundred, oh, 10 fit the direction that you're going for. You would love that data? Okay, come find me afterwards.
And so let's say out of those 10 are the ones that we're interested in, we just simply usually send them an email or LinkedIn or sometimes we meet at these events. At some point, you know, the media circle in Asia is not that big. Everyone knows everyone. So even if you come across a company that we've never encountered before, let's say in Hong Kong or Singapore, usually you call someone and someone will make the intro.
So for example, the Japanese company that we merged with, we had never met them before. I was actually going after another target company and during a Zoom call with that Japanese company, he politely said no, but then said, oh, but the kind of target that you're looking for sounds very similar to this company called Media Gene. I would be happy to make an intro. And so you never know. You really never know. But if you have a rough direction that you're going for, you kind of know how to kind of time this and just see kind of what hits basically.
Sorry. Let's finance talk. But in terms of how do you ensure that when you merge or do a equity swap that the culture of these different companies are still intact? Because I know that can quickly drain down the team, which is also part of the evaluation.
So let's talk about the companies within Taiwan. They're a little bit easier. We've done eight acquisitions in Taiwan. The first six were small enough that they all moved to our offices. So that's typically solves 70% of the problems. So the overall policy of integration is anything that allows us to make more money together, we will integrate. So for example, the sales team.
Typically in our experience, the people that are happiest are the sales team and the IT team of that original, let's say it's a media company. Because if their sales team was originally part of a very small media vertical, they could only sell one million monthly uniques in a tech media or in a gadget media, for example. But once the tech, the sales team is completely integrated, the sales team is very, very happy because all of a sudden you go from one million monthly uniques to 20 million monthly uniques, you know, your bonuses go up, your playground, your arsenal is much bigger. Same thing for the tech team.
Typically the tech team is also very, very happy because you're maintaining one small website before. And now the tech team is integrated, you have eight different, you know, nine different media brands to actually maintain, create data products, create UI, UX products, it's a lot more fun. So the policy is anything that allows us to make more money together or save more money together, we will integrate. Anything that makes no difference or for example, we have no expertise, we will keep independent.
So all the other media companies that we acquired, their editor-in-chief and their editorial team is still completely the same. We've never touched them. In fact, one of the most common compliments to me as a compliment is when we're meeting other companies and we give them our name cards and they'll look at our name cards and they'll say, oh, for example, Inside. And the other person will say, oh, I've been reading Inside for eight years. I had no idea you guys bought them. From my standpoint, that's actually a compliment because we never touched, we never interfered with the editorial independence.
So the idea is, you know, at some point there might be 30, 40, 50 different verticals on top. It's like different trees, you know. Your readers are still the same. They don't feel that there's any difference. Maybe your content quality is even better now. But in the bottom, all of the tech data monetisation is integrated. So everyone makes more money faster and saves more money faster. And typically that solves 70, 80% of the problems.
The two companies that we acquired that were too big to merge into our office, we definitely have more integration issues because they kind of feel like, you know, they're Hawaii. They're like really far away. And we have to run over every week. Even in their tone, they still say you versus us, even though we completely own them, but they have a separate office. So as quickly as possible, we want to move offices together to kind of solve this.
But again, our learning is if you create the value in terms of monetisation, if you create the value in terms of saving money, and for the founders, if again, don't forget for the founders, two-thirds of their entire value as an entrepreneur is tied to our stock together, to IPO together, they will help you solve problems because they don't want to see the integration process become too chaotic either.
Okay, I guess my time is up. But anyway, I'm still here if you're having questions. Thank you.