Michael Arrington

Digital media startups and blogs remain attractive acquisition targets for big media companies – but the current debacle surrounding Techcrunch’s despute with owner Aol shows just how difficult making such deals work. Briefing Media co-founder Rory Brown asks whether entrepreneurs will ever be happy playing the corporate game…

If you follow the media business you cannot have failed to notice the controversy surrounding TechCrunch founder Mike Arrington, his paymasters Aol and the proposed venture fund CrunchFund. For those who have been living under a digital-free rock – you can easily catch up here on TheMediaBriefing.

But here’s a very quick timeline:

2005: Michael Arrington launches TechCrunch in 2005 and quickly builds the site to be a premier technology and start-up information site, covering the comings and goings of Silicon Valley, and later Europe through a sister site.
TechCrunch disrupts many existing tech publications, scoops them regularly and gains a massive online profile.

March 2009: Tim Armstrong – an ex-Googler – becomes CEO of AOL and sets about trying to reinvent the company around high profile content sites.

September 2010: AOL buys TechCrunch for around $25m with earn-outs on top.

February 2011: AOL buys Huffington Post and its high-profile founder

September 2011: Michael Arrington announces in September 2011 that he is to head up CrunchFund – an affiliated AOL investment vehicle. All hell breaks loose about conflicts of interest; Arrington possibly being forced out of the business; public hand-wringing from staff and contributors, notably Paul Carr & MG Sielgler on the site itself.

But what did they expect?

TechCrunch is such a large beast in the new media world that there has been a huge amount of commentary expressed online about what is going on. You can’t help feel that the staffers secretly love it.

Many are expressing surprise at this turn of events so I was interested to see Alan Meckler, the CEO of WebMediaBrands (formerly JupiterMedia) tweet: “Why is every excited about news of @arrington leaving? This was in the cards the minute the deal closed.”

Exactly my sentiment when I heard that TechCrunch had been sold to Aol.

I’ve had first-hand experience of this dating back to when Incisive Media bought Danny Sullivan’s Search Engine Watch (SEW) from JupiterMedia in 2005. Whilst the circumstances are not exactly the same, there are clearly some parallels. I won’t go into the detail of what happened at that time, beyond saying that we clearly mismanaged some of the integration issues and also came up against a key personality in the new media space who believed his personal brand was larger than the underlying property we had bought.

The split became messy with Danny eventually standing up on stage at one of our events in Chicago and (in front of our delegates) announcing that he was setting up a directly competitive business. There was nothing we could do short of rugby-tackling him from the stage…

The lesson I took from this experience was: what motivates a blogging entrepreneur is not money — especially once they have either cashed out or become financially secure through contracted deals. It became all about control. They were never going to be suited to working in a large corporate.

You can see similarities in Rafat Ali’s sale of paidContent to the Guardian. I don’t know the ins and outs of the deal but it seems clear that it was done on the basis of the Guardian being able to build a network of high profile specialist sites in its key sectors and break into North America. I imagine they promised significant investment for expansion and set an earn-out based on that expansion that would reward all involved handsomely.

Unfortunately The Guardian then ran into its own commercial challenges, some staff left and were not replaced (although the site has been hiring reporters this year) and those earn-outs became increasingly fanciful. Rafat left in May 2010. What incentive is there for the entrepreneur who built the site in the first place to stay? (Slight disclosure: our editor Patrick Smith was a paidContent staff reporter in 2009).

I am sure we will continue to see exciting new media sites being acquired by traditional media. It is always tempting to believe that given deeper parental pockets you can transform upstarts into something of real scale. But when even CEOs with real digital experience (Ariana Huffington and Tim Armstrong) seem to be struggling with the original founders, what hope is there for the rest?

Ironically, the only person I have seen recently who seems to have made the post-acquistion experience work is Alan Meckler, with MediaBistro, AllFacebook and even his initial purchase of Search Engine Watch.

What’s he getting right and do readers have any other examples of success stories?

Picture by Joi on flickr via a creative commons licence.