Monster paid $61 million in cash for San Francisco-based Affinity Labs, a company that develops vertical-specific online communities such as policelink.com and nursinglink.com. Affinity Labs was founded by Christopher Michel, who had also founded military.com which Monster acquired in 2004. The acquisition would appear to deliver a decent return for Mayfield and Trinity Ventures who had invested less $10 million in the company in December of 2006. Military.com was acquired for $39 million after having raised $31 million in venture financing.
The industry specific online communities or portals developed by Affinity Labs contain user-generated content, videos, forums, training materials, career information, job listings, and social networking features. I have no idea how popular the sites are, for either users or advertisers, but the idea itself is a solid one and the business model of efficiently developing these portals based on a standard template seems to make a lot of sense. The real question, however, is how efficiently and cheaply Affinity Labs can build the individual portals.
After poking around a bit, it appears that only 2 portals were built with the capital raised late last year, which was, in the press release, earmarked for content acquisition. Assuming that funds were also allocated to further developing the technology platform itself and other corporate overhead items, I’d guess that each portal cost somewhere between $1-3 million to build, populate, launch, and market. I’d bump up the upper end of the range to $4 million if affinity Labs is not as efficient as they could or should be, the content is more expensive that I imagine it to be (I would think by leveraging a sponsored content model it could be very inexpensive or even free if there is sufficient marketing and exposure value), or the company had to fund substantial losses during each portal’s ramp-up period.
Rather than raising another round of capital to keep kicking out new portals, especially if they were more expensive than anticipated or
grew more slowly than modeled, the company simply decided to sell the business to Monster. It certainly makes sense for the company, its owners, and its management team (Michel is joining Monster’s management team). I would guess that it could also make sense for Monster given their ability to fund the development of new portals, promote them through their online properties and installed user-base, and reduce the unit costs of each new vertical community. It certainly hangs together on paper. Time will tell how effectively they leverage the opportunity.
Tags: Monster, Affinity Labs, Christopher Michel, Trinity Ventures, Mayfield, Online Communities, Online Community, Vertical Specific Sites, Portals, Industry Portals, Policelink.com, Nursinglink.com, Monster.com, Social Networking