Ziff Davis Enterprise, Channel Insider, eWeek Sold: Now What?

Ziff Davis Enterprise

Over the past decade, the Ziff Davis Enterprise team transitioned from print publications to web, digital and mobile editions. It was a sometimes painful process, but the ZDE team always seemed to rally. The deeper story here involves important lessons in corporate debt, company valuations, branding, seismic market shifts and the Ziff Davis Enterprise team’s incredible will to fight on.

First, some important notes:

Now for the back story on how Ziff Davis Enterprise reached today’s exit sale.

Dot Com Boom Goes Bust

The story starts in December 1999, when Willis Stein — an investment firm — acquired Ziff Davis Publishing for $780 million. At first glance the deal looked promising. Ziff Davis Publishing, after all, produced massive magazines like PC Magazine, eWeek (formerly PCWeek), PC Computing and more.

But the deal was fundamentally flawed from the get-go. Willis Stein over-paid for Ziff Davis Publishing right before the dot-com implosion occurred and print advertising began to dry up. Further complicating matters Ziff Davis Publishing didn’t even control its own magazine websites. Indeed, CNet at the time oversaw the ZD Publishing online media sites. And CNet in 2000 ultimately paid $1.6 billion in stock to gain control of another Ziff Davis online component called ZDNet.

1999 to 2006

To Willis Stein’s credit, the investment firm helped Ziff Davis Publishing — at the time, rebranded as Ziff Davis Media — to shift away from print advertising, regain magazine website control from CNet, and generate new revenue streams from events and other areas. But debt payments continued to choke Ziff Davis Media while revenues spiraled downward. Indeed, revenues fell to $181 million in 2006, down from $535 million in 1999.

Still, there was a glimmer of hope. Under then-CEO Bob Callahan, Ziff Davis Media’s EBITDA actually rose to $27.1 million in 2006 from $17 million in 2005. Based on that uptick, Willis Stein decided it was time to exit the investment.

2006: Up for Sale

By late 2006 or early 2007, Willis Stein had positioned Ziff Davis Media so that it could be sold off in parts:

Brand Confusion

But the sale process raised as many questions as it answered:

Still: For advertisers, sponsors and readers it became increasingly difficult to track all the different Ziff Davis properties — which ultimately had no real financial or business relationships with one another.

If one Ziff brand suffered from negative news — such as the Ziff Davis Media bankruptcy filing in 2008 — the other, unrelated Ziff companies had to communicate that they were not involved in the bad news.

Multiple sources say Ziff Davis Enterprise considered a complete brand change in 2008 but decided to stick with the good (Ziff Davis universal name recognition) with the bad (brand confusion with the other, unrelated companies).

Repositioning Ziff Davis Enterprise

Initially, Insight Venture Partners’ 2007 buyout of Ziff Davis Enterprise had promise. By January 2008, former CMP Media CEO Steve Weitzner joined Ziff Davis Enterprise as  CEO.

Weitzner and his evolving management team trimmed costs and focused on innovation. But sources say Ziff Davis Enterprise was always plagued by that lingering debt. Like a house purchased during the inflated real estate market,  Ziff Davis Enterprise was always hounded by those debt payments. In more recent years, sources say, Insight Venture Partners essentially exited Ziff Davis Enterprise, leaving the business for bankers and debt holders to monitor.

Through it all, the ZDE team marched forward and evolved — rebuilding its e-Seminars business and launching an aggressive mobile content strategy. But oh, that lingering debt.

Time to Sell

Judgment day approached in late 2011, when bankers may have ran out of patience and started shopping Ziff Davis Enterprise to potential suitors, The VAR Guy believes. The timing was ironic: Morale seemed pretty high within Ziff Davis Enterprise’s halls in 2011. But at some point today, Ziff Davis Enterprise employees were told the company had been sold and certain staff members were let go. And LinuxDevices.com, part of Ziff Davis Enterprise, leaked news of the sale today.

An official public announcement has yet to surface as of 5:17 p.m. eastern on Feb. 3, but some Ziff Davis Enterprise employees are informing their sources about job cuts and company ownership changes.

Where does the Ziff Davis Enterprise story go from here? Stay tuned.

Disclosure

Several of The VAR Guy’s team members are former Ziff Davis Media employees who worked in the business unit that ultimately became Ziff Davis Enterprise. The VAR Guy sends best wishes to current and former Ziff Davis Enterprise employees.