Look for the news of Warren Buffett’s acquisition of Business Wire on Google News. You’re as likely (depending on those unpredictable algorithms) to see the release on the sale from Business Wire come up near the top as you are to see one of the several hundred journalistically sourced items.
Therein lies one way to understand the business being acquired. The sale tells us a number of things about the way business communication has already substantially changed in the last decade. In 1982, when Johnson & Johnson found out that its Tylenol had been tampered with, it orchestrated an impressive campaign to assure its customers of product safety. But that took days, weeks, and months to execute.
Now businesses of all sizes get the word out, the good word and the protective word, immediately, directly, and unfiltered, to vast audiences, without meddlesome journalists acting as intermediaries.
Outsell affiliate analyst Ken Doctor believes that, as with many Internet-propelled businesses, the sale also tells us how new intermediaries like Business Wire, built on aggregation and distribution savvy, are themselves threatened by waves of new technology that compel middlemen to innovate relentlessly.
On Tuesday, Buffett’s Berkshire Hathaway purchased Business Wire, one of the top two players in the Internet-driven press release industry. Business Wire (2004 revenues: $123.5 million) competes head-on with UK-based United Business Media subsidiary PR Newswire (2004 revenues: $173.6 million), and also with Market Wire and Prime Zone. Terms for the purchase of the privately owned company were not announced.
Like other Internet industries, the press release industry sustained a slowdown after the bubble burst (Business Wire hit a high-water mark of $150 million in revenues) and the frenzy of IPO-making releases subsided. Recently, Sarbanes-Oxley and disclosure laws in the U.S. and Europe have spurred a wider round of disclosures, enabled by such services.
What these companies do is clear today: They charge companies (and non-profits) $225 and up for issuing releases. They'll deliver those releases right away, of course. It's the increasing list of value-added services that is driving the business and attempting to ward off Web 2.0 direct-distribution disintermediation, like RSS. Value-added means many things, including:
- targeting releases within industries, to relevant analysts and journalists;
- translating into any relevant language globally;
- including video and multimedia;
- tracking response and measuring impact.
Outsell believes that future prospects of players like Business Wire and PR Newswire are heavily dependent on getting well beyond the distribution service itself and continually upgrading their effectiveness at delivering measurable results. Silicon Valley bloggers have already raised questions about the acquisition, pointing out that company-direct RSS delivery is possible today and that the new Google Base could bypass companies like Business Wire. The point is a good one, but may be overstated for now.
Companies today still don't have enough expertise in direct distribution or in developing the sophisticated targeting/monitoring/bettering systems to make the communication as effective as possible. While some will develop such expertise in-house quicker than others, the market should continue to be substantial - as long as the press release companies innovate and meet such competitors as Factiva (making a niche for itself in reputation management) and clipping services such as Burrelle's and Bacon's, all of whose services begin to overlap with the press release companies'.
The Business Wire acquisition, opening up new capital reserves for expansion (technology, global markets) is an indication that both Warren Buffett and Business Wire CEO Cathy Baron Tamraz see the current business for what it is and where it needs to go.