Due Diligence Begins in NYC; RWW Gets a Media Award
Just as ReadWriteWeb becomes one of the 10 most popular blogs in the world, I travel to New York to meet with Ziff Davis Enterprise about its proposed acquisition.
As soon as I got back home, RWW made it to the top 10 on Technorati. We were now one of the world’s ten most popular blogs, based on how many websites had linked to us in the last six months. Alex had spotted it first, and Marshall confirmed it with a screenshot.
“I really am proud of us all and what RWW has become,” I told the team. “Everybody I talked to at Expo had nothing but praise for RWW, especially compared to our competition.”
To my mind, this also validated our 2007 redesign. That, together with the increase in our team members, was how we’d risen from number 18 to number 10 in Technorati in less than four months. We still had an issue with consistency of posting, something I nudged the writers about regularly. Compared to TechCrunch and Mashable, our two primary competitors, we were often slow to get posts up in the morning US time. But none of our writers were yet full-time on RWW (the closest was Josh at thirty hours per week), so there was only so much I could demand under these arrangements. I wanted to find a way to bring Marshall, in particular, on full-time—but obviously now wasn’t the right time. I hadn’t yet told any of the writers about the ZDE deal and didn’t plan to until the forty-five-day due diligence was over.
I began preparing for my trip to New York. I planned to leave just two weeks after arriving home, which in retrospect seems insane. The flights to New York from my home in Wellington involved around twenty hours in the air, plus all the waiting around in airports. I also needed to organize a lot of paperwork before I left, so I’d made appointments to see my accountant and lawyer. As if that wasn’t enough to deal with, FM Publishing was chasing me—and the rest of their authors—to sign an updated contract for our advertising relationship. Among other things, the new contract asked for a twelve-month commitment. I would need to find a way to delay signing that, since I didn’t yet know what ZDE planned for RWW in terms of advertising revenue.
Meanwhile, while I was in San Francisco I’d received an invitation to attend New Zealand’s annual media awards. I’d been told, in confidence, that I’d won Best Blog and they wanted to ensure I would accept the award in person. The ceremony was to be held in Auckland on Friday, May 9, at the Hyatt Regency hotel. I planned to combine that trip to Auckland with my New York journey. My wife Maria and I would travel up to Auckland that Friday, and I would board my flight to the States on Saturday while she headed back home.
During those two weeks back in New Zealand, I had several phone calls with Insight Partners and ZDE and several more in-person meetings with my accountant and lawyers. If I had thought the due-diligence phase would be relatively straightforward, I was soon disabused of that idea. In one meeting involving my accountant, Bill, and my legal representatives, Gillespie Young Watson, we talked about how to structure the deal so that I wouldn’t incur a big tax bill. ZDE had their own preferences on structure to avoid tax issues on their side. The lawyers recommended I get PricewaterhouseCoopers, one of the big global accounting firms, to advise on this. I should also get a US lawyer, they said, to make sure I was protected in that jurisdiction.
With all these accountants and lawyers getting involved, the complexity was quickly ratcheting up—not to mention the bills.
The New Zealand Media Awards were traditionally known as a knees-up for the local journalism industry—in particular its newspaper and television news shows. It was now in its thirty-fourth year, but the Best Blog category was only in its second year. It had been first awarded in 2007 to a political blogger, Russell Brown, whose weblog, Hard News, had been running since late 2002. Hard News was part of a community of New Zealand-centric blogs that ran on the domain PublicAddress.net, which Russell had set up.
I had met him back in 2005, when we were both on "the Imagineers," a government think tank about the internet and digital content. He was a likable man, about a decade older than me, who was passionate about the kiwi lifestyle and culture. He lived in Auckland and had done all the cool things a New Zealand journalist could’ve done—worked in student radio, written for a music magazine (Rip It Up, a free ’zine that I used to read regularly in the nineties), and gone to England for several years to write for their music mags. He seemed to know everyone in the NZ media industry, and his political leanings were liberal. He was, in short, the ultimate insider when it came to local media.
The NZ blogosphere, such as it was at that time, was dominated by political blogs. The two other finalists in 2008 were political blogs at opposite ends of the spectrum: David Farrar’s right-wing Kiwiblog and Malcolm Harbrow’s left-wing No Right Turn. This scene was completely alien to me; I didn’t read any political blogs, let alone New Zealand ones. While RWW did have a profile in the local tech industry and had been written about by both of New Zealand’s main newspapers, the Dominion Post and the NZ Herald, my focus had been global from the get-go. I often told people that only 1 percent of RWW’s audience came from New Zealand.
When Maria and I arrived at the Hyatt Regency on Friday evening, May 9, I was a bundle of nerves. I wasn’t used to being around people in the traditional media industry. I was definitely an outsider. That said, I was thrilled to be here because the award was a form of acceptance for me. It was something to be proud of, especially since my own father, Kevin, had been a journalist all his career. He'd worked for the daily newspapers of Dunedin and Timaru while I was a young child, and then in 1981, when I was nine, he and his wife Judy moved their four small children (I was the eldest) up to Wellington, where he worked for a farming magazine, Dairy Exporter, for the rest of his career. I never expected to follow in his footsteps; I hadn’t trained to be a journalist, and when I started RWW in 2003, it wasn’t intended to be a business. Yet here I was at the NZ Media Awards ceremony five years later.
As the ceremony began, I sat patiently with Maria. We were at one of the round group tables on the side and near the back—as far as I could tell, the big TV and newspaper companies had the tables nearest the front. I didn’t know anyone else at the table, and I had to explain what blogging was more than once. I felt uncomfortable in my rented black suit and bowtie (the invitation had specified “black tie”). My face was clean-shaven but also tinged with pink due to the drink or two I’d downed to try and settle my anxiety.
I soon realized that I wasn’t the only one feeling a bit tipsy—there was a lot of alcohol being consumed by the gathered media elite. The front tables, in particular, were becoming more raucous as the night went on. When my award was announced, I walked up to the stage and received a paper scroll announcing ReadWriteWeb as the winner of “Blog 2008.” My category wasn’t allowed to do a speech, so I was quickly ushered back to my seat.
After the show ended, we made our way to the hotel bar to meet up with my good friend Dave, who was out on the town with a mate. I’d lived in Auckland a couple of different times during the 1990s, and I’d been out carousing with Dave and other friends on many a Friday night. I bashfully showed them my award certificate. Dave invited me to come into the city and have some celebratory drinks in our old haunts, but I pointed to my black-tie getup and said I was overdressed for that. Besides, I said, I had to get on a plane to New York tomorrow.
It was late at night when I finally arrived at Hotel Chandler in New York City. It had been an epic journey, and I didn’t know what to expect from this trip. Did I really want to sell my business to a company based literally on the other side of the world?
In our discussions, Insight and ZDE had made soothing noises about my role post-acquisition. In a call with Kobi Levy (Insight), Mike Azzara (ZDE), and an Insight bean counter named Jake Stein, we’d talked about me transitioning from all the business things I’d been doing at RWW—sales, operations, and so on—to focusing purely on editorial. They wanted me to extend the RWW brand with three or so new “verticals” (network blogs). What’s more, they noted that ZDE was a legacy media business and so they’d like me to oversee its blogging business in general. This was all music to my ears, since it was the journalism side of RWW that I enjoyed the most.
However, in the back of my mind I was also aware that I needed to be in control of the revenue and expenses of RWW for at least two more years—since half the deal’s value depended on hitting certain targets. What those targets were and how revenue and costs were defined would (I hoped) be clarified during this trip.
I spent my first full day, a Sunday, getting over my jet lag by wandering down Fifth Ave and the surrounding areas. It was springtime, but colder than I had expected. I checked out Central Park and went into the Apple Store at that location. I’d been instructed to buy an iPhone for my wife, but it was sold out. The second generation, the iPhone 3G, hadn’t even been announced yet (that would happen in June). Still, I was surprised that there weren’t any iPhones available in the New York City Apple Store. Regardless, the store was very busy and people seemed to be buying iPods and computers. I spent some time fondling one of the MacBook Airs on display—it had only just come out in January and was said to be the “world’s thinnest notebook.”
I took some photos of Central Park and the city, but I had resolved to stay off social media during my trip. Only Bernard, Sean, and Alex from RWW were aware that I was here. I had told the rest of my writers that I was “traveling,” but I didn’t explain why. I was particularly uncomfortable with keeping Marshall in the dark. He was still only working half-time for RWW, so I wasn’t under any obligation to bring him into business discussions. But for several months now I had been promising to discuss business expansion plans with him—he had ideas about premium content that I was interested in pursuing. I knew it made sense not to tell him about ZDE because he could decide to have no part in it and jump to a competitor. But I also didn’t want to undermine the trust Marshall and I had built up since he’d joined RWW.
I planned to keep daily tabs on the site while I was in New York, but I hoped it would be business as usual for the week. I was happy with how RWW was going as a publication—we were hovering around the number 10 ranking in Technorati, and our page views and subscriber numbers were still growing. But I was worried about messing with a good thing by spending too much of my time focused on this ZDE deal. I just hoped the due diligence would be straightforward, so that the deal could be consummated in early June as planned. Also, I wanted to get back to blogging.
Lead image: NYC from above; photo taken by author in May 2008.
This post is part of my serialized book, Bubble Blog: From Outsider to Insider in Silicon Valley's Web 2.0 Revolution. View table of contents.
Next up: 032. I’m Waiting For The EBITDA: Visiting the ZDE Office
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