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Why Ybrant Bought Lycos; Plans

The $36 million acquisition of Lycos is an all cash deal with the entire stock of Lycos having been purchased by Ybrant Digital. Speaking with MediaNama, Suresh Reddy, CEO of Ybrant Digital said that they’re paying $20 million up front, and will pay the rest in the future based on certain deliverables. The deal is being financed by Ybrant’s internal accruals, and the company is also looking to raise PE funding.

Lycos currently has around 60 employees, and all employees will say on board, including CEO Jungwook Lim. Excerpts from our brief conversation with Reddy:

MediaNama: Why have you acquired Lycos? It’s faced significant devaluation over the years…

Reddy: What we have to see is what the company is worth today and the potential it has. The team is looking strong. What we will leverage is the brand – everyone recognizes it. The decline in value is not relevant – I’m looking at the business and the size, and if I’m paying the right price for it. Daum did sell some properties, cleaned it up, made it profitable. There is tremendous synergy and love for the brand. Our assessment has been that this is a fantastic business to buy, even leaving.

In terms of synergy between Ybrant and Lycos, we have mostly a banners (display advertising) business, and some search (advertising). This deal will give us the impetus for growth to add search business into the mix. With this piece coming in, we have more to offer to our advertisers. Lycos is a destination, while we’re a monetization business. We are a digital media marketing business, selling third party media. We will continue to sell third party business, but in order to bring additional strength and scale, one needs to own some part of the media. It puts you in a position to take a larger piece of the advertising spend from agencies, and we’re able to compete better.

MediaNama:As per Daum’s filing, its international subsidiary (Lycos) reported revenues of approximately 26 million for the last fiscal. How did you manage to acquire the company at a valuation of 36 million?

Reddy: We’ve always looked at the potential for this years bottom line, and I can’t talk about future projections right now. It is a profitable business, quarter on quarter, and it’s growing.

MediaNama:How much debt have you taken on from Lycos?

Reddy: There’s no debt on Lycos’ books, we’ve got a clean balance sheet. We don’t have any debt on our books as well.

MediaNama: What are your plans for Lycos?

Reddy: First we’ll help them monetize their International traffic. We have a large international ad network. We’ll also promote Lycos across our network. We’ll use lycos as a hub to add more search partners, as a search syndication business.

MediaNama: What is the ratio of search to display on Lycos, in terms of revenues?

Reddy: It is around 80 odd percent, but I don’t have exact numbers; big money comes from search. We bring in competency for sales, while they bring competency on the content side. We specialize in selling international traffic for advertisers. Lycos has 60 million users, of which 15 million are from the US, and there’s a big (International) chunk that is under-monetized. The US accounts for most of their revenues. We have sales offices in about 20 countries, with agency relationships, running ads from 140 countries across the world. For us, it is important to create the footprint. We can start selling more, and add a new piece for agencies to buy. We don’t have competency on the content creation front, and we’ll depend on Lycos’ core team and their ability to keep consumers on Lycos.

Earlier: For deal information, Lycos financials, and the history of Lycos – Lycos Sold To India’s Ybrant Digital For $36 Million

– Ybrant Digital Launches City Search Portal YReach; Our Review
– How Ybrant Funds Its Acquisitions; Max Interactive; Eyes China, Japan, Korea
– Ybrant Acquires Ad Network Dream Ad; Buying Spree To Continue

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