Handheld Entertainment has purchased the viral online video
portal eBaum’s World. They paid $15 million in cash and another $2.5
million in stock.
What does this all mean? Well, for one, if you have
never heard of eBaum’s World, you will do now.
Current estimates suggest a possible
total of $50 million in cash and stock over the next three years.
The
press
release
revealed that the site generated approximately $5.2 million in revenue
and $1.6 million in net income last year. It also mentions that the
video service acquired 2.5 billion page views in the last year.
eBaum’s
World claims that its site has an average of 10 million unique visitors
per month.
According to Michael Inouye, a research analyst with In-Stat:-
“HandHeld has instantly become one of the leaders in online
video and
user-generated content and is now rubbing shoulders with YouTube and
the video networks of such companies as Yahoo!, Microsoft, Google and AOL. This truly
is a terrain-changing event in the UGC and online video markets.”
$10 Million Ad Revenue Last Year
eBaum’s World was launched in 1998 by Eric Bauman and, just
last
year, pulled in $10 million in ad revenue. This news, however, led to a
Wired
article in which video content creators accused Bauman of
making some of that money by reposting their valuable content.
As for the financial terms, they are not what you would call
simple.
eBaum’s world is to get $15 million in cash when the deal closes later
this year.
At the closing of the deal, $2.5 million in Handheld
Entertainment stock will be awarded. If targets are met, this will rise
to at least $5 million in stock.
It doesn’t end there though. If various milestones are met,
Bauman
could earn another $15 million in cash and $17.5 million in stock over
three years.
According to ValleyWag:-
“HandHeld is borrowing $24 million, largely to finance the
eBaum’s
deal. That leaves it with $9 million — not enough to pay
eBaum’s the
extra $15 million it’s owed under the earn out deal. That means that
eBaum’s $67.5 million isn’t just conditional on its traffic, it’s
conditional on HandHeld’s ability to raise money.”
The acquisition and financing for the deal are currently
subject to
shareholder approval and closing conditions which is expected to close
within 75 days.
Michael Garrett is a contributing author discussing the social networking world, his work can be found on Profy.com
