It really pains me to see our old company, Knight Ridder Digital, up for sale (Shannon and I are both KRD alumni, and it’s actually where we met). Everyone knows that current Knight Ridder shareholders are looking for bigger profits and valuation from the looming sale. They’ll get some of that but only if they recognize what they really have and invest in it. I’ve been surprised that none of the press has talked about other companies that could stand to benefit from buying Knight Ridder other than the (yawn) other newspaper companies and private equity firms (cringe) that have been named as likely suitors. I know there are good arguments as to why other companies aren’t being discussed, especially interactive companies like Yahoo! or Google, but I think that’s all wrong. Yes, print is going down hill – no kidding – but that doesn’t mean that there isn’t value in the product, it is great local content after all, and even though the Google’s and Yahoo!’s of the world are more about dismantling old models like the one KR operates under it doesn’t have to be that way. If I’ve learned anything from ten years in the Yellow Pages industry and another five at a local newspaper shop, it’s that there’s no better place to find high margin money than local. Local news and information, be it print or online requires investment and the best management to make it work. You keep managing a mature product as a dead product and you create a self-fulfilling prophecy, and all your best people leave.
From the sounds of it you’d think I was an old company stalwart. Actually, I love technology and new companies but I’ve worked for old line, mature product companies for much of my career. I worked for Pacific Bell Directory (SMART Yellow Pages) in the Bay Area for 10 years in the 90’s and played a role in the “Merger integration” work for the entire sales division for Pacific Bell Directory when SBC (now AT&T) purchased Pacific Telesis. I was one of two representatives from sales leadership who flew out to the St. Louis headquarters of SBC’s Yellow Pages and got a front row seat to the efficiencies planning, ‘best practices’ work and new management and employee structures that would become the new company. It wasn’t pretty.
Tony Ridder understood the impact of the Internet back in the mid-90’s much better than most as the Chicago Tribune points out quite accurately, and he backed his vision with real investment dollars until the ‘Dot Com Bomb’ of late 2000 started to detonate. From then on until about a 18 months ago I would say that Knight Ridder has managed their growth Internet properties like a mature product with very little investment and an almost unseen amount of innovation. Why? Investors and Wall Street. Could Tony Ridder, the KR board and senior management have done better? Yes.
I used to delight in telling my new employees that Knight Ridder was the first company in the world to publish a newspaper online (MercuryCenter on AOL) but it was a hollow statement in more recent years as I took part in laying off staff that we desperately needed in an industry with a REAL hockey stick growth rate! Stop and think about that. Why would a company with major assets in one of the hottest industries be cutting staff? As far as management practices go this one is a non-starter. It’s not like people thought during the time of the dot com bomb that the Internet was going to go away or stop producing results. This gutlessness is the root cause of Knight Ridder’s woes.
From the company legacy and employee perspective there is very little good that comes from being acquired. On the flip side the purchasing company will have many upsides, including a plethora of new job opportunities in middle and senior management and a very real power boost from owning new brands, expertise and products. But, I think the truth of the matter is that it’s not that much fun for anyone but the stockholders. Even then there is certainly no guarantee. Knight Ridder is a good company, no doubt under performing on Wall street but I believe it is just our investor Attention Deficit Disorder and management vision that make it so.
When SBC purchased PacBell there was almost a wholesale change of management, key employees and business practices despite the fact that there were many really bright people at PacBell and some great ways of doing business. This is how it goes with buyouts. SBC threw the baby out with the bath water. A year later SBC purchased the tiny SNET of Connecticut but their leadership at least saved some vestiges of management respect when they went down. They certainly outdid the far larger and mighty PacBell, proving that with buyouts that vision and chutzpah are more important than revenue and profit margins.
I hope that Tony Ridder has the guts to stand up for his company. He’s representing generations of Ridder’s, Knight’s and countless thousands of people who have brought great news and advertising to the U.S. and even the world. I hope that the resulting company will respect what they have and invest in it – that it won’t just be an efficiencies race like we all know is the likely outcome. I’ll be rooting for Mr. Ridder, his board and his senior managers like Hilary Schneider, and all the great friends I have there to pull off the all-but-impossible.
The Yahoo! and Google equation that no one is writing about – Maybe that’s because my following hypothesis is all wet but hear me out.
I say that Google or Yahoo! should buy Knight Ridder and would greatly benefit from the purchase. New world companies like Google and Yahoo! have more need for KR’s content and more respect for their success in journalism, advertising and classifieds than any of the other newspaper companies said to be looking at KR. Never mind the news content, what about the hugely successful world of online recruitment where Knight Ridder is 1/3 owner of CareerBuilder.com? Knight Ridder’s online recruitment revenue’s are about 40% of their total online revenue and it only keeps growing. If Yahoo!, currently third in the online recruitment space to CareerBuilder’s second, purchased Knight Ridder they would become a Monster.com squashing powerhouse. Yeah, Tribune and Gannett, the other owners of CareerBuilder would have to agree to the sale but I think they could find it in their hearts to get in bed with Yahoo!, especially if Yahoo! extended some of their other offerings to them. I don’t think it hurts that the CEO of HotJobs, Dan Finnigan, used to run Knight Ridder Digital and was a chief architect of the CareerBuilder acquisition. After working for Dan at both Knight Ridder Digital and before that, SBC’s SMARTpages.com I saw first hand what a great biz dev talent he is and I can’t believe Dan’s not thinking about these things and talking them over with Terry Semel, CEO of Yahoo!. Yahoo! could also combine efforts with Knight Ridder in the hot local search space, a huge oil well waiting to gush the online equivalent of black gold by using the local advertiser relationships that Knight Ridder has. Did I mention that Dan brought over Knight Ridder Digital’s VP of Sales, Tim Lambert to run biz dev at HotJobs? I know Tim well from working for him for years and he’s now moved on to head up Yahoo!’s local sales effort (local search) and is using the experience he gained at Pacific Bell Yellow Pages and Knight Ridder Digital to make Yahoo!’s local search effort a real success.
What I would say against my hypothesis is the obvious oil and vinegar business model that these old/new model companies have. Yahoo! also has a lot of broadcast depth and focus in their senior management and their content clearly leans that way so I could understand if they’re not as excited about print content, as they would be to acquire, say, CNN broadcast content. But, it could still play.
Google also stands to win in this same scenario where they could gain Knight Ridder’s content but also establish themselves overnight in online recruitment, a space that they are clearly starting to go after while also substantially furthering their local search efforts. In fact I believe that a Yahoo!/Google like solution is the ONLY one that will help KR grow and become even more than they already are. Alas, the newspaper companies that would buy KR would only interject more of the same thinking that put Knight Ridder where they are to begin with and a purchase from private equity firms will be the beginning of the end of a great company. Please don’t do it Mr. Ridder – no matter what pressure you come under – let your last at bat be the one you hit out of the park for your brothers and your mom, your dad, your legacy and for all your employees that are counting on you. Believe me, as former employees and as people who have both enjoyed representing your products AND using them please know that we are cheering you on!!
Oh, and if you and your brothers start another news company with all the money you make from the sale and eventually go public, make sure you have two classes of stock.