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The Rationale Behind a $27M Acquisition

Why HubSpot and other SaaS are acquiring media companies.

Hey — It’s Nico.

This is another edition of Failory’s Behind Tactics 🧠, the newsletter in which I analyze the product, operations, and growth strategies behind the most successful tech companies.

This week, I dug into a trend: SaaS companies are buying media companies. I went over:

  • How HubSpot, a huge software company, acquired The Hustle, a business newsletter, for $27M.

  • The way HubSpot integrated The Hustle to minimize audience departure.

  • The four main reasons this strategy works and the three main challenges it has.

  • Some steps you must go through to apply this strategy, even on a small scale.

  • And plenty of examples that might serve you as inspiration.

Let’s get into it.

The Strategy

On February 3, 2021, Sam Parr, founder of The Hustle, announced via Twitter that HubSpot had acquired his media startup.

If you’re subscribed to Failory, chances are you have heard of The Hustle. Like Failory, The Hustle is a newsletter for people interested in businesses and technology, though it’s over 30 times bigger than my project (1.5M subs for The Hustle at the time of the acquisition vs. 40k subs for Failory).

The Hustle is also well-known for its premium research subscription, Trends, and its business interviews podcast, My First Million, hosted by Sam Parr and Shaan Puri.

HubSpot, on the other hand, is a publicly-traded sales and marketing software with a market cap of over $20B at the time of the acquisition.

While the deal’s details were never disclosed, Axios valued it roughly at $27M.

With no further context, this acquisition might sound a little bit weird. Why would such a huge software company spend any time and money acquiring a newsletter?

A deeper analysis shows this was a clever acquisition that allowed HubSpot to diversify their growth and get access to an amazing editorial team to keep pushing their content marketing efforts.

Zooming out, HubSpot’s acquisition of The Hustle forms part of an interesting trend of SaaS companies acquiring niche newsletters, communities and content sites to gain access to their target customers.

HubSpot & “Inbound Marketing”

In times when content marketing was a thing for bloggers, HubSpot decided one of their main customer acquisition channels was going to be their Blog.

But it was not like other B2B company’s blogs, which were mostly posting whitepapers, functional specs and articles that aimed to convert readers. HubSpot’s Blog aimed to educate all kinds of readers on topics related to marketing, sales and GTM, even if these were not down in their conversion funnel.

Over the years, they created thousands of blog articles, hundreds of videos, and dozens of courses and eBooks, among other content formats, which grew to generate millions of monthly visits to HubSpot.

According to Ahrefs, HubSpot gets 12.3M monthly organic users into their website every month, most of them arriving at articles like this one, this one and this one.

The result is that, “for many customers, their first introduction to HubSpot is through our educational blog, Academy, and YouTube content, not our software.”

In an attempt to diversify the content they published and mediums through which they delivered the content, HubSpot started looking for media companies to acquire.

This is when they got in talks with The Hustle, which at the time had 1.5M subscribers that they emailed daily, the Trends subscription, and the business podcast “My First Million”, posting a few times a week.

Acquiring The Hustle would give HubSpot access to two new content distribution channels (newsletter and podcasts), which they were not controlling at this extent until then.

Additionally, it’d make them equipped with 30 of the best editorial and content people out there, which could help keep growing HubSpot’s content marketing efforts.

Furthermore, what made this deal make a lot of sense was the perfect fit between The Hustle’s audience and HubSpot’s aim to reach new types of audiences, other than marketers in enterprise companies.

The Hustle was mostly read by founders, growth people and investors, who worked at tech startups. This means HubSpot would be reaching a new type of audience that they were not yet targeting, to whom they could promote their “HubSpot for Startups” product.

The Integration

Integrating an acquired startup into the parent company can be hard. In the past, I shared a clever strategy Canva was employing for their acquisitions.

When it comes to acquiring media companies, there’s one important thing to be careful with — the independence of the media. There’s a risk that the audience of the media walks out the door once the acquisition closes because they feel like the media is no longer trustworthy.

I think HubSpot handled this very well because the acquisition has added more value to the audience than what it has taken from them.

The Hustle was previously monetized through ads, just as Failory. Nowadays, the newsletters no longer have ads — instead, they feature free sales or marketing resources built by HubSpot.

In my opinion, these free resources provide a better experience for the reader than the old ads.

Besides that, they have added a few natural logo placements of HubSpot throughout the website and newsletter, and links to HubSpot’s products in the navbar.

When it comes to Trends, the subscription was discontinued and they kept publishing reports for free.

And regarding My First Million podcast, most of their ad slots currently promote different HubSpot’s products, but since these episodes already had ads before, the listener’s experience has stayed the same.

I think this is an example of a smooth integration after an acquisition, focused on providing the audience with more value rather than extracting it all.

Should I?

Why This Works

SaaS acquiring media companies is becoming increasingly common. Here are some reasons why these acquisitions are effective:

  1. Large audience at a low cost: Media companies excel at building substantial audiences for a low CAC, yet often struggle to monetize effectively. This makes them inexpensive acquisitions despite being strategically valuable for a SaaS company, which can enhance the media company's LTV by integrating its own products. For example, The Hustle was acquiring subscribers for less than $2 each—a figure that HubSpot likely far exceeded in revenue per subscriber by offering them its products.

  2. Audience diversification: Acquisitions serve as a powerful tool to tap into new audience segments not currently reached, thereby increasing revenue from specific products. HubSpot's acquisition of The Hustle, for instance, provided access to a valuable audience of founders and tech startup professionals, aligning well with their HubSpot for Startups product.

  3. Distribution diversification: Acquiring media companies that produce content formats different from a company’s current offerings can significantly diversify the channels through which a company distributes its products and messaging. HubSpot, known for its blog posts, courses, and eBooks, lacked strength in newsletters and podcasts. Acquiring The Hustle expanded their distribution capabilities to include these channels.

  4. Access to team: Acquiring a media company also means gaining access to an editorial team skilled in engaging with the target audience. In the case of The Hustle, this comprised 30 individuals adept at building a following among tech startup employees—a demographic many marketers find challenging to reach.

How to Apply It

  1. Find a media company: Start by asking your customers which content websites, newsletters, and podcasts they frequent within your niche. Evaluate these options to determine which align most closely with your company’s voice and style.

  2. Validate the fit: Mitigate the risks associated with acquisition by exploring alternative ways to engage with the media company’s audience. Consider options such as sponsorship, participating in a podcast or text interview, or becoming an affiliate partner. These activities will provide valuable insights into the audience’s quality and how well it aligns with your company.

  3. Execute the acquisition: Develop a strategy for acquisition, discussing various approaches and payment options. It is common to acquire the entire company, including the team, and to pay through a combination of cash and stock, although this can vary based on the deal’s size.

  4. Integrate carefully: Plan the integration of the media company into your business carefully to avoid disrupting the existing audience’s experience. Focus on growth and enhancement of the media assets rather than merely maintaining them.

Note that while the examples of The Hustle and HubSpot involve a large acquisition, this strategy is equally applicable to smaller companies. There is a vast array of smaller newsletters, podcasts, and blogs with audiences that could perfectly complement your company’s objectives.

Yes, But

  1. It can be expensive: While it might seem more cost-effective to build an audience from scratch, the reality often proves otherwise. Creating an in-house media operation can be more expensive and time-consuming than anticipated, with a high risk of failure.

  2. Risk of audience departure: If the audience perceives that their favored media outlet has "sold out" following an acquisition, they may disengage. This was a concern expressed by some following Semrush’s acquisition of Backlinko, where mentions of competing SEO tools were replaced with references to Semrush. To preserve the content’s neutrality and trustworthiness, it's crucial to maintain editorial independence.

  3. Challenges with attribution: Acquiring a media company can drive customers to your business in ways that are difficult to trace. For instance, Sam Parr, the founder of The Hustle, often promotes HubSpot on Twitter and other content platforms outside of The Hustle. It’s nearly impossible to determine how many people subscribed to HubSpot as a direct result of his endorsements. The greater the editorial independence, the more challenging it becomes to attribute customer conversions accurately.

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