NBC Universal Nabs iVillage in $600 Million Deal

In a move to extend its reach, NBC Universal on Monday agreed to buy iVillage, a leading online destination for women, for approximately US$600 million in cash.

NBC Universal, which runs the NBC television network and the Universal film studio, will pay $8.50 in cash for each share of iVillage’s stock. That figure is 6.5 percent higher than iVillage’s closing Friday stock price. The transaction is expected to close in the second quarter of 2006 pending shareholder and regulatory approvals.

With this acquisition, NBC Universal will engage 14 million iVillage users, a community it said mirrors a key demographic of the NBC Universal audience — women.

“As this transaction demonstrates, we are committed to delivering content to consumers through distribution systems both traditional and new,” said Bob Wright, vice chairman and executive officer of General Electric, NBC Universal’s parent company.

All About Advertising

Acquiring iVillage will enable NBC to bring its programming to a large and passionate online community, Wright said, noting iVillage’s opportunity to offer its advertising clients “new and exciting ways to reach a valuable demographic.”

Indeed, iVillage brings a profitable Internet business, with proprietary content and a consistent user base that commands premium advertising pricing. iVillage.com revenues were up approximately 30 percent year-over-year in 2005, excluding acquisitions.

With the addition of iVillage, NBC Universal expects to grow the company’s digital revenues to approximately $200 million in 2006, and projects a 20 percent growth rate going forward.

Flat TV Ad Spend?

“News Corp. (NYSE: NWS) and NBC Universal are recognizing that there may be a limit to growth in their respective core industries,” Jupiter Research Media Analyst Todd Chanko told the E-Commerce Times.

While the market for television advertising still dwarfs the market for online advertising, the latter is growing whereas the former is largely flat. Jupiter predicts television advertising will reach $73.5 billion in 2006 and climb to $88.4 billion in 2010. By contrast, Jupiter estimates online advertising will reach $13.6 billion this year and rise to $18.8 billion by 2010, a much steeper growth curve.

Still, Chanko said, nothing can beat TV for reach. Jupiter reports there are 112 million TV households in the U.S. and only 49.4 million residential broadband households. “It’s exciting that mainstream television companies are getting involved in the Internet again, but their bread and butter is still coming from traditional advertising,” he added.

Community, Content and Commerce

This acquisition is about creating important new intersections between community, content and commerce, according to Beth Comstock, President, NBC Universal Digital Media and Market Development.

“We envision connecting more deeply online, on mobile and on demand with key consumers throughout their various life stages — from their unique interests to their finances to their health and well-being,” Comstock explained. “We are also looking to create a more customized consumerhealthcare experience, working in association with GE Healthcare.”

While the synergies with GE make sense to Chanko, he said the real issue is whether or not iVillage and the audience it caters to is particularly interested in anything that NBC has to offer.

“If NBC Universal doesn’t end up using the site as simply a means to promote its television programming and movies, it could actually end up being a viable tool for the network to learn more about women,” Chanko said. “That could be useful to the NBC television network or Bravo or any one of a number of Universal films in production.”