Honey Mag’s Sticky Situation
by R. Asmerom
Honey, the magazine that once vied for Essence’s spot as the go-to glossy for African-American women, was one of the many publications that folded in the last decade, victimized by the shift to online advertising and changes in the media economy. YouBlast Global, formerly known as Sahara Media Holdings Inc, sought to revive the brand as a website in 2008 and has since invested millions of dollars in the niche site and a soon to be released social network named YouBlast. From the poor performance indicated in YouBlast Global’s 2009 annual report, the company’s trajectory is in question. With a reported loss of $6.7 million in 2009, revenues of only $39,000 for the year and $300,000 dollars left in the bank, 2010 might well be the company’s swan song.
The exact business model of YouBlast Global is fuzzy. Are they ad salesmen, content creators, or web application builders? Although HoneyMag.com and their social network, TheHiveSpot.com, appear to be their core offerings, the company’s expected revenue stream seems to also rely heavily on a database it acquired when it purchased the Honey brand. In its corporate communications, YouBlast Global states that it generates revenues from “advertising sales from their websites; licensing of their database and direct marketing and sponsorships,” inferring that the database, which consists of 4.2 million names in the 18 to 49 urban demographic, is integral to their business model and that database licensing and direct marketing is expected to constitute a significant portion of their revenue. Whatever their chosen business model is, they appear to be failing woefully at it.
Ever since HoneyMag.com launched as a site targeting a “multi-cultural urban audience,” its online presence has been underwhelming. With low traffic numbers, the million and a half subscribers of the discontinued magazine are yet to convert into online fans. YouBlast bought the Honey brand in 2005 for $600,000 after its parent company at the time, Vanguard Media, folded the popular magazine during its 2003 bankruptcy filing.
When YouBlast Global raised funding and relaunched the Honey brand in 2008, it outlined its mission simply. “Honey
is a great brand with a strong connection to an important audience,” said Philmore Anderson, YouBlast Global’s Founder and a former music executive, in a statement . “We are positioned to take the Honey brand to the next level as an online magazine and social network.” Despite the company’s praise for the site’s performance in the most recent press release, it’s clear that the site is not doing well and there’s little to indicate that HoneyMag.com’s growth was ever a primary objective for the company.TheHive Spot.com, which has been practically lying dormant, represents the company’s half-baked foray into social networking and will soon be replaced by YouBlast.
“I remember a few years ago, when I was reading some of their opening remarks, [it seemed that] a lot of their funding was related to how many page-views they could generate and unique visitors they could attract,” said new media consultant Liz Burr. “If your funding and livelihood is based on page-views, it probably would’ve been better [for them] to acquire blogs than build propriety social networks.”
The lack of buzz and the fact that it has been able to rack up only 61,000 unique monthly visitors (comScore) after its most recent relaunch puts HoneyMag.com well behind competitors like Essence.com and HelloBeautiful.com, which are both attracting about half a million unique visitors per month according to comScore.
“HoneyMag has probably relaunched three times in the last year or year and a half,” said Burr, adding that the company’s further investment into social networking with YouBlast may pose a difficult prospect. “I’m wondering how they’ll be able to compete in this [social networking] marketplace especially since it doesn’t appear like they did a very good job with getting HoneyMag off the ground.”
By all indications the funding event led by John Thomas Capital Management was an unfavorable deal for YouBlast Global. The total transaction fee paid to John Thomas Capital Management – the second biggest shareholder after Anderson, for the 2008 deal was $2.6 million leaving proceeds of only $7.6 million from what was touted as a $10 million funding round. A funding round with an exceptionally high 25% fee indicates a company that was unable to raise money from traditional sources and had to resort to more creative and hence more expensive sources, say experts with knowledge of transaction.
Post-2008 funding, the company was implicitly valued at $34 million. To get a better picture of the valuation, one has to only look at a similar deal that took place in 2008 when Radio One Inc. purchased Community Connect for $38 million. Although some speculated that Radio One’s acquisition wasn’t the most prudent deal, it did acquire the popular social networking site BlackPlanet, which claimed to have 20 million members and was the fourth most-visited U.S social networking site at the time. That acquisition also included two other ethnic nice sites including AsianAve.com and MiGente.com. Comparatively, YouBlast Global boasts a struggling HoneyMag.com and a barely there social network. How did John Thomas Capital and YouBlast justify a $34 million valuation to investors?