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.
Good luck
EXCELER8ion is where Shannon and Julian Seery Gude write on Social Media & Recruiting, Digital Marketing, Technology, Internet Business, and other Geekiness. 
9 comments ↓
Go get an MBA and spend a few years running a public company. Then you’ll understand the more complex aspects of what’s going on. BTW, read KRI’s financial filings with the SEC and you’ll get a clearer understanding of how little the Ridder’s own. Good writing though….straight from the heart, but naive.
We came across this article in the WSJ after we wrote our post that outlined our exact argument:
New Beginning for Newspapers?
By JOSEPH T. HALLINAN and JOE HAGAN Staff Reporters of THE WALL STREET JOURNAL
November 3, 2005; Page C1
Excerpt – “Conventional wisdom holds that Gannett, the largest newspaper company, might be a good suitor for Knight Ridder. Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout. Some think a new-media company such as Yahoo Inc. or eBay Inc. might be interested.
Newspapers still dominate local news and advertising in many markets. That could attract a company such as Yahoo, which has moved increasingly into original content and would like to develop its local reach. Meanwhile, Google Inc. has expressed interest in entering the classified-ad market, where newspapers have deep relationships and continue to play a dominant role. Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com.”
Funny, we aren’t the only naive ones! The first author, Joseph Hallinan is a Pulitzer Prize-winning journalist that was named a Nieman Fellow at Harvard University. Joe Hagan was a New York Observer writer and is now a media reporter for the Wall Street Journal where he expanded his coverage from mainly television to media in general, with more of a focus towards print. Not sure if they have their MBA’s.
And, yes we know that Tony Ridder owns 1.9% of KR and no member of the Knight or Ridder families own more than 5%. We were trying to provide an alternative point of view to what is being discussed out there.
We love the open exchange of ideas, that’s the point of a blog right? Thanks for the comment – er..sort of. Straight forward, but a little condescending
Point: “Some think a new-media company such as Yahoo Inc. or eBay Inc. might be interested.”
Comment: To date, much has been leaked and revealed about what companies are actually looking at the deal. Not once has a new-media company been named or revealed as truly looking at KRI. Thinking is one thing, acting another. While many journalists like the idea of new-media companies as a the saviour, the reality is new-media companies aren’t likely to jump in and buy when they can partner and “date” first. Heck, they can even play around and hire a few journalists to see what happens (Yahoo). Last time someone jumped in, the pain came fast — AOL and Time Warner.
Point: “Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout.”
Comment: If this happens, things will only get worse at Knight Ridder. Souless money folks will take it apart piece by piece to maximize profits. When financial targets are hit, they sell. Can anyone say hello to Dean Singleton or Bob Jelenic down the road? Hopefully, a strategic buyer win this thing…
Point “…Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com.”
Comment: Part-owner is the operative word. I’ve heard from analysts that Careerbuilder owners have the right to buy out each other on any change of control. My bet would be GCI and TRB would exercise that right if the purchaser were not strategic (e.g. a newspaper company).
Point: “Funny, we aren’t the only naive ones!”
Comment: Indeed more than one person can be naive. I’d alter my statement a bit to say you’re all hoping for something that’s not going to happen. From a truly financial and strategic perspective, Yahoo, Google and eBay don’t need newspapers. You’re all hoping for a silver bullet to save what you love. That’s not necessarily a bad thing, it’s just too simplistic.
Knight Ridder made a bad mistake in the 70s when it scoffed at the idea of having a two-tiered stock. In essense, the people making that decision sold out Knight Ridder. They also sold out the great KRI journalistic heritage by giving away the only protection they truly had from the heathen at the gates.
Point: “Thanks for the comment – er..sort of. Straight forward, but a little condescending.”
Comment: Sorry. Not meant to be. The directness is resultant from too many years standing at the previous mentioned gates with the heathen financial folks on the other side.
Julian: Good conversation Realist – keep it coming. Here are some points to further clarify my position. I’m not saying I want to see newspapers saved, but I do want to see their core offering: local news and classifieds (especially news content) taken to the next level both in print and online. Internet companies have done a good job of going after the money behind classifieds but a crappy job with the hard stuff – local news. Just like new media companies have completely failed at building a real local sales force – still the province of established companies. KR needs a revitalized product offering and a better resulting valuation for the stock. If you take care of the product, which frankly KR hasn’t been doing, the street will recognize it. I do believe that a new media company has a better chance of accomplishing this than a Gannett or private equity firm.
“Comment: To date, much has been leaked and revealed about what companies are actually looking at the deal. Not once has a new-media company been named or revealed as truly looking at KRI. Thinking is one thing, acting another. While many journalists like the idea of new-media companies as a the saviour, the reality is new-media companies aren’t likely to jump in and buy when they can partner and “date” first. Heck, they can even play around and hire a few journalists to see what happens (Yahoo). Last time someone jumped in, the pain came fast — AOL and Time Warner.”
Julian: Agreed, we don’t think it’s very likely to happen either, more that Google and Yahoo! would benefit from KR’s content, local advertiser relationships and their feet on the street. Google and Yahoo! do need these things to improve but you’re right that they can build them for themselves. On that point I don’t believe that either company just wants partnerships at this point, they want to own it and their more recent actions demonstrate that. Example: After years of waiting for the right time Yahoo! has jumped into building their local feet on the street sales force. Google on the other hand still thinks they can conquer the local space through a browser (for the moment). Indeed, if the world was only made up of people from Gen Y then Google would stand a shot with this strategy…
Point: “Others think a consortium of private-equity investors is more likely, since newspapers are considered cheap, but remain good cash-flow vehicles that would help finance a leveraged buyout.”
“Comment: If this happens, things will only get worse at Knight Ridder. Souless money folks will take it apart piece by piece to maximize profits. When financial targets are hit, they sell. Can anyone say hello to Dean Singleton or Bob Jelenic down the road? Hopefully, a strategic buyer win this thing…”
Julian: Absolutely, my original article agrees completely with you on this point. I had an e-mail exchange off the blog about KR with a former CEO from the local print/online space last week where he expressed the sentiment that private equity firms with a growth mindset (vs. traditional LBO model) might well make a better company out of KR (he cited Blackstone, Bain and Thomas Lee to name a few).
Point “…Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com.”
“Comment: Part-owner is the operative word. I’ve heard from analysts that Careerbuilder owners have the right to buy out each other on any change of control. My bet would be GCI and TRB would exercise that right if the purchaser were not strategic (e.g. a newspaper company).”
Julian: Yes, I mentioned that in the original story and CareerBuilder will definitely be a major focus of ANY deal since KR and newspaper companies like KR make the majority of their online and print revenues from recruitment advertising.
Point: “Funny, we aren’t the only naive ones!”
“Comment: Indeed more than one person can be naive. I’d alter my statement a bit to say you’re all hoping for something that’s not going to happen. From a truly financial and strategic perspective, Yahoo, Google and eBay don’t need newspapers. You’re all hoping for a silver bullet to save what you love. That’s not necessarily a bad thing, it’s just too simplistic.
Knight Ridder made a bad mistake in the 70s when it scoffed at the idea of having a two-tiered stock. In essense, the people making that decision sold out Knight Ridder. They also sold out the great KRI journalistic heritage by giving away the only protection they truly had from the heathen at the gates.”
Julian: You’re right, I don’t think it will happen and it is wishful thinking. You’re also right that Google and Yahoo! don’t need KR – but they could use parts of KR that would immediately make them better companies.”
Point: “Thanks for the comment – er..sort of. Straight forward, but a little condescending.”
“Comment: Sorry. Not meant to be. The directness is resultant from too many years standing at the previous mentioned gates with the heathen financial folks on the other side.”
Julian: No offense taken, I can see how one would take the wishful thinking in my post for naiveté. Thanks again for the conversation Realist.
The latest news on Knight Ridder from the Wall Street Journal reminds me of trying to loose 40 lbs. in two months to look great for your school reunion. Can you say cash cow? Gimme a break.
Story here: http://online.wsj.com/public/article/SB113807561016954481-hpMIdcoBMWc6ZqaOb8HErEg2QKs_20060131.html?mod=blogs
Re: Quest: Who runs tribe?…
Knight Ridder possibly up for sale?
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http://www.exceler8ion.c……
[...] » Looming Knight Ridder Sale – Yahoo! or Google should be the real suitors from EXCELER8ion 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 valuati… [Read More] [...]
[...] Julian E. Gude Says: January 7th, 2006 at 10:35 pm [...]
[...] As most of our readers know – Julian and I are Knight Ridder Digital Alumni. We chronicled our thoughts about the KR sale back in January here. Julian said of the pending sale: 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. [...]
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