In case you missed it, Jeff Bezos bought The Washington Post for $250 million. Now that that’s out of the way, here’s why I think it was a great investment:
Cheap. Everyone knows the industry is in shambles, so that reduces the amount of interested buyers, therefore lowering price. To identify a great opportunity, I think you have to be contrarian and correct. He’s paying $250 million for a business that has $581.7 million in annual revenues, about one-fifth of which is a $100 million-internet business which is growing. He’s paying a roughly .5X revenue multiple on the whole and a 2X revenue multiple on the web business. Compared to any other deals in the space, that’s a steal!
Risk. He has a ton of money. This was like buying a bottle of champagne for “normal” people. He can afford to take the risk. It’s not a significant portion of his wealth or investment portfolio.
Growth. It could be testing ground for new forms of e-commerce, content, and advertising connections. There’s a decent amount of synergy with Amazon, even though Washington Post was technically purchased by Bezos personally and not by Amazon. There’s also plenty of opportunity to grow Washington Post’s business organically. They some valuable data, distribution, and eyeballs.
Personal. Having a major media brand provides value that doesn’t show up on an income statement. It gives Jeff a lot of influence, particularly in Washington. This is less of a reason why it’s a great investment in dollar terms, more about why he may have bought it.
Do you think he made a good investment decision? Do you think The Washington Post has growth potential?