Hearst to Acquire UGO Networks

Posted on July 23, 2007

Hearst has acquired UGO Networks, a collection of website targeting the young male demographic. UGO is short for UnderGroundOnline. A short Yahoo profile of UGO says the network covers "movies, sports, technology, video games, and young Hollywood starlets." A Forbes news story says UGO competitors include ESPN, Maxim, MTV and IGN. Forbes also says the deal is estimated to be in the $100 million range.

UGO is up against some pretty tough competitors, including ESPN, Maxim, MTV and IGN. Moses and McCracken knew they would be unable to survive against such heavily financed media outlets. "The media business is all about size and leverage," said Moses in an interview a few months ago. "We can't make it on our own. When the Web was about words and statistics, we were able to compete. But now it's about video. And for video, you need more money."
Moses has been trying to sell his company for more than two years. Just about every media giant out there has taken a look at the deal, and then taken a pass. The nine-year-old company has 82 employees and brings in some $30 million in revenue and an estimated $6 million in EBITDA. A nice little company, to be sure, but let's put that into context. MySpace, which aims for a similar audience, is expected to bring in $1 billion in revenue this year. And it's three-and-a-half years old.
For a company like Hearst, which has multiple media properties including Lifetime Television, The Houston Chronicle, Esquire and Cosmopolitan, UGO brings nine years' worth of Internet experience.
Kenneth Bronfin, president of Hearst Interactive Media, said he plans to retain both Moses and McCracken, and allow them to run the company as a separate entity. Bronfin will also consider more acquisitions to help build out the UGO property. Areas for growth include user-generated content (UGO still gets all its content from full-time employees and paid freelancers) and video.

The Hollywood Gossip brings up Time Warner's failed Office Pirates venture into young men's online entertainment. The difference here is that UGO has already established itself and already has traffic. The UGO move follows Hearst's January acquisition of eCrush.