Answers.com buys Dictionary.com for $US100 million

Stuart Corner
Tuesday, 17 July 2007 09:32

Your IT - Home IT

Answers Corporation, creator of Answers.com is to acquire Lexico Publishing Group, LLC, owner of the Dictionary.com, Thesaurus.com and Reference.com web sites for $US100 million in cash.

According to Answers, "Lexico is a highly profitable company that strongly complements Answers' user base. In 2006, it generated revenues of $US7 million, EBITDA of $US2.9 million and net income of $US2.8 million. This strategic acquisition drives Answers to a leadership position in online information publishing."

Answers says that, based on June 2007 comScore data, the addition of Lexico's Web properties will increase its reach to over 22.5 million monthly unique users, giving it the number 28 slot in the top US properties. However the combination will have a leading position in education and reference sites. According to Hitwise, in June 2007 the Lexico sites ranked number 3 in 'Education-Reference' and the Answers sites ranked number 4, out of nearly 4,000 sites included in the category. The combined properties would rank number 2, behind only Wikipedia. According to a Hitwise analysis of 2006 search terms, 'dictionary' was the second most popular 'generic' search term on the Internet.

"The acquisition of Lexico is a transformative event for us," said Robert S Rosenschein, chairman and CEO of Answers Corporation. "Lexico's suite of popular brands, steady direct traffic and loyal users are valuable assets that we believe will reduce our products' reliance on search engine-driven traffic. Post-transaction, we estimate that over 70 percent of our total traffic will now be direct from end users or people searching specifically for the term 'dictionary' in search engines. Our combined size and available ad inventory should provide greater exposure among online media buyers, which we expect will lead to increased advertising sales."

Answers says it intends to keep Dictionary.com and other Lexico properties as standalone brands. "The bottom line is, with [Lexico sites having] three times the traffic and one-third the monetisation rate [of Answers sites], together with our monetisation expertise, the upside potential is compelling," said Steve Steinberg, Answers CFO. "We will also offer cross-promotion to other Answers sites. For example, this acquisition will allow us to introduce our WikiAnswers property to Lexico's 11.5 million monthly unique users."

Answers is also reducing its revenue forecasts for the second quarter of 2007. In May, the company said it expected revenues of between $US2.8 million and $US3.2 million for the three months ended June 30, 2007. However, it now ssays that "due to more pronounced seasonality in traffic in 2007 than what was experienced in 2006, along with a continued slower than anticipated ramp of direct ad sales effort," it anticipates revenues of between $US2.75 million and $US2.8 million for the three months ended June 30, 2007.

Answers claims to deliver comprehensive content on over four million topics spanning health, finance, entertainment, business and more. Content includes over 180 licensed titles from publishers such as Houghton Mifflin, Barron's, Encyclopaedia Britannica, All Media Guide and others; original articles written by Answers.com's editorial team; community-contributed articles from Wikipedia; and user-generated questions and answers from its own wiki.answers.com. It was founded in 1999 by CEO Bob Rosenschein.