Tickers in this Article: MHP, RATE, AMZN, HGRD, PCLN, EXPE, OWW
The news surrounding print media these days is anything but upbeat, and it's bound to get worse as advertising revenues continue to plummet. Forbes, Fortune and Business Week magazines have seen ad pages in their print editions through the end of April drop 19%, 38% and 38% respectively.

How bad is it out there? Fortune's May 11 issue had 21 pages of ads. A similar issue 20 years ago had more than 100. Business Week has lost money on its magazine the last two years and the loss could reach $20 million in 2009 if advertising revenues continue to dwindle. The word on the street is McGraw-Hill (NYSE:MHP) has put the magazine up for sale. So what's the online alternative?
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Online Properties Changing Hands
Two deals that were announced July 22 will definitely affect the online world, although for different reasons. First, and more directly related to media, was the $571 million deal by Apax Partners to acquire Bankrate.com (Nasdaq:RATE), the consumer finance site helping people find good bank loans, credit cards etc. Apax paid a premium of 18% for the Florida-based company and it sounds like Bankrate management got the best deal it could, considering its second quarter earnings per share were 10 cents (half the 21 cents a year ago, and much less than the 30 cents expected by analysts).

Bankrate CEO had this to say about the deal, "
Apax's offer represents attractive value to our shareholders, while also giving us significantly enhanced flexibility to execute on our long-term strategy in a difficult economic climate." Translation: Our earnings and revenues are heading into the toilet, and we'd rather not wash our dirty laundry in public. Good call.

An Interesting Aside
Another deal announced July 22 was the sale of online shoe retailer Zappos.com to Amazon.com (Nasdaq:AMZN) for approximately $885 million in stock. Zappos CEO Tony Hsieh will continue to run the business independently from Seattle-based Amazon. Known for its premier customer service, Zappos will have the resources of a much bigger internet player to grow its business. The deal seems to make perfect sense; to the New York Times and PEHub.com, it smells more like a disagreement between venture capital firm Sequoia and Tony Hsieh. Apparently, the founder wanted to wait for an IPO exit while the venture capitalists wanted a sale. (Learn how to invest in companies before, during and after a merger in our article, The Merger - What To Do When Companies Converge.)

Online Doing Okay
There are companies making money in online media, including Health Grades (Nasdaq:HGRD). The health care ratings service reported first quarter results in late April and revenues were up 35.6%, from $9.14 million to $12.39 million, and earnings per share 41.4% from $1.16 million to $1.64 million. With Obama's health care reform under discussion, it seems that health care ratings will become more important in any new system, not less. It definitely should be able to continue to drive profitable growth. Another appealing play in online media is Priceline.com (Nasdaq:PCLN), and not just because of the company's spokesman, William Shatner. Priceline's business model makes more money than either of its rivals, Expedia (Nasdaq:EXPE) and Orbitz Worldwide (NYSE:OWW), its got a great balance between U.S. and international business, and it's growing traffic to its sites at a much faster clip (40% vs. 23% for Expedia, and 15% for Hotwire), which translates into greater gross booking dollars.

Bottom Line
There are some interesting things happening online these days. However, like always, those who win will have sensible business models executed flawlessly. Those who don't will hemorrhage themselves into oblivion. (For a related reading, check out The Impact of Recession on Businesses.)

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