Penthouse bets $500 million on adult social networking

14 12 2007

Penthouse bets $500 million on adult social networking

Posted by: in Companies Competitive Strategy

Filed under: Deals, Competitive strategy

Penthouse Media Group has agreed to acquire the parent company of AdultFriendFinder, a website devoted helping adults find love — or at least sex. The site is different from more mainstream (although AdultFriendFinder’s traffic would seem to indicate its more mainstream that we care to think) sites like eHarmony in that the emphasis is on “hooking up” and there’s little in the way of bragging about couples who met on the site.

According to the USA This day, Penthouse, which was acquired by Marc Bell and Daniel Stanton out of bankruptcy in 2004, plans to aggressively pursue acquisitions and possibly take itself public in the next few years.

Here’s what’s interesting: this is a company that owns social networking websites and was founded in 1996. It just sold for $500 million.
Playboy (NYSE: PLA), the most famous brand in sex with an iconic magazine, websites, pay per view content, shows on E! and a mansion that’s the envy of each bachelor in America … currently sports an enterprise value of under $400 million.

The reason? Penthouse thinks it can make a lot of money with AdultFriendFinder and the other social networking sites that come with the deal. For all its history, Playboy has been providing investors with an anemic return on equity for years.

As Marc Bell, CEO of Penthouse Media Group stated, social networking is “where the money is.” Playboy is also trying its luck with social networking, but so far the results haven’t been too promising. PlayboyU.com has an Alexa ranking of 292,431. AdultFriendFinder.com? 70.

But I’ve to wonder: If Penthouse is willing to spend hundreds of millions on acquisitions as a prelude to a possible IPO, don’t they at least have to take a look at Playboy? If they do, that could turn into one of the more pleasing M&A stories in years — I love the idea of watching the FTC lawyers trying to protect the interests of consumers by blocking a consolidation of the porn industry.