eBaum's World gets a buyout with strings attached

How much would you pay for a viral-video site which some have charged with stealing clips? Depends on who you ask. eBaum's World has just sold for $15 million. Or is it $17 million? Or $67.5 million? HandHeld Entertainment, the San Francisco-based developer of the ZVUE portable media player, has agreed to shell out $15 million in cash and $2.5 million in stock for the Rochester, N.Y.-based website. The rest will come over the next three years, if eBaum's World meets traffic targets and other conditions. The conditional nature of the deal reflects the buyer's shaky finances — and also, a growing hesitancy to splash cash on websites with uncertain futures.


HandHeld is borrowing $24 million, largely to finance the eBaum's deal. That leaves it with $9 million — not enough to pay eBaum's the extra $15 million it's owed under the earnout deal. That means that eBaum's $67.5 million isn't just conditional on its traffic — it's conditional on HandHeld's ability to raise money.

No matter. The takeaway from this deal is that buyers, for a host of reasons, are paying for performance when buying interactive properties. Either they're shelling out modest amounts, as Discovery did for the TreeHugger green blog, or they're placing conditions even on the most promising acquisitions, as Disney did in holding back half of its $700 million payout for Club Penguin. That's a clear sign, that despite the blog-business hype, it's still a buyer's market.