Consolidation in Online Newspaper Business

TownNews.com, which helps smaller online newspapers with publishing and advertising infrastructure, has bought similar businesses, and an online ad network, from competitor PowerOne Media.

The companies said it was an all-cash deal but wouldn’t reveal further financial details about the transaction. The acquisition is expected to close March 1.

The agreement calls for PowerOne to hand over its Zwire publishing tool and its AdQuest classifieds business, along with its online advertising network. The acquisition creates a one-stop-shop where media buyers can tap into around 1,500 online newspapers across the country.

“We’ll be able to allow advertisers to have a national footprint with one buy,” Marc Wilson, chief executive officer and founder of TownNews.com, told ClickZ News. “We’ll really be able to hit into a lot of markets that have really been inaccessible to ad agencies, just because it was too hard to make all those separate buys.”

The company has an office in Manhattan staffed by six sales people. It will maintain that presence for its ad network and also open a separate facility in East Greenbush, New York, where PowerOne is headquartered. TownNews.com is based in Moline, Ill.

TownNews.com and PowerOne Media were brought together by Lee Enterprises, the fourth largest newspaper group in the U.S., which is an investor in both companies. PowerOne also counts among its investors many of the larger newspaper groups, including Advance Publishing, the Hearst Corporation, Belo Corporation, Stephens Media Group and the E.W. Scripps Company.

PowerOne, meanwhile, will focus on its two vertical solutions. Car Cast is focused on online automobile listings while Career Site deals with recruitment advertising.

“We looked across all of our business units to see how we can become more relevant in the local marketplaces and in helping the newspapers become much more competitive against the pure plays and the entrenched competitors,” Jack Lintol, CEO of PowerOne Media said. “In the publishing and national ad sales business it was very clear that we would have to purchase a business or be purchased. Looking at all of the opportunities, we deemed this to be the best approach to getting our products to be the best of breed.”