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Discovery In Digital Deal

10/19/2007 8:00 PM Eastern

Discovery Communications said last Monday that it has agreed to purchase HowStuffWorks.com, a popular how-to Internet Web site that has more than 3.8 million unique visitors in the U.S. per month.

Discovery Communications, which includes networks such as Discovery Channel, TLC and Animal Planet, said Monday it expects to close the deal by year-end. While Discovery did not reveal the purchase price, executives familiar with the deal — which also includes other digital properties — have priced it at about $250 million in cash.

Those other digital properties include expert ratings and reviews from ConsumerGuide.com, an extensive database of digitized maps owned by GeoNova Group (formerly MapQuest Publishing), and QuickCompliance, a medical-education business that complements Discovery's existing health businesses.

Pali Research media analyst Richard Greenfield cheered the deal, adding in a research note that it shows that Discovery is “trying to build an Internet strategy that goes well beyond repurposing its video content online.”

And though the price may be a little high — Greenfield noted that HowStuffWorks raised about $75 million in a venture-capital round of financing in April that valued the company at about $150 million — he said it appears to be worth it.

“While Discovery was the most logical buyer for [HowStuffWorks], we believe Discovery might have paid a bit more than it otherwise would have as it needed to jump-start its online strategy beyond its relatively unexciting channel Web sites,” Greenfield wrote.

HowStuffWorks was started by North Carolina university professor Marshall Brain in 1998 and offers unbiased easy to understand explanations on how the world works. The Web site has been run by The Convex Group, an Atlanta-based investor group led by WedMD founder Jeff Arnold, since 2003.

Discovery president of digital media, emerging networks and business development Bruce Campbell said that the acquisition will provide the group of networks with an outlet for its vast library of content — about 100,000 hours at last count. Discovery plans to make short clips of its shows available on the Web site, and through a licensing agreement with HowStuffWorks.com, has already begin to do so.

Campbell said plans are to launch a HowStuffWorks show on Discovery in the summer of 2008, a half-hour daily strip that will be based on the most popular searches on the Internet site each day.

“We, today, view ourselves as the leader in knowledge and curiosity on-air,” Campbell said. “But we'd like to be able to extend that into the Internet. With HowStuffWorks, we now have the platform to do that.”

Campbell added that to date, Discovery's Internet strategy has been largely show-based. With HowStuffWorks, Discovery gets to add high-quality text-based articles and a search-intensive Web site to the mix.

“We see that as a terrific platform into which we can insert our high-quality video clips,” Campbell said. “We also think it gives us something very unique and exciting to offer our advertisers. Around any given topic, we can package together inventory from our on-air networks, from our show-based digital properties and HowStuffWorks.”

Campbell said that the decision to acquire the Web site grew out of discussions on sharing content with the site earlier this year.

“We saw that there was such a terrific overlap that it made sense to bring the companies together,” Campbell said.

September