Peter Kafka

Recent Posts by Peter Kafka

GetGlue + Viggle Is a Big Bet Based on Small Numbers

The Library of Virginia

Viggle, which pays users to “check in” to TV shows, says it will shell out more than $70 million for GetGlue, which lets users “check in” to TV shows, but doesn’t pay them.

The combined company, according to a Viggle press release, will be the “dominant force in the exploding social TV market.”

I don’t think that’s true.

I think that lots of people like to talk about TV shows on Facebook and Twitter, but I’m not at all convinced that there’s an “exploding social TV market” — at least not one where people use specialized services to help them talk about TV.

In any case, it’s a very small market right now.

Viggle says the combined company will have more than 4 million registered users, but the number that matters in the Web world are active users — people who use the service at least once a month. That number is about 1.5 million — a million from GetGlue, and another 500,000 or so from Viggle, says CEO Robert Sillerman.

And those numbers get much smaller once you apply them to a specific show — which is what TV programmers and advertisers care about, since the idea behind the services is that they can boost ratings. Here are a couple of charts that GetGlue provided last month, when it was arguing that it had more influence on social TV than Twitter:

Conclusion: GetGlue might get more people talking about a particular episode of “Modern Family” than Twitter does (live “event” TV is a different story) — but it’s still a tiny fraction of a TV show’s audience. Likely less than 1 percent.

Sillerman’s argument is that Viggle does a much better job of bringing its audience to a particular show, because it rewards them with goodies like iTunes gift cards. He says that on any given night, Viggle can get 100,000 of its users — 20 percent of its active user base — to check in to a program.

If that math applied to GetGlue’s audience, it could bring another 200,000 users. And that certainly could be significant, especially for cable TV shows that are happy to get a couple million viewers. But that’s a lot of assumptions, so we’ll see.

Meanwhile, one other bit of merger math: Viggle intends to pay $25 million, plus 48 million shares, currently valued at $1.30 each, for GetGlue. At the end of June, Viggle had $3.8 million of cash on hand, and said it would need at least $22 million more to fund operations for the next year. Now you can add another $25 million total, which Sillmerman says he will likely raise via debt.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik