Barry Diller’s IAC is testing the waters on a partial exit of Vimeo, according to two sources familiar with the situation. The company is hoping to raise a $50 million round of funding in conjunction with a spin off of the hipster online video business.
IAC is looking to keep a 50% non-controlling stake in the business, with 25% going to new investors and the remaining 25% going to the management team.
The move was a surprise to some sources familiar with IAC. One source noted how much Diller “loves Vimeo,” as it was once the hope to bring the stodgy company made up of mostly Web 1.0 brands some Web 2.0 chic. A similar deal was rumored several years ago but never came to fruition, another source noted.
The deal isn’t a a clear win for investors. While popular among hip youths, Vimeo is no cash cow. Its audience is strong–more than 55 million uniques. Its revenues–we hear $5 million–are not. And yet, Diller and IAC are peddling the investment with a $300 million valuation attached. According to sources, the valuation reflects Diller’s affinity for the brand and will likely remain a sticking point. So far, the investors we spoke with balked at the figure.
Zach Klein and Jakob Lodwick, who worked at IAC after selling College Humor to the company, started Vimeo in 2004 a few months before Youtube was founded. The company’s insistence on sticking to its indie roots hasn’t done much to boost IAC’s bottom line or investor appeal. Even as its biggest competitor, Youtube, struggles to sell ads against user-generated content (and invests in original programming), Vimeo has remained staunchly focused on its users with no apparent business model. The closest its come to a scalable revenue is the freemium offerings of Vimeo Plus, which include HD video, a customizable video player and an increased upload limit, and the recently launched Vimeo Perks, a coupon service for film equipment.
However, a fresh infusion of capital–and with it, talent, sales, biz dev, or all three–could help Vimeo monetize its its loyal user base and become a sustainable business.
Like a lot of once-hot startups languishing under the roof of a large corporation, selling it off could be the best thing IAC could do for the brand.
IAC has not responded to requests for comment.