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Laughing All the Way To the Bank

Want to buy a funny website? If so, you’re in luck. Within days of each other in November, The Onion and Funny Or Die, two of the best-known comedy brands in the digital space, were reported to have contracted with financial advisers to explore respective sale possibilities.

The Onion launched in 1988 as a parody newspaper distributed locally in Madison, Wis., and has since expanded into digital video and television via its Onion News Network brand and Onion Digital Studios, which began in 2012 as part of the YouTube originalchannels initiative. Funny Or Die was founded in 2007 by Will Ferrell and Adam McKay as a hub for online comedy videos, featuring in-house-produced and user-generated content. Neither company chose to comment for this story, but both share one obvious motivation for putting out the for-sale sign: The big-ticket numbers following dollar signs in recent comparable deals.

When it comes to digital video, major media companies have not been shy about pulling out their checkbooks. Their focus of late has been on the multichannel networks that gestated on YouTube and are more recently evolving off of that platform. In 2013, DreamWorks Animation acquired AwesomenessTV for $33 million. AwesomenessTV then turned around last April and bought fellow MCN Big Frame for $15 million, motivated by the prospect of absorbing the company’s talent management division. In September, Otter Media, a joint venture of AT&T and the Chernin Group, agreed to acquire a majority stake in Fullscreen in a deal reported to be worth $200 million to $300 million.

But the high-water mark of MCN deals was Disney’s agreement in April to purchase Maker Studios for $500 million—a base price that could balloon to as much as $950 million with incentives.

“If you’re a seller, you can argue that the market conditions are favorable, arguably as favorable as they have been coming out of the last recession,” says Tuna Amobi, a senior analyst for S&P Capital IQ. Though he would not offer a valuation for The Onion or Funny or Die, Amobi said that Disney-Maker and other MCN agreements “provide some reference points” for deals in the Internet space. “My hunch,” he adds, “is that most of the large media companies are kicking the tires on any number of digital acquisitions, typically in the hundred-to couple-hundred-million or more range that might fit into their existing properties.”

Both The Onion and Funny Or Die are believed to be seeking nine-figure sale prices. That amount of money would be no big deal for companies such as Disney or Time Warner—which through Turner Broadcasting holds a minority stake in Funny Or Die.

What a media giant might be looking to get out of its investment depends on the buyer. A large company could look at Funny Or Die or The Onion as a tuck-in deal that could slip easily into its existing framework. Either or both brands could serve as part of a comedy Frankenstein monster built from multiple components rolled up into a larger network— much as digital company Defy Media was built through a series of acquisitions. From an advertising perspective, both Funny Or Die and The Onion offer large, youth-oriented audiences that come seeking a particular type of content.

For companies with footholds in traditional media such as television, either Funny Or Die or The Onion could work best, at least initially, as content incubators. Properties developed by either company could be easily leveraged by a corporate parent in the same way that Disney leverages its Marvel properties across multiple platforms.

And Funny Or Die and The Onion both have something going for them that other digital media companies don’t: They’re funny.

“Online video is a fast-growing category in general, and you can even parse that down,” Amobi says. “For example, a site that is focused on comedy is going to demand a premium because that’s not been as prevalent as other kinds of video content.”