How a company describes itself to investors and the media says a lot about where it sees its future. While it started as a radio and TV broadcaster, Entravision Communications now refers to itself as “a diversified global marketing, technology and digital media company” with clients throughout the U.S. and across the globe. That last part is of growing importance as recent acquisitions have Santa Monica, CA-based Entravision operating in more than 20 countries worldwide.
And digital is clearly where Entravision is experiencing its greatest growth. The company’s 10-year old Interactive Division hauled in $101.5 million in first quarter 2021 revenue, far outdistancing the $36.1 million from its 55 U.S. TV stations and $11.3 million from Entravision’s 48 radio stations.
Driving much of that digital growth is Entravision’s 51% position in Cisneros Interactive, a digital rep firm that Entravision bought a majority stake in during fourth quarter 2020. Cisneros represents Spotify and LinkedIn for agency sales for countries throughout Latin America, working with more than 2,000 brands and ad agencies. “They are trained by the folks at Facebook on how to execute buys efficiently and effectively,” Entravision CFO Chris Young explained to investors Wednesday. “They turn around and train their own clients in these regions to do the same.”
The upside for Facebook is Cisneros guarantees the receivables so the social media giant doesn’t have to worry about collections in these countries. In exchange, Cisneros gets a commission rate of about 10%. “It’s not a high margin business but it’s one of extremely high growth, particularly in these regions of the world where these markets are less mature and Facebook is only beginning to hit its stride as far as operations are concerned,” Young said at the East Coast Ideas Investor Conference. Cisneros produced $88.5 million in first quarter 2021 revenue, up from $40.2 million one year earlier for a 120% increase.
Serving Up MediaDonuts
A similar strategy guided Entravision in June when it paid $15.1 million for MediaDonuts, which employs the same digital rep firm business model in countries in the Asia-Pacific region. Headquartered in Singapore, MediaDonuts serves more than 500 technology and consumer brand clients across seven countries. While Facebook is the anchor platform for Cisneros, the anchor tenants for MediaDonuts are TikTok, Spotify and Twitter. As with Cisneros, MediaDonuts employees are trained by the platforms and then market them to clients they have cultivated in Southeastern Asia. The company booked $28 million in revenue and had $4 million in cash flow in 2020. Revenue is expected to nearly double to $56 million by year-end 2021. “These folks service high growth platforms in high growth countries and it’s an acquisition we’re extremely excited about,” Young said. The purchase is expected to close July 1.
As Entravision has expanded its digital products over the years, revenue growth has followed. What was a $23.1 million division five years ago now generates ten times more revenue. As of March 31, 2021, digital delivered $231.5 million in annual revenue, accounting for 54% of Entravision’s billings, with $8.4 million in cash flow over the last 12 months.
Entravision Interactive now focuses on five chief business segments: Global Big Tech partnerships, such as those enabled by Cisneros; the Smadex programmatic ad sales unit; local digital ad sales targeting small and medium businesses in the U.S.; digital audio ad sales via El Botón (The Button), audio.ad and audioengage; and agency and branding products.
While Entravision’s 48-station radio platform is dwarfed by its fast growing digital division, Young said second quarter radio revenues are pacing up 84% over the dark days of 2020. “Q2 2020 was the low point of the year as far as operations are concerned due to the pandemic,” Young said. “We like what we see as we sit here and look forward to not just Q2 but third quarter as well.”
Like its broadcast peers, Entravision made significant cost cuts in 2020 in response to the recession in what Young called a “re-engineering” of its radio operations. As a result of these operational changes, radio is on track to be “a strong contributor” to cash flow in the months ahead.