Discovering How Stuff Works

Editors's Note: This article has been corrected to reflect that Discovery's Bruce Campbell referred to growth in Discovery's online segment, not overall growth. We apologize for any inconvenience.

Discovery Holding (Nasdaq: DISCA  ) may have a confusing structure, but its mission is all about explaining things. So, check out Discovery Communications' acquisition of HowStuffWorks, a stand-alone (and self-explanatory) Internet reference site that is being touted as a "primary" growth driver for the company's online business.

At first blush, this acquisition sounded a bit weird to me. Discovery Holding includes The Discovery Channel, as well as TLC, Animal Planet, The Science Channel, and the other Discovery-related TV channels (Discovery Health, Discovery Times, etc.). HowStuffWorks is an Internet site that (obviously) tells people how stuff works.

Of course, basically, both cater to the curious. HowStuffWorks' entry for How Sharks Work already includes Discovery Channel video footage. (Come on, who doesn't love Shark Week?) That's an example of how Discovery's content may go hand in hand with HowStuffWorks.

Then again, it's not alone in the quest for knowledge. Many people sate their curiosity with user-generated Wikipedia, or maybe even New York Times' (NYSE: NYT  ) About.com (About.com has proved itself a bright spot for New York Times' otherwise flagging financials). Discovery touted HowStuffWorks' 11 million unique visitors per month (with a 25% year-over-year increase). However, comScore's July data of Top 50 Web properties put Wikipedia's sites at No. 9, with 46 million unique visitors. Meanwhile HowStuffWorks didn't break the Top 50, which is dominated at the top by search and portals -- which help the curious, too. There we find Yahoo!'s (Nasdaq: YHOO  ) , Google's (Nasdaq: GOOG  ) , and Time Warner's (NYSE: TWX  ) networks of sites, respectively.

Motley Fool Inside Value's Philip Durell withdrew his recommendation of Discovery Holding last month, citing a lack of catalysts as one reason. Of course, this acquisition brings up interesting related points. (Let's not forget its plans for an ecocentric multiplatform initiative, Planet Green, for launch in early 2008.)

The deal's rumored to have a price tag of $250 million, although all the company disclosed was that operating cash flow impact will be "immaterial" in the first year. But is HowStuffWorks really HowDiscoveryBolstersGrowth? Discovery's Bruce Campbell described it as "our primary platform for growth" online, after all, and I can't help but wonder if that sounds a wee bit too ambitious. We'll have to see whether this will be a savvy growth driver for the company's online business, which is important in today's media landscape. Regardless, it's an interesting symbol of the continuing marriage of content between traditional formats and digital ones.

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