Editorial: What’s j2 Global going to buy next?

So what's up with j2?  I was perusing their quarterly report (2013 - Q1) and see their revenues are solid at $94M with an EBITDA of $45M and all seems good. I got to wondering about what might be next for j2 Global on the M&A front. Seems to me they're not done buying just yet.  I've heard rumors that maybe they feel that the gravy train has run dry on fax, and now it's time for something new. I think fax can still be a play for them however, just as long as they acquire the right company. If they buy something other than fax, they may wish to consider complementary technologies like electronic signatures as one of many examples. I think there are some ideal targets out there j2 may wish to consider if they want to expand their fax business. 

In short -  here's my two cents:

• If they buy more fax: Go "upstream", not down. j2 should find a cloud messaging company that already meets the needs of the larger, integrated corporate enterprise. The growth is with outbound production fax and inbound fax capture to workflow and larger organizations require secure and integrated fax solutions. 
• I recommend: That they steer clear of acquiring another online fax messaging company that simply sells, “more of the same” as eFax or any of the other numerous brands of fax they own. Most of them are targeted at SOHO/SMB customer segments and that's not where the significant opportunities lie - at least for j2. 
• If they buy “something else”: Diversify into “beyond fax” technologies that are complementary to fax: Electronic signatures, digital signatures, Fax ATAs, secure email, and secure file transfer come to mind. There are others of course.

My complete commentary is below.

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I got to wondering if j2 Global Services may be sniffing around for another acquisition these days. I sense they have momentum right now. If my hunch is right all I can wonder about is WHAT exactly are they going to buy? More Fax maybe? Maybe they'll consider investing in “adjacent” technologies that may complement fax (electronic signatures is a good example).  A third likely possibility is they'll acquire something that bolsters one of their other main product lines, much like the recent acquisition of Backup-Connect.

Either way, I think it’s safe to say that a company that has had multiple dozens of acquisitions in its history, and with its current bloated fax portfolio - that it’s a fair bet that maybe this time they're looking beyond fax. If not, then I would hope to see an acquisition that actually adds something meaningful to their current fax portfolio.

Let me explain: Putting more of their cash into yet another online fax company that offers consumer-based, self-serve, low cost, pay-as-you-go fax and related services - is simply more of the same and shows no strategic thinking in my opinion.

Why? Because where they need to go when it comes to fax is “upstream”, not down.

Let’s face it: eFax traditionally targets the downstream consumer (B2C) and SOHO/SMB market segments. They lack a stronghold, however as a provider for the higher-end, medium-to-large company enterprises – and the mission critical, redundant, secure business applications they operate that rely on fax (ERP, CRM, ECM, etc.). None of the j2 fax products or brands really satisfies the demands of a larger corporate enterprise. Granted, eFax® Corporate and eFax® Developer are products that address those markets, but it’s hard to imagine that this is their sweet spot right now and their "street cred" as a player in the upper-echelon arena of customers is just not there.

If they want to target the true "money" nascent in this higher-end segment they will need to demonstrate abilities in very technical product integrations with things like: Legacy back office systems, ERP/MRP applications, document workflow systems, and a wide range of host platforms that are still used in production environments. Moreover, inbound fax capture manipulation tools like OCR, Barcodes, PDF, and XML conversion tools are necessary to meet the demands of inbound fax business processes.  In order to get upstream, these are the development tools, functions and capabilities they'll need.  - BUY IT!

j2 needs to find a way to capitalize on this segment and their biggest leverage is their cash reserves for what seems like an ongoing M&A run.  It's even sweeter for them since the trend to migrate fax services to the cloud is exploding so this puts them into a position to be a key player in the larger enterprise arena. They have the money, but will they buy the right solution?

j2 Global would bode well if they acquired a fax company that has technology expertise in integrations and production fax that's also cloud-based or cloud portable – pure and simple.  A prospective fax vendor with a significant vertical industry would be even better. I would take a serious look at Retarus, Esker, and even Biscom if I had a say in the matter, but that's just me.

What if it’s not a fax buy?

It’s most likely that if my hunch is correct that j2 is shopping again, they could in fact buy something other than fax. As far as diversification, I would suggest looking at complementary technologies like electronic signatures, digital signatures or secure file transfer, to name a few. Many believe that e-signatures for example, will replace fax technology. I myself have written about this yet I should caution that electronic signatures will not solely be responsible for replacing fax. That's a topic for a future article. 

My hunch may be wrong, but if j2 Global wants to get serious about making a run for more share of the online fax market, going upstream is the right move.