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When Los Angeles-based Target Media Partners agreed in September to purchase 19 publications in eastern Washington from Lee Enterprises, it marked the 38th acquisition for this growing publisher of classified and niche advertising products.

Today, after eight years of existence, Target Media has more than 75 publications and 30 web sites, 30 locations, average weekly distribution of more than 1,250,000 copies in 26 states, and estimated annual revenue of more than $100 million.

The combination strategy of acquisitions, internal growth of both new and existing operations, and margin improvement has resulted in compound annual revenue growth of more than 20% and operating profit margins comparable to those of traditional newspapers.

The company manages its operations on a decentralized basis and does not change the brand-names or formats of the acquired publications. After an acquisition is completed, the primary change is the adoption of Target Media’s proprietary ad taking, pagination and circulation computer systems.

Company management believes that buying established publications and growing them carries much less risk than starting new ones, according to Jack Humphreville, the director of acquisitions. “We try to change as little as possible,” he says. “After all, these papers have talented people and established brands that have served readers and advertisers for over 20 or 30 years.”

The company is the successor to Recycler Classifieds, a free ad classified paper that was started in a Hollywood garage in 1974. In 1993, Recycler, by then the world’s largest publisher of free classified ads, was acquired by a buyout group consisting of DLJ Merchant Banking, Mark Schiffmacher and Susan Humphreville.

In April 1998, Recycler Classifieds, after four years of substantial growth, was acquired by Times Mirror Corp., the parent company of The Los Angeles Times, for an announced transaction value “in excess of $200 million.” As part of this transaction, Target Media, consisting of Recycler’s non-Los Angeles publications, with revenue of about $20 million, was created.

Today, most of the publications are classified and photo ad publications focused either on a specific category or a local market. Furthermore, unlike Recycler Classifieds, most of its publications are free circulation rack distributed products. Today, only 10 of the local publications have paid circulation.

The organic growth of Target Media’s publications flies in the face of the performance of many newspapers’ classified pages. The company attributes this success to its focus on advertisements as the “editorial content” its readers want to see, the resulting self-targeted nature of its readers, and the price advantage its publications have over newspapers and other media.

This price advantage is a function of low-cost rack distribution methods, the self-selected nature of the readers and very low editorial expenses.

Humphreville indicates that Craigslist, Google, Yahoo and other popular online classified sites have slowed growth for them in some markets. On the other hand, the Internet presents a great opportunity as Target Media has countered with its own online sites, which management says are growing revenues at a 40% annual clip, albeit off a small base.

When asked about an exit strategy, Humphreville said, “We have the financial flexibility and the ownership profile to do what we want, when we want.”