There was a time when the biggest companies in digital media seemed to be on the verge of selling for billions of dollars. Vice Media, co-founded by the eccentric showman Shane Smith, was valued at $5.7 billion back in 2017. BuzzFeed and Vox Media were both valued at $1 billion or more six years ago, based on investments of about $200 million each from NBCUniversal, the parent company of MSNBC and NBC News.
By Jeremy Barr
But, those huge values have so far proved largely theoretical. With the exception of German media conglomerate Axel Springer’s decision to pay about $1 billion this past summer to buy Politico, few buyers were willing to actually pony up the money to buy the hottest brands in digital media. Vice Media’s valuation has also ticked down substantially, as companies have struggled to achieve sizable profit margins. “The luster came off,” said Brandon Ross, a media and technology analyst at LightShed Partners.
In the absence of well-heeled suitors, some of the most influential and successful companies in the digital media industry have instead pivoted to a strategy of consolidation, buying up and merging with onetime competitors. With a larger total audience, those companies can make more money from corporate advertisers and are better positioned to compete with tech giants such as Facebook and Google — or so the thinking goes.
Monday night provided a vivid example of such strategic collaboration, with the D.C.-based Vox Media announcing plans to acquire and merge with the New York City-based Group Nine Media, one of the largest media transactions in recent memory.
The deal was made in exchange for stock in the combined company, not cash, said Vox Media chief executive and co-founder Jim Bankoff, who will run the expanded entity. “The acquisition of Group Nine will contribute to making us an even stronger company collectively, and that is what we and our board of directors determined is the best path forward for all of our stakeholders,” he said in an interview.
Specifically, Bankoff said the deal will provide more financial resources for the company to invest in editorial products such as the general interest news site Vox.com, tech news site The Verge, sports news site SB Nation, and now the media websites that make up Group Nine Media, including travel lifestyle brand Thrillist, news-focused site NowThis and the Dodo, which publishes cute and educational content about animals.
“I have zero question that it’s the right decision,” Group Nine Media chief executive Ben Lerer told The Washington Post. “I think this marries two things that are really working, while a lot of the dealmaking … around digital media is trying to solve a problem by putting things together. This not about that. This is about growth.” (Lerer will serve on the board of the expanded Vox Media and will be “really available for anything and everything” that company leadership needs, he said).
Asked why Group Nine Media chose a merger rather than a sale to a larger company, Lerer said he looked around and chose the best long-term option. “This really wasn’t about going to sell the company,” he added. “We weren’t running a sale process and Vox made the best bid. This was about finding a partner that made sense” and shared a similar vision for how to achieve future success.
Both companies had already grown through acquisition. Vox Media purchased New York magazine and its digital properties in 2019. In April of this year, the company acquired a podcast-focused company called Cafe Studios that was co-founded by Preet Bharara, the former U.S. attorney for the Southern District of New York. Group Nine Media, which was formed in 2016 with substantial funding from Discovery Communications, acquired PopSugar in 2019.
BuzzFeed is embracing a similar strategy of consolidation, but has done so in a different way, choosing to begin selling stock on the public market through a merger with a special-purpose acquisition company (also known as a “blank check company”) that will provide money for the company to make more investments. As part of that process, the company recently acquired youth entertainment company Complex Networks for $200 million, plus $100 million in company stock. BuzzFeed had already grown bigger by acquiring the HuffPost website in November 2020, which has changed hands multiple times since it was first sold to AOL in 2011.
When it began trading on Nasdaq at the beginning of last week, BuzzFeed said it became the first publicly traded digital media company. The stock began selling at a price of $10.95 per share, but ended trading on Monday at $6.25, a 43 percent decline. The company says that it is too early to draw any major conclusions from just over one week of trading — either about BuzzFeed’s value or about the broader strength of the digital media industry. “We’ll focus on the long term and not stress about the daily fluctuations of our stock price,” chief executive Jonah Peretti assured employees last week.
Vice Media, which acquired the women-focused lifestyle brand Refinery29 in 2019, has not gone public and has not made any further major transactions but has continued to raise gobs of money from investors. The company raised $135 million more this past fall, including additional investment from longtime backer James Murdoch, the son of Rupert Murdoch. Company chief executive Nancy Dubuc, who replaced Smith at the helm in 2018, said in September that the company is “in a stronger position today than ever before.”
Jim VandeHei, a former Washington Post reporter who co-founded Politico and then co-founded Axios, which he now runs, said that consolidation “makes a lot of sense for older, bigger companies in search of size or their next act.” But he left Axios off that list. “We thought about consolidation and decided it’s easier in this environment to grow on our own,” he said, citing positive trends in the advertising and subscription business. (Axios reportedly held talks with Axel Springer about a possible sale earlier in the year.)
For now, Vox Media is focused on completing its merger with Group Nine, a deal that is expected to close in the first few months of 2022. But Bankoff has not ruled out going public — like BuzzFeed — in the future. “We’re always going to do what’s in the best interest of our stakeholders, our employees, our audience, our investors,” he said. “Remaining independent — operating from a position of creative strength, financial strength and cultural strength — is and has been our priority.”
Media consolidation deals might make sense for company management and investors, but mergers often lead to employee layoffs. Vox Media’s chief executive indirectly referenced that possibility when he wrote about integrating functions at the two companies in an email sent to employees on Monday afternoon.
But, he assured employees that the company “will be thoughtful” in making those decisions down the road.
