💀 RIP "DIGITAL MEDIA"

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Digital media conglomerates like BuzzFeed and Vice are seriously struggling. It’s because the future of media doesn’t belong to them

NOW THAT EVERYONE can make bankable content, what are digital media firms really worth?

— It’s an intriguing question, one that a lot of companies in the sector are trying to figure out.

IF YOU ARE interested in the digital media space, you’ll know companies like BuzzFeed, Vox, and Vice.

— These news sites spent a lot of money acquiring similar firms in the late 2010s/early 2020s as part of a larger strategy to grow and go public.

— If you’re a fan of the media business, you may —for example— be aware that Vox bought the venerable culture, politics, and lifestyle magazine New York in 2019, or that BuzzFeed bought HuffPost in 2020, before going public itself.

— You might also know that Vice, which owns the popular lifestyle site Refinery29, was valued at US$5.7b back in 2017, and has been trying to go public for years.

BUT. DID YOU know that BuzzFeed is down some 90% from its IPO price?

— Or that Vice today is struggling to pay its bills?

WHAT HAPPENED?

— The answer is two-fold.

— First, digital media firms like Vice and Vox apparently thought that they could merge their way into competing with Google and Facebook for ad dollars.

THIS WAS ALWAYS going to be a challenge. 

— As everyone knows, Google and Facebook sell ad space against essentially limitless user generated content that’s freely and willingly posted on their sites, or —in Google’s case— on the internet.

— How could a relatively limited selection of human-written and curated content, ie., BuzzFeed’s listicles, Vice’s edgy exposés, and Vox’s explainers, ever really compete with… you know, the entirety of human expression that’s posted online every day?

— It can’t.

THE SECOND REASON these sites all bought one another and tried to go public is the more intriguing one.

— Long term investors in these media businesses wanted an out.

— Years ago, Disney put more than US$400m in Vice. And NBCUniversal put a similar figure into BuzzFeed.

— From 2018 to early 2022, BuzzFeed, Vice, Vox Media, and other digital media firms like Group Nine and Bustle Digital Group (BDG) engaged in various M&A activities not only to scale up, but to provide a way for long-term shareholders to exit their investments.

THAT HASN’T really worked out.

— Today, Vice is seriously struggling to find a buyer, and may actually break itself up into pieces.

— Meanwhile, BDG and Vox have cancelled their IPO plans outright.

— The digital media conglomerate model appears to be at odds with a simple, fundamental fact:

CREATORS AND CONSUMERS own the media landscape today.

— As one digital media investor put it, “in the old days of media, with TV networks, if you were down, you could revive yourself with a hit.”

— That era’s over.

— “In the Internet age,” he continued, “everything is so easily substitutable.”

— “If Vice goes down, the audience just moves on to something else.”

FIVE OR SIX years ago, if you told any of these huge digital media firms that a lip synching app would become the largest, most popular digital property in the world, one so powerful that lawmakers in the world’s richest economies would be debating legislation to ban it, they wouldn’t have believed you.

— And as hard as it is to believe, even TikTok is feeling like old news these days.

— Now, as AI and amateurs are poised to create almost every bit of content we consume, you better believe the legacy digital media firms are paying attention.

BUZZFEED STOCK WAS trading at just 95¢ a share at the end of January 2023 when they announced they would start using ChatGPT to write their content.

— The stock popped almost 400% on the news, hitting $3.87 per share within two days of the announcement.

— Wanna know where BuzzFeed trades now?

— 92¢.

BOTTOM LINE: DIGITAL media firms are certainly paying attention to how fast everything’s moving in their space.

— Thing is, it’s not clear what they can do about that.

— The media space today is owned by you, me, and ChatGPT.

More:

The digital media rollup dream is dead for the moment — now it’s all about core brand strength »»

Written by Jon Kallus. Any feedback? Simply reply.