Momentum is developing towards consolidation in the digital media sector, as players large and small are looking for potential combinations.
BuzzFeed Inc. and NowThis, the owner of Group Nine Media Inc., two of the largest risk-averse outfits, is exploring offers to buy competitors or go public through special-purpose purchasing companies or SPACs, according to people familiar with the issue. White check companies raise capital by going public and can put their income into transactions.
Among relatively smaller players, short-form publisher Axios is exploring potential acquisitions, while local news network Patch weighs in on a sale after receiving input purchase interest, people said.
Other potential targets are beginning to emerge, including the youth media company Complex Networks and start-up curator TheSkimm. None of the companies are currently in talks to sell, some people said.
Several factors have created fertile conditions for trading. Major tech players, including Alphabet Inc.
Google and Facebook Inc.
they have cornered the digital advertising market, pressuring publishers to find other ways to grow.
The appetite among venture capitalists to continue financing the digital media has declined. Large media companies, including AT&T Inc.
WarnerMedia, Comcast Body
NBCUniversal and Walt Disney Co.
, have invested millions in digital startups and were once considered the logical buyers of such outlets. But as those media giants focus on their video streaming business, their interest in digital publishers has waned.
An older wave of consolidation in the sector towards the end of last year saw a series of high-profile stock transactions. Vox Media Inc. agreed to buy the editor of New York New York Media magazine, Vice Media bought the women’s-focused publisher Refinery29 and Group Nine bought PopSugar.
The transaction was halted in 2020 as a coronavirus pandemic triggered a sharp drop in ad sales, leading digital media companies to cut costs through layoffs and payments.
Digital advertising has begun to recover in recent months and some of the largest new media companies have returned on a stronger footing to conclude transactions.
BuzzFeed CEO Jonah Peretti said in a note to employees on Thursday that the company will make a profit of $ 30 million this year on revenue of $ 300 million. Vox Media is expected to be profitable this year, according to a person familiar with the matter, and its revenues rose in the last quarter of the year.
The Nine Group, which also owns sites such as The Animal-focused Dodo and the lifestyle-oriented Thrillist, has consulted advisors in recent weeks on buying competitors through a SPAC, The Wall Street Journal reported. Such offers that could expand the audience and increase the leverage with competitors.
BuzzFeed is exploring the public through a SPAC, according to people familiar with the matter, but has not begun talks with empty-checking companies. Media executives see Vox Media as an attractive candidate to be acquired by a SPAC.
Axios, a digital publishing startup specializing in short news, has held talks to bring together a group of business-to-business publishers or consumer media sites, according to someone familiar with the matter.
Earlier this week, Axios said it had acquired digital publisher Charlotte Agenda as part of the push for local news. Axios believes it can market its internal publishing system to corporations for its own internal communications and is trying to position itself as a software service provider, people said.
The Patch Local Network, owned by private equity firm Hale Global and Verizon Communications Inc.,
appealed to an investment bank to consider a sale after receiving interest on the purchase, according to people familiar with the matter. Patch is among the digital players who have tried to help fill the gap caused by the long decline of local newspapers. The company went through trouble and suffered a sharp cut in costs under the previous AOL owner, but recovered under Hale, its new majority owner.
Dealers face potential hurdles. First, many do not have the cash flow to finance purchases. Making transactions through companies without verification is not as simple as traditional procurement and requires a regulatory process. But publishers could choose this route because it provides the necessary capital, said Tony Haile, a digital media entrepreneur and CEO of the Scroll subscription service.
“You have a lot of people who are willing to sell and all the traditional buyers are practically missing out on the action,” Haile said. “So when an opportunity arises that might have a limited window like a SPAC, you have to move.”
Private companies are flooding special purpose procurement companies or SPACs to bypass the traditional IPO process and get a public listing. WSJ explains why some critics say that investing in these so-called blank-check companies is not worth the risk. Illustration: Zoë Soriano / WSJ
—Lukas I. Alpert, Jeffrey A. Trachtenberg, and Cara Lombardo contributed to this article.
Corrections and amplifications
An earlier version of this article included a diagram showing the US audience of large digital media companies that have reduced the number of readers by omitting thousands. (Corrected on December 18)
Write to Benjamin Mullin to [email protected]
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