October 18, 2019

The End of an Era and The Rise of Smart Buys

When it was first announced that Vice Media and Refinery29 were working on an acquisition, it was likely the biggest sign that an era was ending in media.

Ashkan Karbasfrooshan had a great thread on Twitter that summed up how this phase of digital media was ending. It’s worth reading.

Unlike over the past few years where media companies were looking at growth at all cost—buying revenue in many respects—the name of the game is now profitability and cash flow.

A piece on Digiday titled “The age of the operator: What the cluster of digital-media acquirers are doing differently” discussed this, with this part jumping out:

Dealmakers in the space have taken on a different approach in recent years, as opposed to when venture-capital money flooded the sector and valuations soared. The new acquirer largely follows a different playbook that has cashflows and profit front of mind, not simply growth at all costs. Digital media has entered the age of the operator.

A swift path to profitability tends to come from brands that own, rather than rent, their audience. The majority of recent deals have involved highly-focused, subject-specific verticals.New acquisitions are quickly tucked into the margin-sensitive organization’s wider office space, ad-tech stacks and other back-office functions. Overlapping costs are largely stripped out, rather than continuing to operate the assets as separate, adjacent businesses.

The bold is my emphasis. My newsletter is literally called A Media Operator. It’s one thing to chase scale for scale’s sake, but it’s entirely different to run a business. Running a business means having profit. Media companies that are spending venture do not operate the same way that people that spend profits do.

It’s good to see this shift occurring. Although some valuations remain pretty insane (does anyone really think Vice is worth that much?), the fact that there are more deals being down around cash-flow positive businesses points to a healthier market over the next couple of years.

DotDash has taken a smart approach to its acquisitions. In 2019, it purchased four digital-media brands:

  • MyDomaine: Lifestyle and entertaining
  • Byrdie: Beauty
  • Brides: Weddings
  • Liquor.com: Alcohol

None of these are hard hitting journalistic businesses. Yet, the evergreen nature of its content allows for more consistent and known audience metrics. More importantly, it’s straight forward to imagine the right advertising partners for these sites. As we move further away from cookie-based advertising and into contextual advertising, selling against these niche sites will become even more important.

DotDash is also taking the approach of moving the ball forward consistently rather than throwing a Hail Mary pass. By purchasing smaller, safer sites, it can build out niche networks, and then start selling ads against the entire portfolio.

The primary benefit to this model is that there are clear synergies. Audiences are loyal to the content, so as long as that doesn’t change, the entire business side can be streamlined. Do you need separate marketing, sales, HR, finance, etc. for each site? Unlikely.

For larger media brands that are already profitable, this presents unique opportunities, especially if you’re thinking about launching a subscription business. Jessica Lessin, founder of The Information said at a recent event that a bolt-on acquisition might help differentiate your content enough to encourage users to subscribe.

One example is Skift. It purchased Airline Weekly a year ago. Airline Weekly is a subscription newsletter that costs $995 for a solo license. In the announcement post, the founders of Airline Weekly shared their thoughts on the acquisition:

Having the backing of a much bigger media company means we can provide a product and level of service beyond anything imaginable just a few weeks ago. In short, being a part of Skift means we’ll be able to do a lot more. Dig deeper. Go further…

In your niche, are there sub-niche products that you can bolt onto your brand? Skift’s approach of buying a subscription product made perfect sense and I imagine there are plenty of other opportunities out there similar to this.

Ultimately, this points to the need for chasing profitability. Once you’re there, you are in control of your destiny. You can either sell to someone larger than you—and command a greater multiple than just revenue-based—or you can look to use that profit to buy smaller assets that you can bolt on. Both approaches are great.

There’s no denying, though, that this is a buyer’s market. We’ll see if the era of growth for the sake of growth really does come to an end or if media companies will forget these lessons and start to focus on unsupported growth.

TechCrunch reported that The Information is introducing a consumer app called Ticker.

The Information describes Ticker as its first consumer app. The assumption is that anyone who’s currently paying the $399 annual fee for an Information subscription needs it for their job — whether they’re an investor, entrepreneur or some other professional in the tech industry.

The new app, meanwhile, is designed for anyone who might be interested in keeping up-to-date with the latest tech news, and it’s priced much more affordably, at $29 per year. (Information subscribers will get access as well.)

At its core, this is a curation app where The Information team will write short summaries about tech news that other outlets have reported on. As many have figured out, if you can save people time with smart curation, there is serious money to be made.

The price point is incredibly interesting to me, though. At $29/year, they’re asking people to pay less than $2.50 a month for the curation. My question is whether this is going to add a considerable amount of work to the team. If they’re just replicating the Briefing section on The Information, then it’s just using the same piece of content for two revenue streams.

I’m actually very curious to see if this might be where The Information starts to introduce advertising. Here’s a screenshot of what the app will look like:


The product I would create is a 100% share of voice sponsorship sold by the day. The Information could inject the ad between every few stories and it’d be a static banner. Quartz used to do something similar with their mobile app and when they quoted me a few years ago, I seem to recall it costing thousands of dollars a day.

By going 100% share of voice, The Information can start to generate ad revenue without having significant scale since they’re delivering highly viewable impressions that are dedicated to one partner. Plus, people are paying for the content, so The Information knows more about the consumer, which can help with sales outreach.

Although The Information itself has never rolled out advertising, since this is technically a new product, the company might not have the same requirements for staying ad-free. Back in June, they were hiring a head of event and ad sales, so I am curious to see how creative they get.

Speaking of TechCrunch, Danny Crichton, the former executive editor of Extra Crunch, TechCrunch’s membership service, wrote a great piece on the lessons they’ve learned about building a subscription service. While the whole piece is well worth the read, a couple paragraphs jumped out:

People don’t pay for news. They don’t, they won’t, and every time we as an industry ask users to do so, we fail (minus maybe the NYT and WSJ). At TechCrunch, our startup news coverage drives a huge loyal following and is a major credibility point of pride for many early-stage founders. It’s not good business to put that core offering behind a paywall.

With all those constraints and rules in mind, what we ended up centering Extra Crunch on was solving the problems facing founders in building their startups. That included how to raise venture capital, recruit talent, grow, pay themselves, work with PR agencies, and much, much more. I was previously a VC, and so I essentially channeled all the questions my founders would ask me into articles that solved those problems. Since launch in February, we’ve published about 600 articles on these topics.

The niche TechCrunch identified was the number of startup founders that read TechCrunch that needs information on running a startup. Rather than trying to use breaking news as the hook to get a user to subscribe, they created evergreen-like content that touched on pain points founders might be feeling.

Their approach of using content written for Extra Crunch in other avenues—a free newsletter, podcasts and the Disrupt event—is also a smart means of promoting the content to a broader audience and also forming a deeper relationship with subscribed members.

As media companies continue looking for ways to generate subscription revenue, identifying what sort of “service” content they need is a great way to get them to start paying. In this case, TechCrunch identified their audience and created content that they needed. I imagine there are plenty of other niches where this would also work.

Give the piece a read. It’s well worth it…