Will G/O Media Be Dead Soon?
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There has been a big push over the last decade to roll-up various media companies in an attempt to reach scale. Dotdash Meredith, Recurrent Ventures, BDG, G/O Media, and I am sure I am missing others acquired assets left and right. And in some respects, it has worked rather well.
Despite a unbelievably tough advertising year, Dotdash Meredith reported Q3 earnings that were quite impressive. According to the report:
Digital revenue was $212 million (down 4% year-over-year) and Print revenue was $211 million (down 16% year-over-year), with each representing the best year-over-year performance since Q1 2022.
Operating loss of $4 million improved $92 million year-over-year and Adjusted EBITDA increased 119% to $68 million (Q3 2022 included $19 million in restructuring charges and transaction-related expenses).
Being down a collective 11% year-over-year—in this ad market—is likely something that the Dotdash Meredith team is quite pleased with, especially since much of that print decline is due to “the planned reduction in the circulation of certain publications.” CEO Neil Vogel explained at the AMO Summit that they have shut down print products that don’t work and fire subscribers that equally don’t work for the business.
And so, rolling into Q4 2023, I would argue that the roll-up strategy that the Dotdash Meredith team has deployed has worked.
It’s hard to say the same for G/O Media, which bought up the former Gawker publications in 2019. The company shut down Jezebel late last week, which is the right choice, despite what many shocked people on Twitter said. According to a memo from G/O Media CEO Jim Spanfeller:
Unfortunately, our business model and the audiences we serve across our network did not align with Jezebel’s. Still, despite every effort, we could not find Jez a new home.
The only way a network like G/O Media works is if it has an unbelievable amount of scale. Traffic is the name of the game. And as we’ve talked about often in this newsletter, scale is becoming harder to achieve. The thesis when G/O Media was formed in 2019 likely doesn’t exist today.
To compound that, there is an over-reliance on programmatic advertising across the entire G/O network. The issue with a site like Jezebel is that it’s just so easy to block the content with ad tech vendors. That’s basically what 404 Media summed up in this piece, where the author wrote:
Lauren Tousignant, Jezebel’s interim editor in chief, told 404 Media that Jezebel was told “brand safety,” the fact that advertisers don’t want to be next to the type of content Jezebel was publishing, was “one of the biggest factors” that led G/O to stop publishing the site and lay off its staff. Tousignant said that a couple of weeks ago, the ads sales team asked if it could remove Jezebel’s tagline—“Sex. Celebrity. Politics. With Teeth”—from the site.
“They took it off because they’re like, let’s see if this makes a huge difference,” Tousignant said. “So yeah, it was very much the problem here that no one will advertise on Jezebel because we cover sex and abortion. I know taking the tagline off was to see if the algorithm advertising would change. After it was removed one of the editorial directors was like, ‘I’m seeing an ad for J Crew for the first time ever, maybe this will be good.’”
Brand safety is something that we all have to deal with. I once had to hold on an ad because the car manufacturer did not want to be next to the name Elon Musk. This is just the cost of doing business. At least when you’re selling ads directly, you can try to explain to the advertiser why it’s okay. But with programmatic, it’s just too easy to block certain keywords.
Despite the Jezebel change, it’s obvious that G/O Media continues to spiral. As Adweek reports:
In his departure, [Merrill] Brown joins a growing list of editorial leadership that have left the company in recent months.
Dan Ackerman, who joined Gizmodo as its editor in chief in June, resigned last month, citing a poor cultural fit. Lauren Bassett, the editor in chief of Jezebel, resigned in August, also citing the work conditions.
The company can’t keep editorial leadership. It continues letting go of additional people. And so, the question I have to ask is: when will G/O Media cease to exist? At some point, we have to accept that the way these publications are being run is highly inefficient. It’s just not working. The strategy is wrong; monetization is wrong; it’s devolved to using AI to create content for “search traffic.” It’s just not a good business.
Maybe the ad markets come back and a rising tide lifts all ships, but I’m not convinced. And so, I would anticipate seeing one of two things happen. First, additional brands start getting shut down, much like Jezbel. Second, more niche networks buy these sites. Could a network that leans into gaming decide it wants to add Kotaku for additional scale, for example? That could be a way out.
This is exactly what I would do if I were an enterprising former Jezebel employee: try and buy the Jezebel brand. According to Similar Web, 45% of the traffic is direct, so there’s clearly a healthy brand. I would then copy Defector’s strategy. It’s a small team and very focused on serving a core audience—in this case, it only has tens of thousands of paying subscribers rather than millions of anonymous readers.
And it’s working. Defector just released its year 3 financial results and things continue to grow. Revenue grew from $3.8 million last year to $4.5 million this year. A big part of that was growth in non-subscription revenue, which only grew by $150k year-over-year.
As I’ve long said, the future of media is going to be niche publications. You can be nimble and serve your audience so much more efficiently.
The Block sells for a rich price
It seems that the FTX era of The Block is officially at an end. According to Axios:
Crypto media company The Block sold a majority stake to Singaporean venture capital firm Foresight Ventures in a deal valuing the crypto outlet at $70 million.
Foresight Ventures, with some $400 million in assets under management, is buying a stake worth roughly $60 million for about an 80% share of the company.
The vast majority of the capital was used to buy out McCaffrey’s [former CEO] stake, with the rest (under $1 million) used to fulfill a change of control clause.
What an ending to a very bizarre story. And as we see with many of these crypto deals, often times the revenue does not always support the valuation.
In 2022, The Block was reported to be doing close to $20 million in revenue. If I had to guess, revenue for 2023 will come in much closer to $10-15 million if, for no other reason, the crypto ad markets have been abysmal this year. Multiple crypto media companies have struggled with smaller ad budgets, reduced events spend, and fewer people caring about the industry.
As I’ve said every time I write about a crypto deal, the valuations are expensive. According to my July piece about CoinDesk’s potential sale:
When Blockworks raised, I said that it wasn’t worth $135 million on $20 million of 2022 revenue. But at least Blockworks was profitable. And I will say the same thing about CoinDesk. Unless CoinDesk has bucked the trend of crypto cycles, it has likely shrunk as a business year-over-year. And so, an unprofitable business whose revenue is down year-over-year does not likely command a multiple that gets you to $125 million.
In all three cases, it’s crypto money that is investing in these assets, not seasoned media investors, so multiples get out of whack. The saving grace for these deals might be that the crypto markets heat up in 2024, which pushes revenue for all of the publications higher.
But for operators working outside of crypto looking at these multiples, I would recommend ignoring the numbers. It’s not reality. In 2023, it’s all about profitability, which might be why CoinDesk—five months after I wrote the above story—has still not sold. Rumor is, the prospective buyers are getting cold feet.
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