The momentum is consolidating towards consolidation in the digital media sector, as large and small players are looking for potential combinations.
BuzzFeed Inc. and NowThis, owner of Group Nine Media Inc., two of the largest suits with business support, are exploring offers to buy competitors or make themselves public through special purpose acquisition companies or SPACs, according to people familiar with the question. These blank check companies raise capital by making themselves public and can use the proceeds for business.
Among relatively smaller players, short-form publisher Axios is exploring possible acquisitions, while local news network Patch is weighing in on a sale after receiving incoming acquisition interest, according to people.
Other potential targets are beginning to emerge, such as the youth culture media company Complex Networks and the curative news start-up TheSkimm. Some of the people said that neither company is in talks to sell at the moment.
Several factors have created fertile conditions for carrying out deals. Major technology 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 digital media has declined. Large media companies, including AT&T Inc
WarnerMedia, Comcast Corp.
NBCUniversal and Walt Disney Co.
, invested millions in digital startups and were once considered the logical buyers of these outlets. But as these media giants focus on their video streaming business, their interest in digital publishing has waned.
A previous wave of consolidation of the sector towards the end of last year recorded a series of operations with high-profile shares. Vox Media Inc. agreed to buy the publisher of New York Magazine New York Media, Vice Media bought the women-centered publishing house Refinery29 and Group Nine bought PopSugar.
Recruitment eased in 2020, as the coronavirus pandemic triggered a sharp drop in ad sales, leading digital media companies to cut costs through layoffs and penalties.
Digital advertising has begun to recover in recent months and some of the largest new media companies have regained the base to consolidate deals.
BuzzFeed chief executive Jonah Peretti said Thursday in a note to staff that the company would set aside a $ 30 million profit this year in revenue of $ 300 million. Vox Media is expected to be profitable this year, according to someone familiar with the matter, and its revenue grew in the last quarter of the year.
Group Nine, which also owns sites like The Animal-Oriented Dodo and Lifestyle-Oriented Thrillist, has consulted advisors in recent weeks with advisors on buying competitors through a SPAC, it reported The Wall Street Journal. These agreements could expand your audience and increase your leverage with competitors.
BuzzFeed is exploring making it public through a SPAC, according to people who know the subject, but hasn’t started talking to blank check companies. Media executives see Vox Media as an attractive candidate to be acquired by a SPAC.
According to a person familiar with the matter, Axios, a digital publishing start-up specializing in short-term news, has held talks to bring together a group of publishers or media sites from business to business.
Earlier this week, Axios said it bought digital publisher Charlotte Agenda as part of a boost to local news. Axios believes it can market its internal publishing system to companies for its own internal communications and wants to position itself as a software provider as a service, according to people.
Patch local website network, owned by private equity firm Hale Global and Verizon Communications Inc.,
according to those familiar with the matter, it has taken advantage of an investment bank to consider a sale after receiving acquisition interest. Patch is one of the digital players that has tried to help fill the void caused by the long decline of local newspapers. The company went through trouble and suffered a sharp cost reduction under the previous AOL owner, but has recovered with Hale, its new majority owner.
Traders face possible obstacles. On the one hand, many do not have the cash flow to fund acquisitions. Making deals through blank verification companies is not as simple as traditional procurement and requires going through a regulatory process. But publishers could choose this route because it provides the necessary capital, said Tony Haile, digital media entrepreneur and CEO of the Scroll subscription service.
“You have a lot of people open for sale and basically all the traditional buyers are missing out on the action,” Haile said. “So when an opportunity arises that may have a limited window like a SPAC, you have to move on.”
Private companies are flooding special-purpose acquisition companies, or SPACs, to avoid the traditional IPO process and get a public listing. WSJ explains why some critics say investing in these so-called blank check companies is not worth it. 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 chart showing the American audiences of major digital media companies that did not have the number of readers to omit the thousands unit. (Corrected on December 18)
Write to Benjamin Mullin to [email protected]
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