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Momentum is building in the digital media industry as players large and small alike look for potential combinations.
BuzzFeed Inc. and NowThis, owner, Group Nine Media Inc., two of the largest venture capital firms, are exploring deals to buy competitors or go public through Special Purpose Acquisition Companies, or SPAC, according to people familiar with the subject. These blank check companies raise capital by going public and can invest the proceeds in transactions.
Among the relatively smaller players, shorthand publisher Axios is exploring potential acquisitions, while local news network Patch evaluates a sale after receiving interest in the inbound acquisition, people said.
Other potential targets are starting to emerge, including youth culture media company Complex Networks and news curation start-up theSkimm. Neither company is currently in talks to sell, some people said.
Several factors created favorable conditions for negotiation. Main technological players, including Alphabet Inc. of
Google and Facebook Inc.
have cornered the digital advertising market, pressuring publishers to find other ways to grow.
The appetite of venture capitalists to continue funding digital media has diminished. Large media companies, including AT&T Inc. of
WarnerMedia, Comcast Body
NBCUniversal and Walt Disney Co.
, have invested millions in digital startups and were once seen as the logical buyers of these outlets. But as these media giants focus on their video streaming businesses, their interest in digital publishers has waned.
A previous wave of consolidation in the sector towards the end of last year saw a series of large-scale stock transactions. Vox Media Inc. agreed to buy publisher New York Magazine New York Media, Vice Media bought female publisher Refinery29, and Group Nine bought PopSugar.
The deals calmed down in 2020, as the coronavirus pandemic triggered a sharp drop in ad sales, leading digital media companies to cut costs through layoffs and time off.
Digital advertising has started to pick up in recent months, and some of the biggest new media companies have rebounded from a stronger foundation to close deals.
BuzzFeed chief executive Jonah Peretti said in a memo to staff on Thursday that the company would make $ 30 million in profit 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 increased in the last quarter of the year.
Group Nine, which also owns sites such as The Animal-focused Dodo and Lifestyle Thrillist, has consulted with advisers in recent weeks about purchasing competitors through a SPAC, the Wall Street Journal reported. Such offers that could broaden its audience and increase its influence with competitors.
BuzzFeed plans to go public through a SPAC, according to people familiar with the matter, but has not entered into discussions with blank check companies. Media executives see Vox Media as an attractive candidate for a PSPC to acquire.
Axios, a digital publishing start-up specializing in short-form news, has held talks to assemble a group of business-to-business publishers or mainstream media sites, according to a person familiar with the matter.
Earlier this week, Axios announced that it had purchased digital publisher Charlotte Agenda, as part of a push into local news. Axios believes it can market its internal publishing system to companies for their own internal communications and is looking to position itself as a software as a service provider, the people said.
Local website network patch, owned by private equity firm Hale Global and Verizon Communications Inc.,
called on an investment bank to consider a sale after receiving acquisition interest, according to people familiar with the matter. Patch is one of the digital players who have sought to fill the void caused by the long decline of local newspapers. The company ran into trouble and saw big cost reductions under the previous owner AOL, but it recovered under Hale, its new majority owner.
Traders face potential obstacles. On the one hand, many do not have the liquidity to finance acquisitions. Transacting through blank check companies is not as straightforward as traditional acquisitions and requires going through a regulatory process. But publishers might 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 bunch of people who are open to selling, and all of the traditional buyers are basically missing from the action,” Haile said. “So when an opportunity that might have a limited window like a PSPC comes up, you have to move on.”
Private companies are flocking to Special Purpose Acquisition Companies, or SPACs, to bypass 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 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 graphic showing the American audience of large digital media companies underestimating readership by omitting the thousands unit. (Corrected December 18)
Write to Benjamin Mullin at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8
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