The End of digital media consolidation and the Run for defensible positions

Thank you for reading my latest article The Attention Economy Weekly: "The End of digital media consolidation and the Run for defensible positions". I regularly write about management and entertainment trends here on LinkedIn and at Entrepreneur.com.

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In this week's issue, I bring to you an analysis of the shifts in the digital media landscape happening right now. Triggered by Vice Media's bankruptcy, BuzzFeed News' closure, and Vox Media layoffs, we explore the strategic changes that have been shaping the digital media industry, how companies are navigating these challenges, and the broader implications of these developments for the attention economy.

A Shift in Strategy

After years of consolidating to better compete with Google and Facebook for digital advertising dollars, many digital media companies have abandoned this strategy and now focus on their core strength. Companies including BuzzFeed, Vice Media, and Vox Media, are rushing to secure their businesses ahead of a potential recession, decelerating digital advertising market, and ongoing audience and platform shifts

This trend aligns with the behavior of major media companies like Netflix, Disney, and Warner Bros. Discovery. After nearly half their market values decline in 2022, these corporations now focus on strengthening their unique selling points like distribution, branding, or programming quality.

It is high time!

Vice Media, once valued at $5.7 billion in 2017, could not find a buyer when it tried to sell for around $500 million in February, according to people familiar with the matter. It filed for Chapter 11 bankruptcy protection last week and received a rescue offer from its creditors for about $225 million.

BuzzFeed's value has declined by over 90% from $10 per share to now $0.61 per share. On April 20, 2023, it shut down its Pulitzer Prize-winning BuzzFeed News to cut costs. In addition, 15% of the 1200 staff employed with BuzzFeed have been laid off. That is in addition to the staff already laid off 12% in December last year.

Meanwhile, Vox Media, valued at $1 billion in 2015 after receiving a $200 million investment from NBCUniversal, saw its valuation cut to half after the latest capital raise after Penske Media acquired 20% of the company. On April 27, 2023, Vox Media announced, that it would be laying off 130 (7%) of its employees. The layoffs were part of an effort to cut costs and streamline the company's operations.

How did we end up here? A brief history of the Rise of digital media

The rise of digital media companies started in the early 2010s. A new breed of media companies emerged to challenge traditional media companies, newspapers, and especially Google, and Facebook. Companies like BuzzFeed, Vice, and Vox Media grew rapidly by capitalizing on digital advertising and their ability to connect with younger audiences - You, 10 years ago ??. They championed innovative content formats, such as BuzzFeed's viral quizzes or Vice's edgy journalism.

The growth was further fueled by legacy media companies who were keen investors during the 2010s. Have a look at some examples:

The digital media industry witnessed a wave of consolidation and mergers between 2018 and 2022. Venture capitalists and private equity investors, who have made significant investments in the industry during its heydays, have played an important role in driving this trend.

Group Nine Media:

In 2016, Discovery Communications-backed Group Nine Media was formed from the merger of four digital media companies: Thrillist, NowThis Media, The Dodo, and Seeker (formerly Discovery Digital Networks).

Bustle Digital Group (BDG):

BDG, formerly known as Bustle, has made a series of acquisitions including the purchase of Elite Daily in 2017, Mic.com in 2018, and Nylon in 2019. In 2019, BDG also acquired Inverse.com, and in 2020, it purchased Input Magazine and The Outline.

Vice Media:

Vice Media acquired the British fashion magazine i-D in December 2012. Digital agency Carrot Creative in 2013. In 2016, Vice Media acquired a majority stake in Pulse Films, a UK-based film and television production company. Garage Magazine was acquired in 2016. Experiential events company Villain in 2018, and Refinery29, a digital media and entertainment company focused on women in 2019

BuzzFeed:

BuzzFeed acquired HuffPost from Verizon Media in 2020 in a share swap. And Complex Networks for $300M in 2021

The aim of the consolidation strategy was to achieve greater scale and enhance competitiveness against Facebook and Google in the fight for advertising dollars. Cost-cutting through synergies resulting from these mergers was another desired effect.

However, it became increasingly clear that scale is not everything, and digital media companies were unable to take significant amounts of advertising budgets away from the likes of Facebook. It turned out, the platforms were too powerful, and digital media dependent on them for distribution and even content monetization.

It worked, for a while

As digital media companies struggled to grow, legacy media companies saw the value of their investments decline. They stopped strategic investments and started looking for an exit.

For a short while it looked like SPACs might be the solution. These 'blank-check' companies offered a fast track to going public. This triggered several noteworthy deals like Vox Media acquiring New York Magazine, Vice buying Refinery29, and BuzzFeed’s ambitious acquisitions of HuffPost and Complex Networks.

BuzzFeed beat the competition and was the first digital media company to go public via a special-purpose vehicle in late 2021. The market did not react well and BuzzFeed's market cap evaporated. Companies like Vice, BDG, and Vox Media had to cancel their plans to go public.

With the bust of the SPAC market and the rise of interest rates in 2022, money was even harder to come by, forcing companies to look at their bottom-line performance and organic growth.

What is next?

Social media platforms, particularly Facebook, have played a crucial role in distributing digital media content. The emergence of new platforms like TikTok has disrupted the social media landscape. Particularly younger users gravitate toward these new platforms and causing a decline in Facebook's user base. At the same time, we see the relevance of editorial content declining in favor of short-form videos. While this is a threat, it is also a massive opportunity for companies to seize!

To stay relevant, digital media companies are now seeking new avenues for growth and engagement. BuzzFeed, for example, is looking into artificial intelligence to create AI-generated quizzes and content. Personally, I am a big supporter of using artificial intelligence to streamline production processes and drive cost optimization. However, I don't believe it is a defensible position for BuzzFeed. Everyone is doing it.

Vox Media remains committed to its core strengths in journalism. The company is even actively exploring potential deals. Definitely, a contrarian move that can pay off big time in the years to come. This requires Vox Media to buy strategic assets, cut costs drastically and ensure the whole is more than the sum of its parts.

In my 1st newsletter “How Social Media, Music, and Gaming Synergies Drive Fan Engagement and Success with Holistic Experiences" I am already touching on the need to be on as many platforms as possible to engage with your fans. Please let me know if the comments if you want me to dive deeper into cross-platform strategies.

I do believe that digital media companies need to make their content available in as many languages and on as many platforms as possible and find a way to do so cost-efficiently.

The ambitious goals of companies like BuzzFeed, Vox Media, and Vice have led to the raising of billions in capital, developing an ecosystem that continues to benefit the industry. However, their futures are uncertain as they adapt to the evolving demands of the digital world.

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About Patrik Wilkens

Patrik Wilkens is an influencer and thought leader in the fields of gaming, social media, creator economy, and general management. Over the last 15 years, Patrik delivered close to .5 Billion app installs and managed B2B deals for channels with over 1.5 Billion subscribers on over 25 social media, SVOD, AVOD, and FAST platforms.?

Patrik is a regular podcast and conference speaker, including Social Day, Youth Marketing Summit, Game Developer Conference, PocketGamer Connect, etc. He published 20 + articles on process optimization, artificial intelligence, digital media trends, and the social media industry. Patrik is also Entrepreneur.com Leadership Network Contributor.?

His consulting company?Mournival Consulting?focuses on interim management, product management, monetization strategy, digitalization, and gamification.