What a time to be in media. Refinery29 was recently acquired by VICE. VOX scooped up New York Media. Group Nine acquired PopSugar. Taboola and Outbrain finally merged. The Wall Street Journal published a story about Googles dominance across nearly every system used to maintain an ad-supported digital publishing business. Just this week DoubleVerify acquired Ad-juster, bringing together two of the oldest companies in the business. While several of these deals were rumored to be in the hundreds of millions of dollars, the majority were stock-based, an indication of the acquired companies' confidence in going it alone. Several had been unprofitable for years and the least fortunate even saw overall revenue shrink year over year.
These companies went through a period of explosive growth for several years, setting ever more aggressive revenue targets and hiring in order to support them. Venture capital money was easy to come by and they told a story of engaging a diversified audience across every platform they use. Unfortunately, many of those platforms were (and are) still figuring out their own business models and made it difficult or impossible for publishers to successfully monetize their audiences. The idea of building an audience first and monetizing it later (Facebook being the ultimate example) only works if you actually control the platform where the audience is being built.
As someone with an equity stake in the combined combined VICE/R29 entity, I am hoping for their success. In order to build long-term value, they are going to have to do a few things exceptionally well.
Produce content that a valuable audience seeks out. After all, is this not why media companies exist? As a consumer of media myself, I find myself seeking content that educates and inspires me as well as content that simply fills time where I might otherwise be bored. Creating content for a homogenous, undifferentiated audience, however, is not interesting unless you have hundreds of millions of users (which can then be segmented into differentiated audience). Establishing a brand, or brands, that focuses on serving specific communities means that advertisers will be interested in placing their messaging in front of that audience.
Execute on what is sold. It is very difficult to appropriately staff an advertising supported media business. Even more difficult is maintaining continuity across the teams, from sales to account management to ad operations. A common theme over the past year or two among the aforementioned companies is doing layoffs of 10-20% of their staff. A likely outcome of the combined entities will be further layoffs to eliminate redundancy created by bringing duplicative teams together.
Remain lean and efficient. When seeking to develop balanced resources across different revenue-related teams, well-funded companies tend to “over-hire” as they establish goals for the coming years. Smaller companies, or those with more conservative management, tend to maintain a lean staff and focus on creating workflow and operational efficiencies. As a former manager of several teams totaling over 65 people, I have been an advocate of staffing to levels that allow everyone to excel at their jobs. On the other hand, as a business owner, I have chosen to remain lean for reasons I have discussed previously. Unfortunately there is no universal right answer here - each company must make the best decision for their business.
Prove that what they do actually works. From a revenue standpoint, industry news tends to focus on the diversification of revenue streams for media companies. What largely gets excluded from the spotlight, perhaps because it is much less sexy (and often closely guarded) is their ability to actually prove what they do - providing access to a specific audience - actually works. These firms cannot simply assume that advertisers will pay, and continue to pay, to align with a publisher's brand and content. This is much easier said than done, but proving that advertising programs result in improvements to advertiser’s businesses is perhaps second only to attracting an audience in the first place.