Momentum is building towards consolidation in the digital media sector as players large and small alike look for possible combinations.
BuzzFeed Inc. and NowThis owner Group Nine Media Inc., two of the largest venture-backed outfits, are investigating deals to buy or disclose competitors through specialty acquisition companies, or SPACs, according to people familiar with the matter. Those blank check companies raise capital by going public and can put the proceeds into deals.
Among relatively smaller players, the shortened publisher Axios is investigating possible acquisitions, while the local news network Patch is considering a sale after receiving inbound acquisition interest, the people said.
Other potential targets are beginning to emerge, including youth culture media company Complex Networks and news curation startup theSkimm. Neither company is currently in talks to sell, some of the people said.
Several factors have created fertile conditions for closing deals. Major tech players, including Alphabet Inc.’s
Google and Facebook Inc.
have cornered the digital advertising market and pressured publishers to find other ways to grow.
The appetite of venture capital investors to continue to fund digital media outlets has waned. Major media companies, including AT&T Inc.’s
WarnerMedia, Comcast Corps
NBCUniversal and Walt Disney Co.
, invested millions in digital startups and was once considered the logical buyers of such outlets. But while those media giants are targeting their streaming video businesses, their interest in digital publishers has waned.
An earlier wave of consolidation in the sector towards the end of last year sparked a series of high-profile equity deals. Vox Media Inc. agreed to acquire New York Magazine publisher New York Media, Vice Media bought female-focused publisher Refinery29, and Group Nine bought PopSugar.
Enforcement fell to a halt in 2020, when the coronavirus pandemic caused a sharp drop in ad sales, forcing digital media companies to cut costs through layoffs and leave.
Digital advertising has begun to recover in recent months, and some of the biggest new media companies have gotten back on their feet to pursue deals.
BuzzFeed Chief Executive Jonah Peretti said in a note to staff on Thursday that the company would record a profit of $ 30 million on revenues of $ 300 million this year. Vox Media is expected to be profitable this year, according to a person familiar with the matter, and sales grew in the last quarter of the year.
Group Nine, which also owns sites like animal-centric The Dodo and lifestyle-oriented Thrillist, has been consulting with advisers about buying competitors through an SPAC in recent weeks, The Wall Street Journal reported. Such deals could increase its audience and increase its influence on competitors.
BuzzFeed is investigating going public through a SPAC, according to people familiar with the matter, but has not yet begun discussions with blank check companies. Media executives see Vox Media as an attractive candidate to be acquired by an SPAC.
Axios, a digital publisher specializing in short news, has been in talks to bring together a group of business-to-business publishers or consumer media sites, said a person familiar with the matter.
Earlier this week, Axios said it had bought digital publisher Charlotte Agenda as part of a boost for local news. Axios believes it can sell its own publishing system to companies for their own internal communications and is trying 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.,
has appealed to an investment bank to consider a sale after receiving takeover interest, according to people familiar with the case. Patch is one of the digital players that has tried to help fill the void left by the long-term decline of local newspapers. The company was struggling and subject to significant cost savings under previous owner AOL, but has recovered under Hale, the new majority shareholder.
Dealmakers face potential obstacles. First, many don’t have the cash flow to fund acquisitions. Closing deals through blank check companies is not as easy as traditional takeovers and requires going through a regulatory process. But publishers could choose that path because it brings the necessary capital, said Tony Haile, a digital media entrepreneur and CEO of the Scroll subscription service.
“You have a lot of people who are open to sell, and all the traditional buyers are basically missing,” said Mr Haile. “So when an opportunity comes up with a limited time, like a SPAC, you have to move.”
Private companies are flocking to special acquisition companies, or SPACs, to bypass the traditional IPO process and get 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 reinforcements
An earlier version of this article featured a chart showing the US audience of major digital media companies undercounting readership by omitting thousands. (Corrected December 18)
Write to Benjamin Mullin at [email protected]
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