Time to invest?
If you’re looking to grow your media business and drive profit, then making strategic investments in startups as well as later start venture capital funding could be one way to do it. Then again there is every chance it could go horribly wrong!
It’s fair to say recent success rates for publishers and media owners have been mixed. For example, Time Warner was one of six companies that invested US$56.5m in video streaming service OnLine, only for the company to be dissolved shortly after being acquired by Sony. Then there was adtech company appsavvy which raised $13.3m funding, including a chunk from The New York Times, before shutting up shop.
But for every story of failure, it seems there’s at least one of success with the number of media companies prepared to invest at its highest level for some time. In August, Comcast’s NBC Universal announced it was investing $200m in BuzzFeed as well as upping its stake in digital media company Vox with a further investment of $200m. Publishing eight websites focusing on sports, politics, food, fashion and technology (including The Verge and Re/code), Vox has a strong traction among younger readers which many media companies, including NBC Universal, are keen to attract. Around two fifths (41 per cent) of Vox’s combined 54.1m unique visitors are between the ages of 18 and 34, according to comScore’s June stats.
Undoubtedly one of the biggest investment success stories of recent times has to be that of South Africa’s Naspers. A traditional newspaper and magazine business founded in 1915, it has been completely transformed thanks to some astute investments, most notably in a little known Chinese internet company 14 years ago. Naspers’ Chairman Koos Bekker spent $34m on a 46.5 per cent stake in Tencent when it was just a start up providing instant messaging services. That investment has since paid off spectacularly, making its Chairman a billionaire with Tencent now the strongest player in mobile gaming as well as instant messaging in the region. Indeed, Tencent’s valuation is now roughly the same as Naspers at around $66.5bn. Naspers has also gone on to invest in other sectors, especially online classifieds, last year announcing a Joint Venture with Norway’s Schibsted to cover emerging markets including Brazil (where the two had been competing head to head) Indonesia and Bangladesh.
For traditional print publishers looking to extend their reach in the digital world, setting up a venture capital arm for start up investments often makes a great deal of sense. For example, Dennis launched Dennis Enterprise with its first seed capital investment of £500K in Contentment Media back in 2013. Said Martin Belson, MD of Dennis Enterprise at the time: “Publishing to smartphones and tablets is an important opportunity for Dennis, but it’s also a hugely challenging one. Customers are increasingly demanding seamless services that work across every device they own. To be successful, titles need to be scalable across a wide range of devices…Contentment has found a solution to this in Padify.” Men’s Fitness was the first of Dennis’ titles to feature content designed with Padify.
Similarly New York Times and German publisher Axel Springer (which publishes Germany’s best selling tabloid Bild) have agreed to invest €3m in Blendle, a startup from the Netherlands which launched in 2014, in the hope of extending their digital reach and attracting a new group of younger readers. Described by some as the ‘iTunes for journalism’, Blendle distributes content from its publishers content via multiple platforms, charging customers on a per article basis rather relying on a paywall or a digital advertising business model. Articles typically cost €0.20 with publishers keeping 70 per cent of the revenue. “As a publisher we want to convince users to pay for great journalism,” said Axel Springer Chief Executive Mathias Döpfner. “Blendle has the potential to attract young, Internet savvy readers.” Blendle has 130,000 users in the Netherlands and has recently signed a deal with the publisher of The Economist.
Another media company which has invested heavily in digital with some success is the US’ Meredith Corporation. It publishes titles such as American Baby and Better Homes and Gardens as well as operating some TV stations. In 2012 it agreed to buy AllRecipes.com from Reader’s Digest for $175m in a deal that doubled the size of its digital footprint. In 2014 that website was viewed 1.4bn times and the brand has since launched a print version too with a circulation of nearly a million copies. Meredith has recently merged with Media General Inc, which operates 71 TV stations in 48 markets, in a stock and cash deal worth $2.4bn.
For Time Inc,. which publishes UK titles such as Marie Claire, Wallpaper and Woman and Home, investing in digital start-ups is a way of tapping revenue streams streams beyond traditional advertising. Last month it invested in London-based fashion image recognition technology, Snap Fashion. Founded by computer science graduate Jenny Griffiths in 2011, it’s a website and app based business that allows people to upload images of clothing items. The aim is for it to help Time Inc monetise image galleries across its titles in both the UK and US. “We already trialled the technology across our titles before investing so we know the conversion rates are good,” said Time Inc.’s UK digital director Neil Robinson.
Like Time Inc, Germany’s Hubert Burda Media, founded in 1903, also continues to invest in digital start ups as well later stage investment, particularly in the fashion arena. In 2008 it invested in vintage/handmade clothing site Etsy and has recently completed Series G funding of $30m in Mode Media. Mode, formerly known as Glam, is trying to build itself into a destination site where content producers go to promote their content and is now generating more than $100m in revenue annually. It has so far raised over $244m in 11 rounds of funding.
Although success isn’t guaranteed, for media companies looking to extend their digital reach and attract a new generation of younger users, it seems there’s never been a better time to invest.
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