What Do Investors’ Actions Tell Us About Media’s Future?
Venture capitalists are placing bets in the media marketplace, but on content-companies selling themselves as a platform.
Everybody has their own hot take on the media. The coldest eye likely comes from (or probably should come from) those who put their own money on the line.
Publicly-traded media companies share a lot of mandatory financial information, but what drives the perspectives of those looking a bit further down the road, without the benefit of hindsight? What are venture capital funds or those seeking to raise new money in the media business most excited—and concerned—about today? And what might that suggest for the publishing world?
In general, there’s a lot of negative buzz about media by folks inside and outside the business. Conventional wisdom (surely you’ve seen it around) holds that there’s too much content out there; traditional media consumption is falling; digital advertising is damaged by a lack of transparency and standardized measurement; new business models are unsettled; the ad tech sector was way over-invested; and the FAANG companies (Facebook, Apple, Amazon, Netflix and Google) are sucking up all of the oxygen—not to mention the money.
Certainly, there’s a parade of scare stories for digital-native content companies, as Awesomeness was sold last year to Viacom for a price somewhere between $25–100 million, down from a $650-million valuation in 2016, Bustle Digital Group purchased Mic for $5 million (down from a $100-million valuation a year earlier) and Vice Media’s valuation has deflated from $5.7 billion to around $4.9 billion in little more than a year.
Yet despite those headwinds, when you look at people with money to spend (and even to raise), the situation is far more nuanced. There’s a lot of money still pouring into the early-stage fundraising process, and plenty to be made (and invested) in media if you know where to look.
A high-level view of the venture capital market finds a pretty startling level of continued investment. In the last 10 years, the amount of VC money invested worldwide has tripled—from $53 billion in 2008 to $160 billion in 2017. Last year, $130 billion in VC money went to 8,400 companies in the U.S. alone. And there were twice as many deals with $100 million or more in 2018 as there were in 2017.
If you have any doubt of the flood of money in the VC world, take note that Fi, which touts its “smart” dog collar (Apple Watch for dogs?), just raised $7 million from prominent VCs including Lerer Hippeau.
The vast majority of VC money still flows toward technology, accounting for $100 billion of the $130 billion spent on U.S. companies last year. But companies that have built their reputations at least in part due to media-related savvy have continued to raise significant money. Union Square Ventures, an early investor in Twitter, Tumblr and Etsy among others, announced earlier this year that it raised an additional $429 million for two new funds. Greycroft, admittedly as much a private equity as a VC firm, has raised a fifth fund of $250 million.
If you’re in the content business, you do have hurdles to overcome when hunting for money. As Richard Reisman, who helps run the New York Angels investment group, told me, a lot of folks still feel burned from earlier content investments (see a few above). Reisman noted that content is, by nature, unique and hard to scale, and at odds with the pursuit of what Union Square Ventures folks call “network effects.” And as John Frankel, a co-founder of FF Venture Capital, told me, as easy as it can be for anyone to create an audience (he points to his own somewhat-surprising 25,000 Twitter followers), that’s what makes it so hard to be distinctive when you build one.
There’s an emerging common thread of success if you’re trying to make a go of a content-related business–make sure you are creating and selling yourself as a “platform.” You don’t have to be the owner of the platform, but at least the equivalent of an architect, construction engineer or supporter of others’ platforms.
One of many examples of a company out-pitching its service to this sweet spot is Video Call Center, run by former Wall Street analyst and serial inventor Tom Wolzien, which provides a unique and patented solution to deliver broadcast-quality live video online. At the high end of this money-raising business is Splice, which just raised $57.5 million, including from Union Square Ventures and Lerer Hippeau. It’s in the music business, and not a label owner or a music producer, but a provider of software tools for many who are.
At the grandest scale, Viacom just spent $340 million to buy a still-early-stage OTT video provider, Pluto TV. Pluto is all about delivering free to consumer, ad-supported video streams without cable or satellite TV subscriptions. It’s not about the content, it’s about the platform (except, of course, for the consumer).
The podcasting space has generated a huge amount of interest and money recently, becoming what Fast Company called “sardine can-crowded.” A global podcasting company called Himalaya recently launched with $100 million of financing. Of course, Peter Vincer, Himalaya’s VP of global partnerships, describes it as a “platform.” Spotify bought Gimlet, a leading podcasting studio, for $200 million. OK, so that’s a pure content play, right? But then again, maybe it’s really just about growing the power of the Spotify platform. You say tomato….
For businesses that have traditionally relied on some combination of circulation and subscription revenue like magazine publishers, the phrase du jour is seeking partners and capabilities that will drive “reader revenue.” This is the space in which you can find Piano Media (ironically not in the music business), which just raised $22 million on its construction and operation of metered paywalls for scores of publishers online, including Hearst, Business Insider, The Economist and Ad Age. It’s this reader-revenue space in which The News Project (TNP) is out mining for gold. TNP is the brainchild of Merrill Brown, my former colleague, head of content for MSNBC.com, and a long-ago magazine editor himself at the beloved Channels.
As Brown pointed out, the renewed enthusiasm for recurring subscription-type revenue, combined with the “entire reconstruction of the world’s information architecture” make the market ripe for those, like TNP, seeking to help support an enduring digital presence for high-quality news and information.
Ultimately, the patchwork of the current media marketplace demands that rare blend of timing, story and the “chops” to execute. If that’s all there, all platforms aboard!