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This post looks at the evolution of digital media amidst Buzzfeed’s recently announced SPAC deal to go public. Media and journalism are trending and changing. Today we look at how it’s changing and what it means going forward.
The LA Times was rumored to be for sale a few months ago, but the owner and CEO quickly shot down that notion. Instead, he and the newly poached editor from ESPN’s Undefeated, Kevin Merida, made the rounds last week to pitch that the LA Times will no longer be about journalism. Instead, it’ll expand into a media ecosystem, more akin to Disney than the NY Times. Highlighting the ability to highlight local music, DJ battles, entertainment, and culture, the LA Times is already talking about how HBO Max is a larger competitor than the NY Times.
Buzzfeed finally pulled the trigger. Over the years and all the rumors, Buzzfeed is going public with a valuation of $1.5B, slightly lower than its past $1.7B valuation it was able to garner. Apart from this, Buzzfeed also purchased Complex Networks. That, along with its acquisition of Huffingtonpost last year, now has Buzzfeed as the defacto elephant of any digital media business. At the same time, not insanely profitable (those Tasty videos don’t film themselves) compared to other traditional media businesses, Buzzfeed is planning to generate more than $1B by 2024.
Why Axios CEO is investing big in local news journalism - Press Gazette
Local news has been all the buzz in many of the journalism circles these days. Will it survive? How can it work? Has the NY Times killed local news? Well, Axios has decided to double down on local news after launching in 8 local markets earlier this year. Already it’s on track to make $5M and has a variety of business models it’s experimented with over the past year. The local news of tomorrow will look and be a lot leaner than the local news of yesterday, but that might not be a bad thing. The only guarantee, that no matter who decides to tackle this problem, the revival of local news will start as a newsletter.
Ad dollars are still critical revenue for most journalism
BuzzFeed told investors it expects to generate $654 million in revenue next year, with traditional advertising accounting for 48% of the total, but that’s a bit disingenuous as whenever you’re on Buzzfeed, it feels like you’re just consuming sponsored content or ads nonstop. When adding in their “content” revenue, or let’s call it non-traditional advertising, the split showcases that ad dollars are actually closer to 77% of BuzzFeed’s revenues next year. To put that into perspective, even by 2024, when the company forecasts surpassing $1 billion in top-line revenue for the first time, advertising revenue streams look to account for nearly 69% of the business. Axios Local, which is on track to make $5M this year, will heavily rely on newsletters and those coveted sponsorships early on as the primary revenue driver. Subscriptions show promise, but the business model and scale for that at a local and community level is still unproven. But as much as everyone is talking about paywalls and subscriptions, remember the best in the business understand the value of creating, displaying, and utilizing best-in-class ads, in addition to any other revenue streams.
Media companies are just eCommerce companies disguised as media brands.
Yet, the most interesting about the recent interview that Patrick Soon-Shiong and Kevin Merida was the lack of mention of reporting, journalism, or news, which are the most common terms when anyone tends to discuss newspapers. Instead, they were so focused on discussing the property as transitioning the paper into a media ecosystem. While most Buzzfeed is still reliant on ad dollars, the most interesting shift in their investor deck was how fast that “non-traditional” advertising dollars was growing vs. the traditional ad dollars. Affiliate deals and brand and franchise creation, which indirectly sells more merch down the line, anchor their “non-traditional” advertising dollars. Yet, even more telling is that currently, eCommerce makes up 13% of their revenue, but they anticipate that it’ll grow to 31% by 2024 (a 70% CAGR). Buzzfeed is betting that its superpower going forward will be its ability to sell you stuff, primarily more of their own stuff, or getting a cut of getting a MillZennial to buy from them.
As targeting gets more difficult across ad platforms, local news outlets may see a renewed interest in ad dollars spent.
The most compelling case Buzzfeed kept on discussing its acquisition of Huffington Post and Complex was its wide access to a variety of audiences, but predominantly the most attractive audiences to brands, 18 - 35 men, 18 - 35 women, and 36+ high affluent Gen Xers and Boomers. Their case was simple; they can make content and integrate their franchises with your brand better than any other brand, which is important if consumers value their privacy. Axios Local makes the same pitch with their forecast and growth goals of opening 50 local sites that can focus and push local events and businesses thru their newsletters and content. The LA Times is banking that LATAM and APAC businesses and residents will care about the LA perspective and California consumers enough that they’ll want to consume and be featured in the LA Times ecosystem. Growing eCommerce sales, moving beyond media, creating direct relationships are just the talking points every media company needs to say in the present, but the real prize that every media company with content talent resides on the destruction of the current self-service ad system that Google and Facebook have dominated by exploiting consumer data. If only David Carr were still around to see how this plays out.