In­vest­ments heat up the online news sec­tor

The China Post - - BUSINESS - BY ROB LEVER

Sud­denly the online news busi­ness is red- hot.

Money is flow­ing into dig­i­tal news ven­tures at an un­prece­dented pace, as in­vestors an­tic­i­pate an ac­cel­er­at­ing shift away from tra­di­tional media, and new ways to gen­er­ate rev­enue from news.

Buz­zFeed made news this past week with a US$200 mil­lion cap­i­tal in­jec­tion from Com­cast’s NBCUniver­sal, and with the an­nounce­ment of a joint ven­ture with Ya­hoo Ja­pan for Ja­panese read­ers.

Ear­lier this month, Vox Media also se­cured US$ 200 mil­lion from NBCU as the startup seeks to ramp up its news web­sites in­clud­ing Vox. com, The Verge, Re/ code and Bleacher Re­port.

Vox and Buz­zFeed joined the club of “uni­corns,” or ven­ture­funded star­tups worth at least US$1 bil­lion, a group which also in­cludes Vice Media, which un­veiled a US$500 mil­lion fund­ing round last year.

The flood of cap­i­tal to the sec­tor sug­gests con­fi­dence in the abil­ity of dig­i­tal media to con­nect with read­ers — es­pe­cially younger au­di­ences which es­chew tra­di­tional media — and gen­er­ate prof­its, say an­a­lysts.

“Right now it’s an arms race. These are com­pa­nies grow­ing quickly and they have to grow quickly,” said Ken Doc­tor, a media an­a­lyst with the re­search firm Out­sell.

Doc­tor said a key for these or­ga­ni­za­tion is cap­tur­ing the at­ten­tion of “mil­len­ni­als,” or young adults born af­ter 1980 who rarely sub­scribe to print publi­ca­tions or ca­ble tele­vi­sion, and who get most of their con­tent online.

“Mar­keters have dis­cov­ered the mil­len­nial gen­er­a­tion as they get more earn­ing power,” he told AFP.

In­ter­est­ingly, much of the money flow­ing into these or­ga­ni­za­tions is com­ing from tra­di­tional media, seek­ing fresh ways to deal with a tran­si­tion to dig­i­tal news.

The Mur­doch fam­ily’s 21st Cen­tury Fox is an in­vestor in Vice Media, for ex­am­ple, while Time Warner has in­vested in the online news site Mash­able.

“It’s as much a hedge as any­thing else,” Doc­tor said.

“It’s a lot of money but not a bank-break­ing amount.”

‘Dig­i­tal eats ev­ery­thing’

The an­a­lyst added that big media groups which saw trou­bles for print a decade ago are now wak­ing up to dig­i­tal dis­rup­tion of tele­vi­sion.

With con­sumers slowly mov­ing away from ca­ble TV bun­dles, “you can see the fault lines,” Doc­tor said. “Dig­i­tal eats ev­ery­thing, and tele­vi­sion is not im­mune.”

The more

suc­cess­ful media star­tups have found ways to con­nect and use tech­nol­ogy bet­ter than legacy firms, say some an­a­lysts.

“Buz­zFeed and Vox and other high- pro­file star­tups make the claim they are not just con­tent com­pa­nies, they are tech com­pa­nies,” says Nikki Usher Layser, a jour­nal­ism pro­fes­sor at Ge­orge Washington Univer­sity spe­cial­iz­ing in dig­i­tal media.

This means “us­ing data science to un­der­stand how in­for­ma­tion is spread­ing” and be­ing shared, she said, to bet­ter adapt news feeds and en­able ad­ver­tis­ers to reach spe­cific seg­ments of read­ers.

Buz­zFeed is known for us­ing tech­nol­ogy to help un­der­stand how news goes vi­ral, while Mash­able uses its own sys­tem for this. AOL, which owns news sites such as The Huff­in­g­ton Post and TechCrunch, is known for ad tech­nol­ogy which mea­sures ef­fec­tive­ness of online mes­sages.

Old, New Media Merge

Re­becca Lieb, an in­de­pen­dent media an­a­lyst and con­sul­tant, said she sees ben­e­fits from bring­ing old and new media to­gether.

Com­cast’s NBC can reach young au­di­ences by shar­ing video from pro­gram­ming in­clud­ing the Olympic Games.

“We’re see­ing an era of de­clin­ing tele­vi­sion view­er­ship and in­creased cord cut­ting,” she told AFP.

“We have a large num­ber of mil­len­ni­als who are never go­ing to sign up for tele­vi­sion pack­ages so I’m sure NBC is hop­ing that Buz­zFeed can help drive new au­di­ences.”

For jour­nal­ism, the good news is that this trend is driv­ing in­vest­ment in con­tent, which means more hir­ing and in- depth re­port­ing at a time when tra­di­tional news­room job losses are ac­cel­er­at­ing.

These large ven­ture- funded news groups have been adding staff, along with smaller ones like Ozy, Fu­sion and Voca­tiv. Ad­di­tion­ally, eBay founder Pierre Omid­yar has pledged to in­vest US$ 250 mil­lion in his online news oper­a­tions, which in­clude in­ves­tiga­tive site The In­ter­cept.

Doc­tor said most new media groups spend 60 to 70 per­cent of their bud­gets on news and con­tent com­pared with just 12 per­cent for the news­pa­per in­dus­try.

“These com­pa­nies have a belief that good con­tent and ap­pro­pri­ate con­tent is a busi­ness driver,” Doc­tor said.

Still, it re­mains un­clear if the com­pa­nies are see­ing an in­vest­ment bub­ble which gives them un­jus­ti­fi­ably high val­u­a­tions.

“We have seen scant ev­i­dence of ac­tual re­turn of money to in­vestors,” Layser said.

“We have not seen a magic bullet that is go­ing to make a clear path­way to prof­itabil­ity.”

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