DIGITAL MEDIA COS. MULL SALE
Google, Facebook set rules
Digital media companies are desperately trying to find a financial path forward as the shadows of the digital twin towers — Google and Facebook — continue to set the rules.
“They control consumer demand and where it goes in a way that we’ve never seen,” said Jason Kint, chief executive of Digital Content
Next, a trade group representing digital media companies.
“We really have two companies that have a stranglehold.”
Last week, reports emerged that IAC, the parent company of The Daily Beast, is considering selling the news and opinion website, while tech and culture site Mashable has reportedly agreed to a sale to publisher Ziff Davis for $50 million, one-fifth of its $250 million valuation last year. Univision is looking to sell off a stake in Fusion Media Group, which includes sites the company acquired from Gawker Media just over a year ago, according to reports.
Other sites expect to come up far short of revenue goals for the year. BuzzFeed expects to miss its targets by as much as 20 percent, according to The Wall Street Journal, and CNN Digital is on track to miss its projections by at least $20 million, according to a BuzzFeed report.
The going has been especially tough for outlets that rely on advertising revenue for a large portion of their income. Facebook and Google dominate the online ad market, and account for an estimated 93 percent of the growth in digital ad revenue.
“It makes it difficult for others that are in the marketplace to compete effectively,” said Jacob Groshek, a new media professor at Boston University. “It’s perhaps a little unsurprising to find these outlets going through these challenges.”
While Google and Facebook dominate the ad market, the companies also have pervasive, opaque algorithms that can be changed at any moment. The companies can decide to prioritize content that is longer, or shorter, or decide to list content from clickbait sites less frequently. In 2013, viral news site Upworthy was one of the most popular websites, but its traffic plummeted after Facebook changed its algorithm. More recently, outlets have been investing in video content because videos are now in the good graces of Facebook. Kint said many of the struggling sites may have tried to contort to the whims of Facebook and Google instead of building a sustainable revenue stream.
“If you’re beholden to these two companies for your traffic and you’re basically chasing their priorities, that’s never going to evolve into a profitable business,” Kint said. “If you’re trying to game their algorithm with whatever their latest fantasy is, it is going to be impossible to build a sustainable business model.”
Many of the struggling companies have taken investment from venture capital firms and have pushed for user and revenue growth to match the investment.
“I have not seen too many venture-backed media businesses I would want to be a part of right now,” said Jeff Fagnan, founder of Cambridge venture capital firm Accomplice. “Keeping monetization through clicks and display (ads) is extremely tough right now.”