Nat Poulter, chief operating officer at Jungle Creations, explores BuzzFeed's acquisition of Huffington Post and what it says about the dream prophesied for digital media and how the publishing model has changed to one that requires investment in a whole new set of skills and people.
When Disney invested more than $400m into Vice Media, it did so in faith that as the digital market matured, the site’s audience could be monetised through ad revenues that were, at the time, in line with those seen in print.
Investors overvaluing a high-flying digital publisher is a now-familiar story. But back then, huge paydays for those who dared to dream digitally seemed writ large. Just ask Arianna Huffington and Jonah Peretti, whose sites – Huffington Post and BuzzFeed respectively – each raised vast sums at valuations outrageous by today’s standards.
Remember when BuzzFeed was valued at $1.5bn? HuffPost $1bn? Or when a nonchalant Shane Smith, sat on a $5.7bn valuation, mused Vice would IPO “when we're ready”, only to need a bailout two years later?
Had the digital dream come to fruition, we would not today be commenting on the Huff-Feed-Buzz-Post merger announced last week, nor the formation of a content business that will have, perhaps, the world’s largest audience.
The digital dream prophesied by many never happened. As the barriers to entry have lowered, the competition for ad revenues has grown exponentially bigger. Cost per reader or user from web-based advertising alone has never matched up to expectations, and many digital media businesses have woken up to this disappointing reality.
Meanwhile, through a lack of wherewithal, knowledge or ambition, many have not changed tact. 2020 has truly been the coming of age for digital publishers. Any publisher totally reliant on display advertising is going to have a hard time staying afloat. It simply doesn’t pay.
That is not to say there is not money to be made from digital publishing – far from it. Jungle's 1000% year-on-year profit hike is testament to that. It is to say, however, that the model has changed to one vastly more complex that requires investment in a whole new set of skills and people.
Businesses like HuffPost and BuzzFeed understand this new model, which is why they will succeed as a combined entity. They have each built robust revenue lines across sponsorships, branded content, subscription, programming, affiliates and commerce, all driven by a cross-platform distribution strategy that covers sites, platforms, apps, podcasting, OTT and beyond.
By virtue of owning this audience relationship, the new entity can focus on broadening its distribution strategy and audience development – making it well-placed to diversify into broader advertising revenues across other platforms and consumer revenues.
Most of us in this game will be familiar with the phrase ‘the medium is the message’. But in digital, the model is the message. It is whether or not publishers utilise the new model that determines the success of their offering to advertisers.
Diversifying into as broad an array of revenue streams as possible better serves advertisers’ needs while maximising the value a publisher can drive from its audience. And given the complexities and cost of delivering this model, Huff-Feed/Buzz-Post clearly stands to benefit from the economies of scale the combined entities will achieve, not least access to (potentially) the world’s largest audience.
Call it an adjustment, call it the maturation of the digital ecosystem. However you look at it, it is clear that those still chasing eyeballs and click-throughs alone will continue to suffer. And there are many, many sites for whom this is the case.
This is the continuation of a wave of consolidation that started with Vice and Refinery29, and will end with many publishers brought under the watchful eyes of leaders who understand that the world has moved on.