What's driving media company valuations? Technology.
Until recently, $300 million was the highest valuation that digital media companies aspired to. That’s around the price AOL paid for the Huffington Post. Subtract $100 million, and you’re in the ballpark of what NBC Universal paid for Daily Candy and what Turner paid for Bleacher Report.
The latest class of digital media companies is changing that perception. Vox Media, Vice and BuzzFeed, along with fast-growing up-and-comers like Business Insider, Mic, Bustle, Refinery29, and others, carry ambitions that far outstrip the first wave of digital media exits. More importantly, they’ve got the venture capital to support those ambitions.
To wit: Vox Media announced Wednesday a $200 million round of funding from NBC Universal. Vox had previously raised $100 million in funding, including from the venture arm of NBC Universal’s parent company, Comcast CMCSA . Other Vox investors include Accel Partners, Allen & Company, General Atlantic, Khosla Ventures and Ted Leonsis, the former AOL executive. Its most recent round was a $46.5 million raise last fall at a reported valuation of $380 million.
The latest round values Washington, D.C.-based Vox Media at $850 million, according to the Wall Street Journal. Including the venture funding, Vox Media now is officially a startup “unicorn” worth more than $1 billion.
CEO and founder Jim Bankoff noted in a statement that the funding is strategic. NBCU and Vox will collaborate on things like video programming and advertising. The companies will also cross-promote content, share technology, and launch new franchises together.
The deal puts to rest – for now, at least – talk that Vox Media would sell to Comcast and NBCU. (Fortune first reported that the two had held deal discussions, which had fallen apart, in April.)
BuzzFeed will surpass Vox’s valuation, if reports come true. Recode, which is owned by Vox Media, reported that NBCU is also nearing a deal to invest $200 million into BuzzFeed at a $1.5 billion valuation.
These deals follow Vice Media’s $2.5 billion valuation, which it got in a funding round last summer. Even Huffington Post, which comes from the first wave of digital content companies, is reported to carry a price tag of $1 billion.
A driving force behind the ballooning valuations of media startups is the narrative they’re telling about their technology. Vox Media, for example, likes to tout Chorus, its in-house content management system. BuzzFeed plays up its use of data. At these valuations, they are too expensive for many of the legacy media companies to acquire. So their only viable avenue to cash out their investors is an IPO.
BuzzFeed has turned down acquisition offers, including a handshake agreement with Disney in 2014. Last December, the company sold $50 million in secondary stock to General Atlantic, which has also backed Vox Media. That deal included a 10-for-1 stock split, sources told Fortune, a move that startups typically make in preparation for an IPO.