New media and old media are getting together because they need each other

August 13, 2015, 1:53 PM UTC
Brian Roberts
FILE - In this Nov. 12, 2014 file photo, Comcast Corporation chairman & CEO Brian Roberts speaks at a Comcast presentation at the Contemporary Jewish Museum in San Francisco. After regulators from the FCC and Justice Department signaled that they wouldn’t approve the deal, Comcast in April 2015 said goodbye to Time Warner Cable. (AP Photo/Jeff Chiu, File)
Photograph by Jeff Chiu — AP

As a number of news outlets have been predicting, Comcast’s NBCUniversal unit has invested $200 million in Vox Media, the parent company of sites like The Verge, Vox, and SB Nation. The cable provider is also widely expected to announce a similar-sized investment soon in BuzzFeed. In some ways, these deals are a marriage made in media heaven—both sides get something they need, and in the process they both make themselves look much more attractive than they otherwise would.

Take Vox. According to Quantcast, it gets about 75 million unique visitors a month to its various content sites. That’s impressive, but it’s not nearly as large as a site like The Huffington Post, which gets more than 125 million. And while Vox is building a native-advertising business, it’s not currently making money because it is trying to grow so quickly.

What does such a company need most of all, apart from a growing audience? Money. Expanding your readership and building an ad business and tech platform all take time and investment, and hiring people to do all of those things (as well as acquiring new assets like Re/code, the tech-news site that Vox bought earlier this year) all cost money. That’s why companies like Vox are almost always venture funded.

Vox has already raised $110 million (in fact, some of its earliest funding came from Comcast’s venture arm), but it still needs more in order to grow. And the best kind of funding comes from a strategic partner, which is what it hopes Comcast (CMCSA) will become, so it can get money and resources while also benefiting from synergies with its new investor.

BuzzFeed is substantially bigger than Vox, but is also trying to grow extremely quickly, which means it also needs funding. It closed a $50 million financing round last year from the venture fund Andreessen Horowitz, but it still needs more. According to internal financial documents that were leaked to Gawker recently, BuzzFeed is spending about $20 million a year on editorial and $10 million on Facebook advertisements for clients of its custom-content business.

The company is profitable, with an estimated profit of $2.7 million in the first six months of this year. But it still doesn’t have the kind of money it needs to pour into hiring hundreds of people to staff its UK bureau or its rapidly-expanding motion picture unit, or any of its other investments. So getting a chunk from an outside investor like Comcast/NBCUniversal makes sense, for much the same reason that Vice Media accepted an investment from A&E Networks last year that valued it at $2.5 billion.

So what these new-media entities need most is money (and perhaps a bit of old-media prestige). Comcast has plenty of that, thanks to its cable TV, ISP, and movie businesses. Getting that cash also gives Vox and Buzzfeed a broader reach—and it allows them to brag about being “unicorns” for passing the $1 billion mark.

So what does Comcast/NBCUniversal get out of these kinds of deals? For the most part, it means they get a hedge against the future. Rubbing shoulders with sexy new-media upstarts like Vox and BuzzFeed has a certain cool factor to it, and there’s the possibility of the cable provider using new media content for its various broadcast properties. The larger rationale is that having a chunk of a couple of new-media pioneers gives old media companies a window into the future of content, especially that favored by millennials.

Giant money-printing businesses like Comcast are rarely innovative enough to see the future coming. Even when they do see what’s down the pike, they usually fail to adapt as quickly as they need to, simply because the move so slowly. They need to acquire other, more nimble assets in an attempt to inject fresh thinking into their holdings. That’s why Comcast Ventures invested in what became SB Nation, the forerunner of Vox.

The unanswered question is whether Vox and BuzzFeed will actually provide enough value to justify the investments that Comcast/NBCUniversal is making. Will either one of the new-media startups go public? Perhaps, and most likely BuzzFeed will be the first. That could provide a payoff. But if a payoff doesn’t happen, will Comcast get enough out of its holdings? In the long run, it may not matter. The company has to spend that money somewhere, and hedging its bets on the evolution of content seems as good a gamble as any.

Read More

Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward