Report: Digital Media Players Prepare for Deal Frenzy

Momentum is building toward consolidation in the digital media sector as big and small players alike look for potential combinations, reports TheWall Street Journal.

BuzzFeed Inc. and NowThis owner Group Nine Media Inc., two of the largest venture-backed outfits, are exploring deals to buy competitors or go public through special-purpose acquisition companies, or SPACs, according to people familiar with the matter. Those blank-check companies raise capital by going public and can put the proceeds into deals.

WSJ Graphic

Among relatively smaller players, short-form publisher Axios is exploring potential acquisitions, while local news network Patch is weighing a sale after receiving inbound acquisition interest, the people said.

Other potential targets are beginning to emerge, including the youth-culture media company Complex Networks and news curation startup theSkimm. Neither company is currently in talks to sell, some of the people said.

Several factors have created fertile conditions for dealmaking. Major tech players including Alphabet Inc.’s Google and Facebook Inc. have cornered the digital advertising market, pressuring publishers to find other ways to grow.

Appetite among venture-capital investors to continue funding digital media outlets has diminished. Big media companies, including AT&T Inc.’s WarnerMedia, Comcast Corp.’s NBCUniversal and Walt Disney Co. , invested millions in digital startups and were once thought of as the logical buyers of such outlets. But as those media giants focus on their streaming-video businesses, their interest in digital publishers has waned.

An earlier wave of consolidation in the sector toward the end of last year saw a series of high-profile stock deals. Vox Media Inc. agreed to purchase New York Magazine publisher New York Media, Vice Media purchased women-focused publisher Refinery29 and Group Nine bought PopSugar.

Dealmaking quieted down in 2020, as the coronavirus pandemic triggered a steep decline in ad sales, leading digital media companies to cut costs through layoffs and furloughs.

Digital advertising has begun to recover in recent months, and some of the biggest new-media companies have rebounded onto stronger footing to pursue deals.