Exclusive: Leaf Group CEO Steps Down As the Publisher Faces Financial Woes

The chief executive of Leaf Group, Sean Moriarty, stepped down from the role after nine years last week as the media company faces financial headwinds and pressure from its ownership group, Graham Holdings Company, to reverse its commercial struggles, according to people familiar with the matter. A spokesperson for Graham Holdings Company, Pinkie Mayfield, confirmed the departure. Moriarty will be replaced on an interim basis by Timothy J. O’Shaughnessy, the president and CEO of Graham Holdings Company and the husband of Laura Graham O’Shaughnessy, the granddaughter of Katharine Graham, the former publisher of The Washington Post. Moriarty has served as CEO of Leaf Group since 2014, where he played an instrumental role in reinventing the media company once known as Demand Media. Publishers Pare Down Their Portfolios Following Pandemic M&A Fortunes reversed since thriving during the pandemic After rebranding in 2016, Leaf Group embraced a commercial model that blended commerce from its art marketplaces, Society6 and Saatchi Art, and advertising from its portfolio of publishers, which includes titles like Well + Good, Livestrong and eHow. The company saw demand for its art marketplaces skyrocket during the early days of the pandemic, when a combination of factors, including stay-at-home measures and stimulus checks, led consumers to spend lavishly on home renovation and decor. In the first quarter of 2021, Leaf Group saw its overall revenue rise 58% year over year, from $33 million to $52 million, according to public filings. Revenue from Society6 alone rose 106% year over year, from $16 million to $33 million, while revenue from its media group declined slightly, from $14.1 million to $13.9 million. Although Leaf Group closed that quarter at a $6.3 million loss, its revenues had grown enormously and its deficit shrank by $4.4 million. These positive trendlines helped convince Graham Holdings Company to acquire Leaf Group in June 2021 for $348 million. Graham Holdings Company, which owns a portfolio of businesses ranging from restaurant groups to car dealerships, has an extensive background in media. It owns both Slate and Foreign Policy, and it has bought and sold both The Washington Post and Newsweek. However, the conditions that led revenues at Leaf Group to spike soon began to recede. As pandemic restrictions eased, consumer spending on home renovation and decor dwindled, and appetite for direct-to-consumer art services like Society6 declined, according to people familiar with its finances. By October 2022, Society6 was on pace to lose roughly $10 million on revenues of between $100 and $150 million. Compounding this downturn, the industry-wide slowdown in digital advertising spend last year further complicated the situation. In his 2022 shareholders letter, O’Shaughnessy addressed the situation. “Leaf Group, our collection of media and commerce brands acquired in 2021, has struggled. Those struggles accelerated as 2022 progressed,” he wrote. “In short, Leaf has underperformed our expectations and we overpaid. I screwed this one up. “To make matters worse, we’re not out of the woods yet,” he continued. “Trends around advertising were not favorable as we exited 2022, and Society6 continued to see depressed demand and inflationary pressures. As a result, Leaf Group incurred substantial losses in 2022, which we expect to continue into 2023.” Financial challenges persist for publishers Leaf Group is by no means alone in its commercial straits, as the media industry has broadly resorted to layoffs, closures and cost-savings to cope with a depressed climate for digital advertising. The fortunes of its art marketplaces followed a trajectory similar to other industries, such as the technology sector, that saw demand spike during lockdown only to normalize afterward. While its diversified business model shielded Leaf Group from some risk, in this case, it also exposed the company to two parallel downturns: the decrease in lockdown spending and the drop in advertising demand. Graham Holdings Group now finds itself in a position similar to that of Vox Media and Recurrent Ventures, which both acquired publishers during the pandemic only to reevaluate their value in a recessionary market. Unlike Vox Media and Recurrent Ventures, which this week spun off NowThis and Saveur, respectively, Graham Holdings Company remains committed to Leaf Group and aims to shepherd it through this downturn, according to Mayfield. “The team at Leaf Group will continue to work with Graham Holdings’ leadership to grow the business and drive results,” Mayfield said.

C-Suite

Exclusive: Leaf Group CEO Steps Down As the Publisher Faces Financial Woes

Ownership group Graham Holdings Company said it ‘overpaid’ to acquire the company in 2021

Fortunes reversed since thriving during the pandemic

Mark Stenberg

About

Subscriptions

Events

Publications

Fortunes reversed since thriving during the pandemic

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Mark Stenberg