M&A and Banner-Year Comparisons: What Publishers’ Mixed Digital Ad Sales Show

A number of publicly traded news publishers reported an uptick in their year-over-year digital advertising revenues this week, a data point that further complicates the ongoing debate surrounding the health of the U.S. economy. In their quarterly earnings reports, the publishers BuzzFeed Inc., Dotdash Meredith, Dow Jones and The Arena Group reported increases in their digital advertising revenues of 11%, 220%, 16% and 114%, respectively, compared to the same period last year. These upticks do not correlate neatly to profitability. BuzzFeed Inc. increased its overall revenue 20% compared to the second quarter of 2021, and The Arena Group boosted its same-year revenue 87%, but neither turned a profit. The parent company of Dotdash Meredith, IAC, also reported a second-quarter loss. Only Dow Jones, which posted an overall revenue increase of 26%, emerged in the black. Meanwhile, the publishers Ziff Davis, Gannett and The New York Times saw decreases of 5%, 2.4% and 2.3%, respectively, in their digital advertising revenues—a signal of softening ad demand. Overall, Ziff Davis and Gannet saw its second quarter revenues fall 1.1% and 6.9%, respectively, while The Times reported an overall revenue growth of 11.5%, largely due to the continued growth of its digital subscriptions business. “Headwinds from advertising are playing out broadly as we’d expect them to,” said New York Times' chief executive Meredith Kopit Levien during an earnings call with analysts. As consumers and analysts alike try to determine whether the U.S. has entered a recession, many have looked to the advertising sector as a bellwether of the health of the economy. Recently, technology companies and social platforms like Snap, Twitter and Meta all reported revenue decreases in their latest quarterly earnings, citing a downturn in advertising demand. Publishers' mixed earning reports have spurred concerns that this softened demand is spreading, but not all publishers are created equal: print costs, revenue models and a business versus consumer focus mark just a few key differences. The diversity of the industry means that even a downturn will be felt unequally. Acquisitions bolster digital ad revenues for some Of the publishers that posted year-over-year increases in their digital revenue, all but one––Dow Jones––made a significant acquisition or series of acquisitions since last year. In the time between last August and now, BuzzFeed Inc. acquired Complex Media, Dotdash acquired Meredith and The Arena Group acquired Parade. These purchases require intensive amounts of capital and the process of merging companies is costly, meaning they rarely result in an overnight increase in overall profitability; indeed, none of the three newly combined companies are currently profitable. But acquisitions do boost digital advertising revenue quickly, as the tie-ups combine two line items into one and expand their publishers’ reach immediately. As a result, these three publishers’ increased digital revenues should be considered in their appropriate financial context. Dow Jones, however, managed to increase its digital revenues without any acquisitions, reflecting an ability to court advertiser demand even as economic circumstances shift. Comparisons to 2021 ad revenues will likely prove unflattering In their year-over-year comparisons, each of these publishers is also contending with another headwind: their historic performances from the year prior. The pandemic led marketers to pinch their pennies out of caution, and these pent-up budgets led to an outburst of spending in 2021, a stroke of good fortune that publishers parlayed into banner years. But last year’s outsized gains are this year’s impossible benchmarks—and the better a publisher performed in 2021, the harder those watermarks are to top. For Ziff Davis, The New York Times and Gannett, such context makes their digital decline more palatable. For Dow Jones, the backdrop only makes their gains more impressive. Whether these trends continue into the next quarter remains to be seen—a number of publishers cautioned against optimism in their financial forecasts. But for the time being, the media industry appears to be weathering the storm. “We expect recession concerns to continue putting pressure on advertising—and we're prepared for what comes next,” said BuzzFeed Inc. chief executive Jonah Peretti on the company's earnings call. “We've navigated multiple economic downturns and seismic industry shifts. I am confident we’ll do so again, positioning the company for long-term growth and monetization.” Why Publishers’ Ad Revenues Skyrocketed Last Year, in 5 Charts