Unanswered Questions From the Vox Media Merger

When Vox Media and Group Nine Media announced their merger on Monday, the benefits of scale to the newly formed Vox Media were clear: It would reach 115 million unduplicated visitors per month, immediately boosting its appeal to marketers and shoring up its first-party databank, multiple sources told Adweek. However, the consolidation did leave a number of key questions unanswered. They concern both the future machinations of the new Vox Media and the effects of its formation on the rest of the digital-media ecosystem. What happens to the Group Nine Media SPAC? In January, Group Nine Media raised $200 million to create a special acquisition company that had two years to purchase other publishers. But now that the acquirer has become the acquisition, the fate of the Group Nine Media SPAC remains uncertain. The SPAC sponsor entity is a subsidiary of Group Nine Media and will be acquired by Vox Media as part of the merger, sources tell Adweek. As it stands now, Vox Media has just over 12 months to deploy its newly acquired SPAC; otherwise, it will have to retire the investment vehicle, which generally incurs a fine, said Chris Karl, the chief business development officer at Jegi Investment. How The Washington Post Is Using Data Journalism to Drive Subscriptions Because the SPAC is only valued at $200 million, Vox Media is unlikely to use the holding company, at its current value, as a means of going public. Instead, it could raise additional investment, which extends the expiration date of the SPAC and makes it a more viable means of entering the public market, Karl told Adweek. However, given the disappointing SPAC-facilitated IPO from BuzzFeed in mid December, which raised the company only $16.2 million, Vox Media will feel extra pressure to prove its value to investors in the coming months. Will there be layoffs? Multiple sources close to the deal said that the primary purpose of the merger was to act as a growth opportunity, a tie-up that combined the strength of two ascendant publishers to amplify their reach. Reducing editorial headcount would run counter to that goal, though the publisher declined to answer whether the consolidation would lead to lay-offs. In media mergers, the acquiring company needs to ingest the new brand, cut expenses and grow top-line revenue relatively quickly, said Jason Wagenheim, the chief revenue officer of Bustle Digital Group. And as part of reducing costs, publishers need to eliminate operational roles that the merger makes redundant, Wagenheim said. “Successful integrations are the ones where you can swiftly identify where the opportunities are and where the overlap is,” he said. “You need to make decisions very quickly to get on track.” In its efforts to boost profitability, Vox Media will look to seize any new efficiencies it can find, meaning departments such as human resources, finance or legal could be subject to scrutiny. Will this affect future media valuations? In the last two weeks, the public debut of BuzzFeed and the consolidation of Vox Media and Group Nine Media have revealed a sharp decrease in the market value of digital media companies. Especially when compared to the skyscraping valuations of digital media upstarts in the mid 2010s—Group Nine was worth $585 million in 2016, whereas Vox was valued at $1 billion in 2015—investors’ fervor for new media appears to have cooled significantly. This return-to-reality moment could have lasting impacts on future media valuations, said GroupM global president of business intelligence Brian Wieser. The ghost of inflated valuations past could give investors pause going forward, increasing their reticence to buy into the kind of hype that characterized the giddy early years of digital media. “The valuations say something more about expectations of the past that were probably overly robust,” Wieser said. “In 2015 and 2016, BuzzFeed was talking up BuzzFeed, and Vox was talking up Vox, and they were able to create narratives around themselves that were largely unchallenged by investors.” Rather than dampen media investment, these reality checks will act as a much needed corrective. Media companies are not technology companies after all, Wieser said, and they should be valued as such. Are larger tie-ups ahead? For years, digital media companies have fought against one another, a struggle that Karl likens to rowers in the same canoe paddling in opposite directions. The founders of vaunted digital media companies, like the companies themselves, have aged over the last decade, and their concerns have matured. Many are now looking for exits or liquidation events, especially since their publications have surpassed the metrics milestones that give them a greater assurance of longevity. “If you can get above $100 million EBITDA, you have relevance to the world's largest marketers,” Karl said. “If you have a platform big enough, they need to be talking to you.” On the heels of a frothy ad market in a late-pandemic economy, acquisitive publishers have been on the prowl, scooping up smaller properties and folding them into their operations with gusto. Now, as the number of guppy publishers dwindles, the timing is ripe for major consolidations that could restructure the media landscape.

Publishing News

Unanswered Questions From the Vox Media Merger

The consolidation marks a new, more realistic era for digital media

What happens to the Group Nine Media SPAC?

Mark Stenberg

About

Subscriptions

Events

Publications

What happens to the Group Nine Media SPAC?

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Mark Stenberg