Q&A With Venture Capitalist Powerhouse Eric Hippeau on the Future of Digital Media

Eric Hippeau has been riding the media wave for almost three decades—from running Ziff Davis throughout the 1990s to serving as the chief executive of the Huffington Post during its 2011 sale to AOL. Since then, Hippeau has served as managing director at Lerer Hippeau Ventures, the venture capital company whose fingerprints are all over the digital media landscape. As an early stage investor to digital media companies like BuzzFeed, NowThis (Hippeau is also a co-founder of NowThis), Warby Parker, Axios, Casper, Giphy, Mic, Percolate and others, Lerer Hippeau has arguably had more influence in shaping the realities of “new” media than any other company. In effect, his role is to bet on the future of media and advertising. Adweek recently visited Hippeau in his lofty SoHo office to talk about the current state of media, where it’s heading, and how tech plays a vital role in the decisions the industry makes. The following has been edited for length and clarity. Adweek: It seems we’re at an inflection point in the media, one being led by rapid advancement of technology. Perhaps more importantly, it’s a time for media to not repeat the mistakes of the past. Is that an accurate assessment? Hippeau: That makes sense; I guess what you're saying is it's time for these companies to fully embrace all the tools that are available. That wasn't clear before. It's clear now that the future is digital. And so [it's important to be] all-in—and "all-in" means that you have to restructure your operations very differently. Adweek: So for restructuring operations, you go from HuffPost’s SEO magic to BuzzFeed’s distributed content. What’s next? Hippeau: [Next is the] concept of channels—that there is a concentration of content that you are particularly in tune with but is still within the platform. You don't have to leave the platform. I think that's that's a very positive evolution. I think the Discover section in Snapchat is actually quite [good]. Snapchat made the decision not to give you third party content in your feed. You actually have to go. I actually think that's pretty smart because it means that I have made a conscious decision to go to CNN on the Discover platform. Adweek: SEO strategy and social distribution strategy is replicable from media company to media company; channel discovery doesn't seem to be as an opportunity to be as pervasive. Hippeau: Well, it's not that it gives you this massive distribution, but it's going to give you a committed audience, which is really what media has always been about. I remember when I used to publish [at Ziff Davis] and we had like 20 different computer magazines. People would say to me, "How is it possible?" and I said it’s because you pick up a magazine and it either attracts or rejects you until you find the right thing. And those audiences will be, by definition, smaller than the mass, right? But they will be a very valuable audience for advertising. Adweek: Do you think this evolution works for publications like The New York Times or The Wall Street Journal? Media companies already have channels; they’re beats. Hippeau: So those are the traditional ways to cut those channels. I don't know the answer to that. I think in some cases, like news, like when you hear these surveys a majority of people now read their news or find their news on Facebook, you say, 'what news are they finding on Facebook?’ What do they mean by news? But in the morning, I want to see the digital edition of The New York Times. So whatever platform I'm on, either I'm going to news or specifically go to The New York Times. But unfortunately, The New York Times doesn't have that strategy, so I can't find The New York Times in a comprehensive way on Facebook. I can't. It's not really updated. It doesn't give me the news. So there's that, but there's also the new kinds of channels. A good example is Tasty, which is a brand, but it's also a channel, because it's all about food. Adweek: So this ‘channel’ evolution implies some kind of brand loyalty. Do you think that we might be coming back to a time of digital brand loyalty versus just kind of getting bites here and there based on your Facebook feed? Hippeau: So the history of content, from the very beginning, is always that content is king. And I firmly believe in that. We are going through a phase where there was an attempt to just give us a massive amount of content that was undifferentiated or false, like in the case of this Russian stuff, or just deliberately vague. And I think people are starting to see through that and the idea that content should be trusted will, I think, pervade. Adweek: Do you see that being driven by algorithms and AI? Hippeau: To some degree, that's what they're doing today, right? Facebook as an example: their algos determine what you seem to like, then try to give you more of that. I think that that's put us into a hole. Twitter, you can choose who you follow and that's really basically what you get in your feed. When you like something on Facebook, it doesn't necessarily mean that's what you're going to see. Adweek: But moving forward, since we know that that happens, are we moving into a world where these algorithms can do this, but we just don't know what kind of content we're going to receive—where the algorithms are going to decide where we're going to go? Hippeau: So the idea that AI exists in a vacuum is false, because the basic premise of AI is that you train the algorithm. Someone out there is training the algorithm—usually it's humans. Maybe in the future, it can be another AI. So at the moment, going back to this idea of Facebook, I have no idea who these people are who are training the AI that shows me what's in my feed. And I have no idea what their intentions are, what their biases might be—and rather than doing it that way, why don't they allow me to train my algo? Why is this some mysterious black box doing it? Adweek: Then training the algorithm is essentially making media more personalized. Do you see that philosophy also moving outside the media into how advertisers are going to be looking at AI; giving it a more personalized touch, if you will? Hippeau: You'd think that would be the rational evolution of programmatic. Unfortunately programmatic is a little stuck. I mean, how often do you actually go buy a pair shoes? [But] for a few weeks, you still see the same ads. I just bought these shoes; sell me something else! So programmatic is stuck, but you're right, you'd think that the evolution of that would be to add some intelligence so they could try to figure out more about you, not necessarily just because you visited some website. Adweek: To quote Wayne Gretzky, ‘Skate to where the puck is going, not to where it's at.’ You seem to take that philosophy in media. Are those questions of the AI evolution and personalization informing how you analyze possible investments? Hippeau: Yes, but it's not yet—or hasn't been—the predominant criteria. Personalization has always been the holy grail for media and has never worked. My NYT feed is the same as your NYT feed. ... For some reason, it hasn't been done. So we're very selective. Media is less than 10 percent of our portfolio, even though we're quite well known because of our background. So we look for changes in technology: mobile is one big investments; social, of course; today, it would be AR/VR. We feel the timing isn't there yet. It's too early, but we have made a couple of VR investments. We're in the market in a very small way because we want to understand what's going on. We want to know the community. But to make investments on a larger scale for us, we would have to be convinced that the time has come. So it's all about timing. Adweek: When you invest in these companies, how quickly are you looking for a return? Hippeau: Oh, we're early stage investors. Typically, if we continue to invest in the company, we will invest with the life cycle of the companies. So we are very long-term; we're very patient. You know we have companies that are eight or nine years old. BuzzFeed, Warby Parker, companies like that. We are big believers in those companies and eventually will exit. We don't have a timetable. Adweek: Speaking of BuzzFeed: Does NBC gobble it up wholly? Does it go public? Worst-case scenario, does it disappear altogether? Hippeau: No, it's a solid business. None of these businesses go like this [hand motions upwards]. They all go through [hand motions up and down]. I was an early investor in Yahoo. I remember we went through these plateaus, and then suddenly you make whatever corrections you make, and boom! So BuzzFeed is definitely in that category. BuzzFeed also has a fantastic platform and a lot of data. It's a great company. I don't know about NBC, but what you are seeing in the media business, if Disney buys the Fox assets for $60 billion—[Editor’s note: this interview was conducted before Disney acquired 21st Century Fox for $52.4 billion] Adweek: Do you think that's overinflated? Hippeau: I don't know. Analysts will be able to dissect it. Disney has a bigger goal, which is to be its own Netflix. So for them, it has a long-term value. You're starting to see tectonic shifts where people are realizing that they have to reassemble their portfolios for the future. Adweek: To that end, Gizmodo makes a ton of money from their ecommerce sites and affiliate links. The New York Times has Wirecutter. Is this a fad that's going to turn into a trend for other media companies to start looking at ecommerce this way? Hippeau: I don't see why not. I think it's going to really require adjustment of thinking that a media company of tomorrow is not going to be the media company of yesterday. Adweek: So thinking about Axios, of which you led early round funding. Hippeau: Perfect timing. I mean like, they basically launched right around the inauguration. They're an old format: newsletters. Now they reinvented the newsletters. It has a new advertising format to it, which people love. It works well in the continuous stream. So using the concept that you are familiar with—social media—but using it in a newsletter format ... that's the big innovation. But what people love is the smart content and the brevity. You're going to know everything you need to know. Very insightful. Adweek: Now on the flip side with with Group Nine, to which your partner Ben Lerer was given $100 million to basically bring several titles—Thrillist, Dodo, NowThis—under one umbrella. Hippeau: The concept here is that you need scale to be a leader in digital. So it kind of reminded us of the early days of Viacom, because all the Viacom channels were independent businesses. MTV was its own business. Comedy Central was its own business. And then they put it together so they could centralize and benefit everybody in terms not only of the admin but distribution [and] advertising sales, because individually, you don't have the heft to do that. Adweek: Are we going to start to see more digital media companies emulate the media conglomerate model? Hippeau: Yes. Though I haven't seen the evidence besides Group Nine, at the moment. Adweek: Well, Gizmodo/Fusion/Univision. AOL/Verizon/Yahoo. Hippeau: So the answer is yes, because it makes perfect sense to bolt this on to to a big media company that has a lot of assets that could be put to use. Adweek: With digital conglomerates though, you basically create your own ad network. Hippeau: Sure, because things move so quickly that as a media company you need to get much closer to your clients. And so you still work with agencies but the agencies are kind of out-to-lunch right now. So you need to be working, because the clients are bringing in some of these resources in-house. They're obviously very interested in data and they will move faster. And if you have more heft, if you're a big P&G or you're a big advertiser, you don't want to be dealing with the tiny little brand. Adweek: So as this consolidation happens, how do you make sure that you do not repeat the sins of the past? Hippeau: Such as? Adweek: Display ads, banners, pop ups, interstitials, etc. Hippeau: Yeah, you absolutely have to innovate in the formats. You have to create like we did with Axios, like we did with Buzzfeed and this whole concept of sponsored content;, like we did with Tasty and how you do product placements in a digital way. That's why it's simple to be in touch with the customer: Understand the customers needs and marketing goals while constantly being innovative. And the agencies obviously, they're there; they're necessary, but they are laggards. They don't innovate. You have to drag them into it. Adweek: What’s the biggest issue of the moment? Hippeau: I think that the issue of the moment for everybody is: Are the big platforms treating media companies fairly? I would say no. I think that they don't recognize what they’re getting, and if for some reason they want to drive away these media companies, their users would be hurt; they would be missing a lot. Adweek: Do you envision any media company saying, ‘we're not going to be on Facebook anymore?’ Hippeau: No, because it will not be in their best interest. But I can envision media companies not putting their best efforts [there]. Adweek: Kind of like an untended garden? Hippeau: Yeah, like more of a marketing pool. You've seen the statistics. Facebook and Google eat up 95 percent or more of all incremental dollars. They don't even know the old adage ‘always leave a dollar on the table when you're negotiating to keep the other side happy.’ They don't do that. And I don't think that's sustainable.

Digital Transformation

Q&A With Venture Capitalist Powerhouse Eric Hippeau on the Future of Digital Media

Hippeau assesses the state of the industry

Marty Swant

Josh Sternberg

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Marty Swant

Josh Sternberg