New media investing in favor but hazards lurk

Sun Nov 17, 2013 9:08am EST
 
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By Jennifer Saba

NEW YORK (Reuters) - New media websites from BuzzFeed to Business Insider are on a roll lately, showered with dollars from venture capitalists betting that they will crack an advertising market that has stymied traditional media companies.

With their mix of top-ten lists, slide shows that highlight the indignities of air travel, eye-catching headlines and thoughtful news, such media start-ups think their fresh approach to working with brands will coax more money from advertisers.

They build large audiences by using social media like Facebook and Twitter to push content to young readers that marketers covet.

Some investors are already true believers, as evident in the much higher valuations that digital content start-ups are commanding - in some cases, they are valued at five times the multiples that venerable old media companies fetch. Still, the start-ups face steep odds in the long-term as scores of competitors vie for marketers' dollars.

Venture capital firm Accel Partners recently led a round of new financing of nearly $34 million for Vox, the publisher of sports and technology websites SB Nation and The Verge that has raised nearly $70 million so far. Last week, Vox announced it bought the Curbed Network, a group of blogs that cover real estate, food culture and fashion. Reports pegged the acquisition in the range of $20 million to $30 million.

BuzzFeed, a social news and entertainment company, received $46 million, including $19.3 million in January from venture capitalists. Technology-focused Business Insider and the fashion-oriented Refinery29 have also raised tens of millions of dollars each.

The influx of money has some industry watchers proclaiming the comeback of content, as entrepreneurs try to appeal to so-called millennial readers who grew up on digital news and have likely never touched print.

"If you can get to scale, the media model is fantastically profitable," said Dan Marriott, managing partner at the investment firm Stripes Group and an investor in Refinery29.   Continued...

 
A BuzzFeed employee works on a computer at their office in New York February 19, 2013. REUTERS/Shannon Stapleton