Last year saw the digital media upstarts step up a gear, and 2016 looks set to see them consolidate their place alongside established media businesses. The biggest development of the year will be digital darling Vice going all traditional media and launching TV channels across Europe. At least that will be the big story until something bigger happens, because the digital media landscape is a bit like that.
Vice will probably get yet another investor upping its stake (cue a further ridiculous surge in valuation beyond $5bn) to try to tap into some of its edgy, youth-focused cool. Or perhaps founder Shane Smith might look to sell up, or go for an IPO.
Who Vice’s lucky European partner, or partners, might be is a tricky one. Smith is in talks with everyone and has mooted everything from a pan-European deal with one partner, to breaking the Vice content plan up into bits and doing deals across different media with different partners.
A question many of the sexy digital media players like Vice, BuzzFeed, HuffingtonPost (now part of Verizon) and Vox will have to answer in 2016 is whether they can keep their cool as their businesses start to look more like the established media companies they challenge.
“Regarding relative upstart publishers,” says Brian Wieser, senior research analyst at Pivotal, “I think with the passing of time and growth in size the more they will resemble older publishers with legacies in print, in terms of quality content [creation] as well as the opportunities and challenges of generating revenue from digital advertising. Among the advantages they have to complement this position, they have better access to capital and seem to be more flexible in terms of looking for new revenue generating opportunities, such as BuzzFeed providing content distribution services or Vice investing in TV-related assets.”
Investment has come easy, which has led to international expansion, a big surge in the hiring of staff – often big names from traditional publishers – and that has meant expanding cost bases. BuzzFeed chief executive Jonah Peretti has already indicated hiring won’t be as rapid over the next year. With a tough digital advertising marketplace, at least beyond Google and Facebook, could the unstoppable growth story come to an end for some of the upstarts as with Twitter’s surprise shedding of jobs in 2015?
“We talk about traditional businesses having problems [with digital growth] but they are still buoyed by a good print revenues business,” says McCabe of Enders Analysis.
“Digital advertising is a tough marketplace and costs are rising [among the digital media companies]. It is possible there could be redundancies. You might start to see signs of one or two of these [digital] native businesses start to retreat, or at least their level of ambition start to retreat slightly.”
