For online media, it's a double helping day of bad news. Mashable will get sold to Ziff-Davis for a fraction of the valuation it held even last year and BuzzFeed and Vice Media could miss their revenue targets by large amounts this year.

Some online publishers have experimented with different revenue models. But most still depend on digital advertising. Competition is tight, much of the available ad money goes to Facebook and Google, and independent sites face trouble. GigaOm went under in 2015, only to see the brand sold within a few months. When the dust clears after more consolidation, investor kickback, and other challenges, how many independent voices -- and separate opportunities for advertising, promotion, and PR -- will be left?

The Mashable price tag is $50 million. Just last year, the company gained a $15 million round of investment at a price that assumed a $250 million valuation, so the sale represents a loss of 80 percent of perceived value.

BuzzFeed, in the meanwhile, had targeted $350 million for revenue this year. The expected shortfall will be between 15 percent and 20 percent, according to the Wall Street Journal, which also said the company provided a statement that it would still show revenue growth and audience expansion.

The story also reported that Vice Media could miss its revenue target this year by $800 million. The scale of loss could make the BuzzFeed slip look like loose change.

There is a string of reasons why some media companies with hot brands are seeing tepid to cool results:

  • Facebook and Google are expected to take more than 60 percent of digital advertising spending this year. The amount left to split among everyone else is thin.
  • Many publishers become dependent on the money flowing through Google and Facebook. When they modify algorithms or change policies, sites can find themselves suddenly losing large amounts of revenue.
  • The explosion of online media and advertising opportunities has created a huge surplus of ad space. As supply has increased, prices have plummeted.
  • Automated ad buying and selling, known as programmatic advertising, have also helped drive down prices as well by making large amounts of ad supply easily available.
  • Advertisers increasingly want more targeted audiences as well as price based on results of some kind. That may send prices higher, but on much reduced delivery, lowering overall revenue from a campaign.

It seems like all publishers are running this way and that in pursuit of what is supposed to be the new hot way to advertise and make money. Many are boosting video, often at the expense of other types. Ad rates on video are higher, but playing takes longer. Consumers devote only so much time to media. The more they spend with video, they less in total they read or watch.

There has also been the assumption on the part of investors that companies would continue to grow at a fast rate. Publishers have pushed to expand as a result, burning a lot of cash. But investors only tolerate red ink -- or pixels -- for so long. Maybe a continued shift from traditional print and even television to digital will enable growth and profitability.

But it won't for all the companies. For a few winners, there are likely to be many losers, just as has been the case in social media. Advertisers may find that consolidation and pressure on new ventures will eventually start to shrink at least some of the ad supply and, ultimately, drive up prices. The other impact will be a reduction in the number of outlets, meaning fewer opportunities for companies to promote themselves and increased advantages for businesses that already tend to attract attention from the media.

Published on: Nov 17, 2017