Vox-Group Nine deal confirms the scaling-to-survive reality of digital media

The consolidation of digital media companies shows no signs of slowing down. Vox Media is acquire Group Nine Media, the publisher of sites such as Thrillist, NowThis and the Dodo, a move that would combine the brands into one of the largest online publishers in the digital space. The deal, first reported By the Wall Street Journal and confirmed shortly afterwards in a company-wide memo sent by Vox Media CEO Jim Bankoff, will close early next year pending regulatory approval; the combined company would generate more than $700 million in revenue and more than $100 million in profits, according to the log.

“The business rationale behind this merger is to increase revenue, scale and combine these incredibly powerful and complementary portfolios,” Bankoff told staff in his memo. The nature of the all-share deal would give Group Nine investors a 25% stake in Vox Media; because Group Nine’s investors include Comcast and those of Vox Media Discovery, Recode’s Peter Kafka points out that “two of the largest media companies in the world could end up with interests in the same digital media operation.” Bankoff will lead the combined company, with Group Nine Chief Executive Ben Lerer a director’s role on the board. The pair appeared on CNBC on Tuesday, with Lerer saying that “scale is a path to optionality,” putting them in a position to acquire others and “take advantage of a market where being small was difficult.”

Vox has grown steadily over the years, to buy New York Media (where I used to work) and Epic in 2019 and, more recently, smaller properties such as the cocktail website Punch and podcast studio Criminal productions. Group Nine, which itself emerged from a merger in 2016, had its own ambitions for expansion: it acquired PopSugar in 2019 and last year formed a SPAC — the route BuzzFeed took to go public and acquire Complex — to apparently chase others. While Group Nine’s deal with Vox Media is reportedly not related to the SPAC, Kafka says it will move into the merger. Bankoff told staff he has “no immediate plans to go public,” although Kafka noted that “this is very much the kind of deal you make as a prelude to going public.”

So Bankoff is in a stronger position to make Vox Media public, as is his colleague Jonah Peretti, the CEO of BuzzFeed, did last week in a rocky but nevertheless historic opportunity for digital media. BuzzFeed’s public debut came when the Complex Networks acquisition was finalized. Peretti, who has been talking since 2018 on digital media companies collaborating, and finalized a deal for HuffPost earlier this year, touted the Complex acquisition and the SPAC merger as a way to “thrive in an era of media consolidation.” Bankoff appeared to share that view, telling employees Monday that “together we will be an even stronger, more financially sustainable company that can invest more in our products and our people” and “be the clear leader in modern media.” Vox Media “has been exploring ways to raise funds for continued growth, including the option to go public” and may be able to pursue further acquisitions – and an eventual IPO – following this merger. log reports. BuzzFeed’s own challenges however, as it becomes a publicly traded company, Vox’s calculation may change.

Regardless of whether Vox Media becomes the next big player to trade as a publicly traded company, the Group Nine acquisition is: only the last certificate on the need to scale to survive in a Google and Facebook dominated ad market. “It’s not that all of these companies together would be actual competitors of Google or Facebook,” Kafka writes. “It’s just that a bigger audience makes it easier to attract more advertising dollars, or for subscription-based businesses, bigger companies have more stuff to sell.”

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