There’s money to be made in the new media business

Australia’s media industry can be described as one of the most concentrated in the world. As one of the world’s most successful democracies, it is hard to imagine three main owners (Fairfax Media, News Corp and APN News) hold 98% of the media industry. With players such as Private Media (the publishers of Crikey and StartupSmart) coming through, Australian readers are beginning to receive more options to choose from.

Smaller independent media outlets such as The House of Media find it difficult to compete and secure airtime in a 24-hour news cycle. In order to survive and stand out, they need to be creative, accessible and innovative.

New media outlets around the world have gained a strong market presence in the global media industry. Digital players such as BuzzFeed, Mashable and Quartz have succeeded in finding their place due to their technological knowhow and money from non-media investors. Not only have new media platforms been able to attract monetary investment, they have also attracted award-winning journalists and maintained a viable content production staff to compete with traditional media channels.

An example of this is First Look Media. Funded by eBay founder Pierre Omidyar, First Look Media operates without having to rely on traditional funding sources such as advertising. To differentiate itself from its competitors, First Look Media is seeking 501c3 non-profit status from the IRS in the US. First Look Media aims to promote editorial independence free from financial and political interference. With a billionaire as their publisher, First Look Media can continue to attract award-winning journalists to prepare content and pursue independent reporting.

Other new media companies around the world have been successful in attracting non-media investors. In the last six months, we have witnessed millions of dollars being invested by venture capitalists into online media businesses. However, the big question remains, what profit margins will they get in return?

Mashable, one of the world’s leading media companies for technology and the connected generation, raised $17 million in Series B funding. With funding from Time Warner Investments, the injection of funding will allow Mashable to hire more staff, develop its strategic growth areas such as video production and proprietary Velocity technology and grow its editorial talent. According to Mashable, 2014 brought in a 45% increase in revenue, 60% increase of social followers and 40% growth in monthly unique visitors to 42 million globally. Mashable’s success in attracting local audiences is attributed to its dedicated country sites in the UK and Australia and diversifying its advertising portfolio through integrated partnerships with blue chip clients.

Success stories such as Mashable have opened up opportunities for new media businesses to succeed and make money. Other notable deals over the past six months include:

• Business Insider: Launched in 2009 in New York City, business and technology news website Business Insider recently pulled in $25 million in funding from venture investor Axel Springer, totalling their investment backing to almost $60 million to date.

• Vice Media: New age arts and culture magazine and website raised $250 million by selling a 10% stake to A&E Networks (a joint venture between Disney and Hearst Co.)

• BuzzFeed: Popular entertainment site BuzzFeed closed in on a $50 million investment led by Andreessen Horowitz last year. The latest financing round pushes the company market value of BuzzFeed at $850 million.

• Vox: Vox closed a funding round of $46 million from first time media investor General Atlantic.

A question we still ask ourselves is – are these new media companies worth the investment? I guess only time will tell.

New media companies don’t just produce and publish news and content, they are vertically-integrated technology platforms with their own publishing tool. This makes online publications such as BuzzFeed and Vox extremely attractive to advertisers who are searching for new ways to reach audiences. Another reason why new media companies are an attractive option for venture capitalists and investors is its ability to influence and shape debate and discussion. Investors want to influence decision-makers and keep corporate and government institutions accountable. For a number of investors, the ability to influence is worth the monetary and time investment.

Content consumption in Australia and around the world is constantly evolving and changing. To remain relevant, new media players need to develop innovative production, distribution and marketing techniques to push their content. New media websites such as Mamamia have managed to capture the interest of a core group within Australian society. Its targeted stories on politics, pop culture, entertainment, fashion and feminism have enabled it to morph from a lifestyle blog to an interactive news website with a loyal readership of 4 million readers per month.

Australia’s digital media scene requires innovation and a fresh change. With many global new media companies able to attract serious funding and investment, there is a real opportunity for new media organisations in Australia to make money and stand out. So what are we waiting for? Let’s get started!

Jieh-Yung Lo is the founder and managing director of The House of Media. Follow him on twitter at @jiehyunglo.

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