The digital media rollup dream is dead for the moment — now it's all about core brand strength

When a matrimony oregon an engagement fails, it's communal for the participants to instrumentality clip to enactment connected themselves.

That's wherever the integer media manufacture finds itself today.

After years of focusing connected consolidating to amended vie with Google and Facebook for integer advertizing dollars, galore of the astir well-known digital media companies person abandoned consolidation efforts to ore connected differentiation.

"What you're uncovering is companies are trying to find a non-substitutable core," said Jonathan Miller, the CEO of Integrated Media, which specializes successful integer media investments. "The epoch of trying to enactment these companies unneurotic is over, and I don't deliberation it's coming back."

A 90% diminution successful BuzzFeed shares since the institution went nationalist successful 2021, a failed income process from Vice, the illness of peculiar intent acquisition companies, and a choppy advertizing market person made integer media executives rethink their companies' futures. For the moment, executives person decided that much concentrated concern is amended than attempts to summation scale.

"Right now, everyone's trying to get done a tougher marketplace by focusing connected their strengths," BuzzFeed CEO Jonah Peretti said successful an interrogation with CNBC. "We're successful this play present wherever we should conscionable absorption connected innovating for the aboriginal and gathering much efficient, stronger, amended companies."

What's happening successful the integer media abstraction echoes trends from the biggest media companies, including Netflix, Disney and Warner Bros. Discovery. After losing astir fractional their marketplace values, oregon more, successful 2022, those companies person emphasized what makes them different, whether it beryllium distribution, marque oregon prime of programming, aft years of planetary enlargement and mega-mergers. Disney CEO Bob Iger said the connection "brand" much than 25 times astatine a Morgan Stanley media league this month.

"I deliberation brands matter," Iger said. "The much prime radical have, the much important brands go due to the fact that of what they convey to consumers."

Making strategical decisions based connected user request alternatively than capitalist unit is simply a pivot for the industry, said Bryan Goldberg, CEO of Bustle Digital Group, which has acquired and developed a fig of brands and sites aimed astatine women, including Nylon, Scary Mommy, Romper and Elite Daily.

"Too galore of the mergers were driven by capitalist needs arsenic opposed to user needs," Goldberg said successful an interview.

From precocious 2018 to aboriginal 2022, the integer media manufacture had a shared goal. Pushed by task capitalist and backstage equity investors who had made sizeable investments successful the manufacture during the 2010s, companies specified arsenic BuzzFeed, Vice, Vox Media, Group Nine, and Bustle Digital Group, oregon BDG, were talking to each other, successful assorted combinations, astir merging to summation scale.

"If BuzzFeed and 5 of the different biggest companies were combined into a bigger integer media company, you would astir apt beryllium capable to get paid much money," Peretti told The New York Times successful November 2018, kicking disconnected a multiyear effort to consolidate.

The rationale was twofold. First, integer media companies needed much standard to vie with Facebook and Google for integer advertizing dollars. Adding sites and brands nether 1 firm umbrella would boost wide eyeballs for advertisers. Cost-cutting from M&A synergies was an added payment for investors.

Second, longtime shareholders wanted to exit their investments. Large bequest media companies specified arsenic Disney and Comcast's NBCUniversal invested hundreds of millions successful integer media successful the aboriginal and mid-2010s. Disney invested more than $400 cardinal successful Vice. NBCUniversal enactment a akin amount into BuzzFeed. By the extremity of the decade, aft seeing the worth of those investments fall, bequest media companies made it wide to integer media executives that they weren't funny successful being acquirers.

With nary strategical purchaser available, merging with each different utilizing publically traded banal could springiness VC and PE shareholders a accidental to currency retired of investments that were good past the modular clasp clip of 7 years. Digital media companies eyed peculiar intent acquisition companies — besides known arsenic SPACs oregon blank-check companies — arsenic a mode to spell nationalist quickly. The popularity of SPACs picked up steam successful 2020 and peaked successful 2021.

Deal travel accelerated. Vox acquired New York Magazine successful September 2019. About a week later, Vice announced it had acquired Refinery29, a integer media institution focused connected younger women. BuzzFeed bought quality aggregator and blog HuffPost successful 2020 and past acquired digital steadfast Complex Networks successful 2021 arsenic portion of a SPAC transaction to spell public. Vox and Group Nine agreed to a merger aboriginal that year.

BuzzFeed, mostly thought by manufacture executives astatine the clip to person the strongest equilibrium expanse with the champion maturation narrative, successfully went nationalist via SPAC successful December 2021. Shares instantly tanked, falling 24% successful their archetypal week of trading. The coming weeks and months were adjacent worse. BuzzFeed opened astatine $10 per share. The banal presently trades astatine astir $1 — a 90% nonaccomplishment of value.

BuzzFeed's underwhelming show coincided with the implosion of the SPAC market successful aboriginal 2022 arsenic involvement rates rose. Other companies that planned to travel BuzzFeed unopen down their efforts to spell nationalist completely. Vice tried and failed. Now it's trying for the second clip successful 2 years to find a buyer. BDG and Vox, meanwhile, abandoned considerations to spell public. Vox alternatively sold a 20% involvement successful itself successful February to Penske Media, which owns Rolling Stone and Variety.

Consolidation was ever a flawed strategy due to the fact that integer media could ne'er go large capable to vie with Facebook and Google, said Integrated Media's Miller.

"You person to person capable magnitude of standard to matter, but that's not a winning look by itself," Miller said.

Vice's woody for Refinery29 is simply a premier illustration of a woody motivated by standard that lacked user rationale, said BDG's Goldberg.

"The integer media rollup has proven palmy lone erstwhile assets are thoughtfully combined with an oculus toward consumers," Goldberg said. "In what satellite did Vice and Refinery29 marque sense in combination?" 

Vice is engaged successful merchantability talks with a fig of buyers that autumn extracurricular the integer media landscape, CNBC previously reported. It's besides considering selling itself successful pieces if there's much involvement successful parts of the company, specified arsenic its TV accumulation assets and its advertisement agency, Virtue.

Vice is simply a cautionary communicative of what happens to a integer media institution erstwhile its marque loses luster, Miller said. Valued astatine $5.7 billion successful 2017, Vice is present considering selling itself for astir $500 million, according to radical acquainted with the matter, who asked not to beryllium named due to the fact that the merchantability discussions are private.

A Vice spokesperson declined to comment.

"In the aged days of media, with TV networks, if you were down, you could revive yourself with a hit," said Miller. "In the net age, everything is truthful easy substitutable. If Vice goes down, the assemblage conscionable moves connected to thing else."

Companies specified arsenic BuzzFeed, Vox and BDG are present trying to find an enduring relevancy amid a myriad of accusation and amusement options. BuzzFeed has chosen to thin successful to artificial intelligence, touting caller AI-generated quizzes and different contented that fuses the enactment of unit writers with AI databases.

BDG has chosen to chiefly people pistillate audiences crossed manner categories.

Vox has focused connected journalism and accusation crossed a fig of antithetic verticals. That's a strategy that hasn't truly changed adjacent arsenic the marketplace has turned against integer media, allowing Vox CEO Jim Bankoff the accidental to proceed to hunt for deals. Just don't expect the partners to beryllium Vice, BDG oregon BuzzFeed.

"We privation to beryllium the starring modern media institution with the strongest portfolio of brands that service their audiences connected modern platforms — websites, podcasts, streaming services — portion gathering franchises done aggregate gross streams," Bankoff said. "There's nary uncertainty M&A is portion of our playbook, and we expect it volition proceed to beryllium successful the future."

While executives whitethorn beryllium making strategy decisions with a sharper oculus toward the consumer, the occupation of uncovering an exit for investors remains. Differentiation whitethorn unfastened up the excavation of imaginable buyers beyond the media industry. BuzzFeed's accent connected artificial quality could pull involvement from exertion platforms, for instance.

It's besides imaginable that determination volition beryllium an eventual 2nd question of peer-to-peer mergers. While Integrated Media's Miller doesn't expect a aboriginal manufacture rollup, BuzzFeed's Peretti hasn't closed the doorway connected the conception if marketplace conditions improve. As executives put successful less ideas and verticals, the extremity effect could beryllium healthier companies that are much charismatic merger partners, helium said.

"If everyone invests successful what they're champion at, if you enactment them backmost together, you'd person that diversified integer media institution with existent scale," Peretti said. "That helps thrust commerce for each parts of a unified company. I deliberation it's inactive possible."

Disclosure: Comcast's NBCUniversal is the genitor institution of CNBC.

WATCH: Axios' Sara Fischer connected BuzzFeed's continuing struggles