There’s been a flurry of M&A activity among media brands this year. Vox acquired New York Media, Vice announced its purchase of Refinery 29 and NowThis parent Group Nine has taken over PopSugar. Dealmakers in the space have taken on a different approach in recent years, as opposed to when venture-capital money flooded the sector and valuations soared. The new acquirer largely follows a different playbook that has cash flows and profit front of mind, not simply growth at all costs. Savvy media brands are looking at how they can convince their audiences to hand over money for their content, such as paywalls, creating a membership model or executing intelligent affiliate linking strategies.

A swift path to profitability tends to come from brands that own, rather than rent, their audience. The majority of recent deals have involved highly-focused, subject-specific verticals. New acquisitions are quickly tucked into the margin-sensitive organization’s wider office space, ad-tech stacks and other back-office functions. Overlapping costs are largely stripped out, rather than continuing to operate the assets as separate, adjacent businesses. “It is not just about traffic or eyeballs, it is about profitability and a sustainable business model,” Moon said Roddy Moon, managing director for TMT at KPMG Corporate Finance.

Vice positioned its acquisition of Refinery 29 as an advancement in its quest towards profitability, helping to grow its reach among a female audience and to supplement its newer revenue streams, such as events and e-commerce. “We are obviously very prudent. We will find ways to drive operating leverage against both platforms,” said Vice Media Group Chief Strategy Officer Hozefa Lokhandwala. “We are aiming for 20-plus percent more content coming out of the organization. For us, the goal is to be in growth mode and to do it smartly and thoughtfully.”

Acquisitions are positioned to complement other brands in existing brand portfolios. “It cannot just be about the consolidation of corporate teams,” said Vox Media Chief Revenue Officer Ryan Pauley. “Successful strategies will be about the elevation of the work itself, whether that is the quality of the editorial, or of the product the audience sees, or the quality of the work we do with brands.” Revenue diversification beyond advertising is also a core strand of the new digital-media acquirer’s strategy. “It is about an appetite for things other than original content, whether that be commerce, or a tie-in to what is available through traditional video and television,” said KPMG’s Moon.

To be sure, the path to building the new digital-media conglomerate will not be easy and not every acquisition will succeed. Many of the aforementioned companies’ acquirers remain venture-backed, meaning the high expectations for a return on investment have not gone away. With that being said, Bryan Goldberg, CEO of Bustle Digital Group said that acquisitions require patience and take time to fully take off, noting that it took around 18 months for Elite Daily, which BDG acquired in 2017, to become fully integrated and begin turning a profit.

With a backdrop of tightening data regulation and recent moves from browsers suggesting a cookie-less future, digital-media companies will need to build out strong first-party data strategies in order to maintain healthy levels of spending, including how to get consumers to pay for the content they are viewing and expand into new areas such as events and commerce. Ultimately, it is about building “next-generation media company” that require sustainability, durability and stability to pivot, move and be flexible as changes continue to happen to the media industry.

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DIGITAL MEDIA MERGER MANIA