Vox's new mega-round puts a bow on content's "holy shit" moment

By Hamish McKenzie and Sarah Lacy , written on October 15, 2013

From The News Desk

Today it was revealed that Vox Media, owner of The Verge, SB Nation, and Polygon has raised another $40 million of funding. Then came BuzzFeed’s scoop that Glenn Greenwald, the political reporter who broke the ongoing saga of Edward Snowden’s NSA leaks, is leaving the Guardian to join a new, “very well-funded” media venture that will cover general news. The new publication, which Reuters reports will be funded by eBay founder Pierre Omidyar, is yet to be revealed.

We must now take a break from our scheduled programming to say: “Holy shit, content is back!”

It’s not just the mysterious Greenwald venture and Vox Media, which has now raised a total of $80 million and is expected to reach profitability this year, that are cause for mild tech-media enthusiasm, however.

It’s also BuzzFeed, which has raised $46.3 million and is now profitable.

It’s Vice Media, who sold a 5 percent stake to 21st Century Fox for $70 million, valuing it at $1.4 billion.

It’s Business Insider, which has raised $18.6 million and is investing “hundreds of thousands” in longform content.

It’s the Washington Post, which was just bought by Jeff Bezos.

It's The New Republic, which was bought by Facebook co-founder Chris Hughes.

It’s Bustle, which raised $6 million in seed money, pre-launch. [Disclosure: Bustle founder Bryan Goldberg is a contributor to PandoDaily.]

It’s PolicyMic, which has just raised $3 million.

It’s Contently, which has raised $3 million in a Series A and is now meeting investors looking for more.

It’s NowThisNews, which has raised close to $10 million for shortform video news.

It’s Wall Street Cheat Sheet, which bootstrapped itself to profitability.

It’s Upworthy, which recently raised an $8 million Series A and is one of the fastest-growing media companies the world has seen.

It's the impending Kara Swisher-Walt Mossberg deal.

And don’t be surprised if, within the next day, we hear of another major funding round from a prominent new media company. (Keep your eyes on PandoDaily for more on that front.)

Large funding rounds don’t prove that new media companies are ultimately going to be successes. But it's certainly a new trend in a venture capital community that's historically seen content companies as low growth and unscalable. It's not product, platforms, design, hacks, or algorithms – it's people. Creating content is downright artisan compared to scalable tech startups. And those sub-$30 million exits from Weblogs and TechCrunch have just weighed on the industry like a wet blanket.

But bigger exits are emerging: There was Huffington Post and Bleacher Report. There's that Vice valuation. And even Swisher and Mossberg without a site are rumored to be in the $30 million valuation size -- bigger than what TechCrunch sold for after six years. A pattern is forming.

The investments in Buzzfeed and Vox in particular show that well-heeled investors believe that new media can be more than just profitable lifestyle businesses buoyed by non-scalable event franchises. These guys are betting there are big public companies here.

We're seeing the same kind of transition with content that we saw with the early Web 2.0 companies like Delicious and Flickr. They sold out cheap at first as projects morphed into companies and then the next generation thought bigger.

It doesn't hurt that most of those could-be-the-next-Facebook/SoLoMo bets haven't panned out either. These kinds of consumer Internet bets are binary: Something either gets huge or falls flat. Content on the other hand has some of the advantages of enterprise software. It's something the world values and needs. It's got a baked business model, which has new life thanks to excitement around native, sponsored content, and high-dollar video CPMs. Does it take a long time to build a media brand? Yep. But all venture deals that aren't flips are, on average, taking longer and longer to exit.

Investors are betting that new media companies, especially ones that produce video, can grab more dollars from television advertisers, who are shifting more of their budgets to digital. As devices and platforms converge, content from these new media outlets can be seen on smartphones, tablets, TVs, and desktop computers, taking their advertising wherever they go.

These companies are also increasingly global, with audiences that cross borders. The Internet is the world’s best delivery truck. Suddenly "niches" can command audiences of tens of millions, not hundreds of thousands. Meanwhile, BuzzFeed has established a presence in the UK, and it has partnered with Duolingo to translate its articles into languages other than English. The Verge’s readers span the English-speaking parts of the globe.

These brands are also stepping in where old media brands have failed to step up, taking advantage of technology and network effects to produce publications that are speedy, responsive to various platforms and devices, and heavily social, being able to take full advantage of the traffic hoses that are Facebook, Twitter, Reddit, Digg, and the like. They’re also leading the experiments and innovation with digital advertising, including BuzzFeed’s sponsored listicles, The Verge’s premium rich-media ads, and Vice’s sponsored videos.

Accel Partners’ Andrew Braccia, who led the Vox Media investment, says new brands have an opportunity to be enduring voices of a generation, just like MTV and cable news channels have been for previous generations.

“Every generation needs a voice and needs to be connected with some media brands that they believe represent who they are and speak to them in a certain way,” Braccia says. “This generation requires those brands to be web-native brands, and ones that understand how to deliver experiences to them in a way that they can appreciate and connect with.”

Braccia has a point. As Marc Andreessen pointed out at our last PandoMonthly, media was one of the first industries to be disrupted by the Web, thanks to how deregulated it is. And yet, we've seen staggeringly few new dominant publications created. The landscape is still dominated by titans created a century or more ago.

Braccia says Vox was a growth-stage investment for Accel (which, full disclosure, is also an investor in PandoDaily), and that he believes companies like it don't have to rely on acquisitions by larger companies for exits. Asked if a digital media company can hope to be a public company, he says: “I think that it can be, and that there will be, and that Vox won’t be the only one.”

Eric Hippeau, managing director of Lerer Ventures, a big backer of BuzzFeed, shares Braccia’s sentiments and says traditional media brands are falling behind on generational trends and tech. “The question is who is attracting the 18-34 year olds, or even the 40 year olds, and that’s increasingly the new brands,” Hippeau says. (Lerer Ventures is also an investor in PandoDaily.)

There’s no pressure for these companies to go public, Hippeau says, but in a few years time, when their audiences are larger, they certainly will be IPO candidates.

At the very least, these large funding rounds mean new media companies won’t be able to get away with piddling sales to AOL. As each mega investment rolls in, the imperative to think bigger comes with it.

With some luck, the new guard might finally threaten century-old brands, opening up a whole new world of ad dollars.

[Illustration by Brad Jonas]