The age of the operator: What the new cluster of digital-media acquirers are doing differently

Digital-media-merger-mania accelerated towards the end of 2019. In the past couple of weeks alone, Vice said it was acquiring Refinery29, Vox Media acquired New York Media, and Group Nine scooped up PopSugar. There were 83 digital content M&A transactions in the first three quarters of 2019, with a considerable uptick in the third quarter, according to investment bank Luma Partners. If more M&A announcements are to follow before the year is out — as many observers predict will be the case — it’s a safe bet the acquirers will be one of six companies whose corporate development teams have been busy cutting deals of late: Vox, Vice, Group Nine, Bustle, J2’s Ziff Davis and IAC’s DotDash. 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 cashflows and profit front of mind, not simply growth at all costs. Digital media has entered the age of the operator. 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.