Money flowing into online news businesses, BuzzFeed gets US$200 million in capital

PUBLISHED : Sunday, 23 August, 2015, 8:51pm
UPDATED : Sunday, 23 August, 2015, 8:51pm
AFP

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Suddenly the online news business is red-hot.

Money is flowing into digital news ventures at an unprecedented pace, as investors anticipate an accelerating shift away from traditional media, and new ways to generate revenue from news.

BuzzFeed made news this last week with a US$200 million capital injection from Comcast's NBCUniversal, and with the announcement of a joint venture with Yahoo Japan for Japanese readers.

Earlier this month, Vox Media also secured US$200 million from NBCU as the start-up seeks to ramp up its news websites.

Vox and BuzzFeed joined the club of "unicorns", or venture-funded start-ups worth at least US$1 billion, a group that also includes Vice Media, which unveiled a US$500 million funding round last year.

The flood of capital to the sector suggests confidence in the ability of digital media to connect with readers and generate profits, say analysts.

"Right now it's an arms race. These are companies growing quickly and they have to grow quickly," said Ken Doctor, a media analyst with the research firm Outsell.

Doctor said a key for these organisations was capturing the attention of "millennials", or young adults born after 1980 who rarely subscribe to print publications or cable television, and who get most of their content online.

"Marketers have discovered the millennial generation as they get more earning power," he said.

Interestingly, much of the money flowing into these organisations is coming from traditional media, seeking fresh ways to deal with a transition to digital news.

The Murdoch family's 21st Century Fox is an investor in Vice Media while Time Warner has invested in the online news site Mashable. "It's as much a hedge as anything else," Doctor said.

"It's a lot of money but not a bank-breaking amount."

The analyst added that big media groups that saw troubles for print a decade ago are now waking up to digital disruption of television. With consumers slowly moving away from cable TV bundles, "you can see the fault lines," Doctor said. "Digital eats everything, and television is not immune."

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