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Digital Media’s Do-or-Die Moment

Digital Media’s Do-or-Die Moment
Yinchen Niu/VIP+

As 2021 draws to a close, there have been some wild last-minute moves from recognizable names in digital media. Buzzfeed hit the public market by merging with a SPAC just over three weeks ago and acquired Complex in the process. And about two weeks ago, Vox and Group Nine announced a merger.  

Two major announcements in the digital media space but two distinctly very different exit strategies to ultimately achieve similar goals. 

Both announcements focus on gaining scale in order to beat out the competition. Following its latest acquisition, Buzzfeed’s portfolio now includes BuzzFeed, BuzzFeed News, HuffPost, Tasty and Complex Networks. Meanwhile, the combined Vox-Group Nine entity would own brands such as New York Magazine, NowThis, Thrillist, Eater, The Dodo, The Vox and The Verge. 

But which exit strategy was the smarter move: SPAC IPO or traditional merger?  

There are pros and cons to both strategies, but analyzing what we know about Buzzfeed’s SPAC IPO and its stock performance since can help to answer that question. 

As Buzzfeed was eyeing its public debut, it advertised proudly that its IPO would make it the first publicly traded pure-play digital-media company. And yet from the stock’s reaction since its debut, it doesn’t appear like investors are very excited about having a pure-play digital-media stock on the market.  

Buzzfeed stock opened at $10.95 per share on Dec. 6 and fell 11% on its first trading day. Since its debut, the stock has plunged more than 50% while the S&P 500 rose 5.5% during the same time period. What this tells us is that while investors are still putting money to work in stocks, they don’t want to put their cash into Buzzfeed. 

Buzzfeed’s SPAC merger with 890 Fifth Ave. was actually announced in June, but it took six months for stock to debut on the Nasdaq, all while investor appetite for SPACs went from very high to very low quickly this year. 

SPACs had a strong start to the year before ultimately peaking in March, and then things took a turn. In April, the Securities and Exchange Commission (SEC) issued guidance on possible changes to the accounting for SPACs, and in August the commission charged Stable Road Acquisition Co. for misleading disclosures ahead of its planned merger.  

Another reason SPAC IPOs were gaining immense popularity was because the companies would be able to make bold business predictions that are typically not allowed in traditional IPO processes. Still, the road to a SPAC IPO isn’t nearly as appealing as it was last year and earlier this year. 

Sure, SPAC IPOs are less time consuming and capital intensive initially, but is the heightened regulatory scrutiny afterward worth it? And can investors really believe the bold claims these companies make?  

Buzzfeed made some of its own pretty aggressive financial claims as it was eyeing its public debut. The company claimed that its revenue would increase 25% annually through 2024, to hit $1 billion.  

Meanwhile, before the announced merger between Vox and Group Nine, Group Nine had also formed a SPAC at the beginning of 2021 and was looking for a company with which to merge. Though it’s too soon to discount a future IPO, perhaps the decision to opt for a good old traditional merger instead was because Group Nine decided a SPAC wasn’t the best path forward.  

Regardless of whether it’s through a SPAC or not, going public isn’t always the best move, and sometimes it just makes more sense to stay private. That is why some companies revert to being private after an unsuccessful period as a publicly traded company.  

Now Buzzfeed has a whole new set of challenges because it is a public company. It has to answer to Wall Street and ultimately deliver on its lofty promises. It will be expected to deliver clear financial results every quarter, and everything will be looked over with a fine-toothed comb.  

To be fair, Buzzfeed is in a tough place. It is still unprofitable and has to go up against digital-advertising juggernauts such as Alphabet and Meta. So it’s understandable that it felt it needed to make some major moves to survive.  

With that being said, there are a lot of eyes on Buzzfeed going forward. While it’s still early in its journey as a public company, other digital media companies, such as Forbes, Vice, Bustle, BDG and even Vox-Group Nine, are looking to Buzzfeed’s reception in the market before making their own exit/consolidation moves.  

So, while there may be a first-mover advantage for Buzzfeed, that advantage could also turn into a disadvantage very quickly.