Digital media companies Group Nine Media and Refinery29 are said to be in talks to merge

Ben Lerer Ken Lerer

  • Group Nine Media and Refinery29 are in talks to merge, say three people familiar with the situation.
  • The digital media business has been rife with speculation about potential mergers between venture-funded digital media outlets, as several of them have experienced slowing growth.
  • Both companies are looking to diversify away from advertising, which has been harder to come by as most of the digital ad dollars are going to Google and Facebook.

Millennial digital media companies Group Nine and Refinery29 are in talks to merge, according to three people familiar with the situation.

There's been lots of speculation about potential mergers between venture-funded digital media outlets over the past few months, as several of them have experienced slowing growth with most of the digital ad pie going to Google and Facebook. Earlier this year, the heads of Group Nine and Refinery said they see themselves as acquirers.

A potential Group Nine-Refinery merger may be far from a done deal. Lots of companies are said to have been talking to each other about combining, and any merger would face big hurdles. Investors including Discovery and Turner, which have backed Group Nine and Refinery, respectively, and the boards of both companies would have to agree on the terms.

It’s also hard to combine companies with different cultures and the participating companies would have to agree on the value their respective company would have in the merged entity. One potential scenario is that the companies could combine in a stock deal where no money would change hands, say people who have experience with media M&A.

Asked for comment, a Group Nine spokesperson said: "It's our policy not to respond to rumors." 

A Refinery spokesperson said: "As previously stated, we are frequently having discussions with our industry peers about opportunities to come together. However, there are no immediate plans to do so at this time."

Read more: Billions from VC companies like Lerer Hippeau and Lightspeed fueled the rise of digital media and stoked crazy expectations for growth — here's why insiders say that approach is killing companies

The companies have investor ties

Group Nine and Refinery29 are in similar businesses of similar sizes, though Group Nine is bigger; both are focused on making video for a millennial audience. Refinery isn’t profitable yet. Group Nine is presumed by industry watchers to be unprofitable, though the company won’t say. The two are connected in that Group Nine CEO Ben Lerer is on the team of Lerer Hippeau, which is an investor in Refinery.

Group Nine Media is the product of a rollup of NowThis, The Dodo, Thrillist, and Seeker. It formed in 2016 when Discovery Communications put $100 million into the company, and it led another round of $40 million in 2017. It’s valued at $500 million, based on Discovery owning 42% of the company and valuing it at $212 million. Discovery has an option to buy the remaining stake in the company but hasn’t exercised it. Thrillist and The Dodo unionized in 2017 and 2018, respectively. The company has over 600 employees.

Refinery is a women’s lifestyle publisher that was founded in 2005. It raised $125 million as of 2016 with Turner leading the last round along with Scripps, when it was valued at $500 million. It went through two rounds of layoffs, in 2017 and fall 2018, at which point it had about 360 employees. The editorial staff unionized in January.

Both companies have been trying to diversify their revenue this year. Group Nine is focused on selling its video studio output and branching out to e-commerce.

Refinery gets 70% percent its revenue from advertising, the rest coming from events and other sources. Cofounder and co-CEO Philippe von Borries said in January the plan was to get to profitability in 2020, by expanding its live events, growing internationally, and selling high-quality video to streaming services.

He added that he’s looking at acquiring companies in areas like events and direct-to-consumer businesses. “There’s significant opportunity for us to be a consolidator. There’s interesting businesses to roll up. I want the business to be relevant and meaningful 10 years from now. And one way is to acquire but if there’s an amazing company that would allow us to accelerate our vision, of course that’s something we will consider.”

Group Nine CEO Ben Lerer also said at the time that he expects to add some companies in the next year.

“We own brands people are crazy for and are growing in all kinds of ways. Consolidating is not easy to do. It’s people and culture and strategy. We’re really, really well positioned to participate meaningfully,” Lerer said.

Digital media startups are facing challenges

The talk of digital media mergers got stirred up after BuzzFeed CEO Jonah Peretti floated the idea in The New York Times of BuzzFeed, Refinery29, BuzzFeed, Vox Media and Vice Media combining forces to gain leverage over Facebook and other distributors.

Earlier this year, speculation centered on a BuzzFeed-Group Nine merger, because both have a connection with Ken Lerer, who is chairman of BuzzFeed’s board and Ben Lerer's father; also, Ben Lerer and Peretti are friends.

The logic for a merger is that venture-backed digital media companies are running out of money and not consistently profitable and can’t raise any more money, say media experts. Venture capital flowed freely to these millennial-aimed digital media upstarts when they could get cheap distribution on Facebook.

But Facebook has clamped down on free distribution, most of the digital advertising is going to Facebook and Google, and the media companies have struggled to diversify away from advertising. Merging would let the media companies cut redundant staff and get profitable, so the thinking goes.

SEE ALSO: Mic was a poster child for publishers depending on Facebook. But its demise has broader lessons for the media industry.

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Contributer : Tech Insider https://ift.tt/2Tx6CWB
Digital media companies Group Nine Media and Refinery29 are said to be in talks to merge Digital media companies Group Nine Media and Refinery29 are said to be in talks to merge Reviewed by mimisabreena on Monday, March 25, 2019 Rating: 5

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