In New York City, in front of the New York Stock Exchange, the CEO of BuzzFeed stands in front of the company going public.
In its first week of trading, the digital media company fell 39%, which was a bad start for the prospects of public markets.
Even if its valuation is disappointing, it gives peers a public market valuation comparison.
In an interview with CNBC, the Chief Executive Officer of BuzzFeed said that digital media doesn't have comps. We are the only public digital media that reaches a Gen Z audience.
Group Nine and Bustle Digital Group may try to go public again if the shares of BuzzFeed increase. All four considered that route earlier this year. The industry put the brakes on plans to go public when SPACs lost their investment appeal.
It didn't go well, and only BuzzFeed succeeded. The original investors pulled back most of the cash that they had committed to the company.
Peretti said that a lot of public market investors said they wouldn't invest in SPACs anymore, but they're still interested in meeting with you.
The CEO of the Bustle Digital Group said that the key level for the company will be $15 per share. The market value of the company is about $2.25 billion. That is four times revenue. In the first six months of this year, Complex Media brought in 53 million dollars, which was in addition to the $161 million revenue generated by BuzzFeed in the first half of the year.
Confidence in the future may grease the wheels for consolidation. The equity of the company will need to be used as currency for acquisitions. Goldberg said that sellers will feel like they are getting a just price if BuzzFeed can hold steady at a 4x revenue multiple.
Goldberg said that 4x revenue should be the default. It may take six to eight months to get there.
Goldberg said that fourth-quarter digital advertising revenue numbers wouldn't be good. He said that supply chain disruptions have led to a decrease in advertising spending. That may cause more pressure on the shares. A lockup period for investors may cause a rush of selling when investors are free to sell.
Goldberg has a good idea of what digital advertising sales will look like in the fourth quarter and in the year after that. Digital advertising is going to be rough in the fourth quarter. I think the skies will be clear in 2022.
Digital media companies will be able to use it as a comparison in an industry that has not had one. It is not possible for peers to go public, but the stabilization of BuzzFeed will give the industry a sense of what companies are worth.
Digital media has suffered from the absence of a publicly traded company.
According to people familiar with the matter, Group Nine, Vice, and BuzzFeed have held on-and-off merger talks. Having raised money at lofty valuations, the companies need to prove to public investors and potential acquirers that they can compete with the likes of Facebook and Google for advertising dollars.
Agreement on value and founder ego are two factors that have prevented industry consolidation.
Setting valuations has been leaps of faith without a public market comparison. Vice Media was the poster child for inflated private valuation. Vice tried and failed to go public this year, despite being valued at $3.6 billion. When there are no viable exit strategies, you can say your house is worth $278 million, but that doesn't mean someone will pay that amount.
It might not be possible to use BuzzFeed as an exact proxy for every digital media company, but it is enough of an apples-to-apples comparison to make private-to-private deals more feasible.
The leaders of most of the major digital media start-ups want to be the consolidators, rather than being sucked up into a conglomerate run by someone else.
Now that it is public, it will start rolling out the industry. People familiar with the matter say that the speed of consolidation depends on the personality of those in charge.
The co- founder of the Huffington Post is Jonah Peretti.
The people who asked not to be named said that the major digital media players feel they have particular expertise in acquiring and integrating companies.
New York Media, the owner of New York Magazine, was bought by Vox Media. Vice Media bought Refinery29 for $400 million. Group Nine announced its deal for PopSugar a week later. In the past few years, the Bustle Media Group has bought a number of media companies. Goldberg told CNBC that he will be a buyer.
In 2020 it acquired HuffPost and in the same year it bought Complex Networks for $300 million.
There is a new crop of upstarts who may not play along. Companies like The Information and Axios don't have the same obligations to investors as their venture-fattened peers. People familiar with the matter say that the company's founders aren't interested in acquisition offers on the strength of their own business models. If they can sustain profitability through subscriber fees, there is little need for Punchbowl and Puck to sell.
One digital media executive who asked not to be named said that BuzzFeed still has a lot of detractors.
Many of those same competitors are rooting for the success of BuzzFeed. If management wins over Wall Street, they have a lot more options.
Peretti said that other company executives were rooting for him.
Peretti will focus on running a profitable company if the shares don't recover.
Goldberg will be buying shares.
Goldberg said he just bought a lot of shares of the website. I will back up the truck if it goes lower.
The CEO of BuzzFeed is on the SPAC merger.