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  • Digital media went through a bloodbath in 2019, with investors seeing billions in theoretical value wiped out and scores of people losing their jobs.
  • Some venture capital funding continued to pour into media companies, but many journalism upstarts didn’t meet aggressive growth expectations, which forced them to look for buyers and sell for less than their onetime private market value.
  • Observers predict more firesales and consolidations in 2020 as there are still many small, independent digital outlets facing an unfriendly business climate.
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2019 has been one of the most difficult years for the media industry in history.

More than 7,600 jobs were lost, compared to an estimated 5,000 between 2014 and 2017. That’s approaching the recession high, when more than 7,000 journalism jobs were lost during the first five months of 2009.

Investors who poured millions into digital media upstarts earlier in the decade saw billions in estimated value disappear as those companies missed growth targets and were forced into downrounds, firesales, head-scratching mergers, and shutdowns.  

In one of the year’s biggest deals, Vice Media acquired Refinery29, a company that had raised $133 million, for mostly stock. Group Nine Media also acquired fellow millennial media company Pop Sugar in a stock deal.

A third major tie-up saw Vox Media acquire New York Media, with the goal of future proofing both businesses.

“We’ve observed a spate of mergers and acquisitions in our sector and have often been struck by their lackluster rationales and ambitions,” Vox CEO Jim Bankoff and New York Media owner Pam Wasserstein said at the time.  “Too many deals are done to buy some time or quickly change a narrative if a company has failed to innovate. By contrast, this combination is solely about leadership, growth, and opportunity.” 

Bustle Digital Group emerged as a buyer of last resort, acquiring a string of sites including Inverse, Gawker, and The Outline, often at bargain-basement prices. 

Read: Insiders say morale at Bustle Digital Group is cratering as it quietly axes staff and loses focus

In most of those deals, the acquired companies lost a hefty chunk of their onetime valuations, signaling a sort of private-market correction.

Nicole Quinn, a partner at Lightspeed which made bets on Jon Steinberg’s Cheddar (a successful $200 million cash acquisition) and Mic (a flop), said watching media business models over-rely on digital advertising has sharpened the firm’s investing criteria. “It has made us more focused on companies that are capital-efficient and profitable,” she said.

Observers predict more such deals in 2020 as there are still many small, independent digital outlets facing an unfriendly business climate. There are also still funders and buyers for digital startups that aren’t wholly dependent on ad revenue, like The Athletic and Food52; niche sites like Byrdie, which sold to IAC; and older digital sites like BabyCenter, which sold this year to J2, a portfolio of internet media and services companies.

“I’m looking for digital brands that have durability, that have been able to sustain all the changes,” said Vivek Shah, CEO of J2. “I will always value those that can stand the test of time.”

The Athletic, the breakout media startup of the year, made waves by amassing a huge subscriber base of more than 600,000 sports fans. But the subscription revenue approach didn’t work for every publisher. Take Quartz, which struggled to turn its free distribution, ad-based business model into a membership one. 

Still, there are some signals that digital media will turn a corner in 2020. Fred Wilson, a partner at Union Square Ventures who has a knack for nailing startup trends, thinks now could be the perfect time to invest in media companies.

Digital media investment peaked in 2014, when venture capitalists invested $1.1 billion into 82 digital media startups — three times what they invested the year prior, according to Pitchbook. By 2018, that figure had fallen to $237 million, though it has rebounded to more than $537 million in 2019.

“We’re intrigued about what looks like a little bit of a vacuum now in media,” Wilson told Business Insider in a recent interview. “I like to zig when other people zag. I like to get to things before people get into them or when other people have gotten out of them. Those are generally the good time to invest in companies.”

So far, the size of Wilson’s bets are relatively small as he tests the waters. He recently invested $5 million in video news startup on The Recount, not $50 million like in digital media’s heyday.

GroupNine CEO Ben Lerer believes some of the tough decisions made this year will result in longer-term success.

“We went from the perception that it was an industry without a plan or a path to one where there’s a much clearer set of winners,” he told Business Insider.

“There was a destruction of value from a perceived value standpoint. I do think there was a creation or meaningful value protection with some of the combinations that happened. We all have a lot of work to do. But we are coming out of 2019 so much stronger than we were.”

Go deeper into recent digital media trends:

SEE ALSO: How Refinery29 bootstrapped for 8 years, caught fire, and raised $133 million — only to end up selling to another struggling startup, Vice Media, for mostly stock

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