New media challengers emerged…and you won’t believe what happened next!

Over the past few years, Catalyst has reviewed investment opportunities in the new crop of online media companies that use technology to attract, maintain, and monetize their audiences. These companies look more like tech startups than media companies, with coders among their first employees and many with patents as valuable as their copyrights. Until recently, technology investors were weary of online content companies, avoiding businesses that relied on human writers to create consistently successful content. However, as new media challengers leverage technology to optimize content and grow their audience, they have attracted the attention of VC dollars and strategic acquirors (most recently with Axel Springer’s acquisition of Business Insider).

Below are the top 5 reasons Catalyst is excited about new media challengers:

  1. Social Media is the New Homepage – Facebook and Twitter are supplanting the homepage, directing traffic to content sharedby friends rather than propagated by a brand with a familiar URL (who still has the New York Times as their home page?!). Viral, premium and user-generated content have enabled new media challengers to amass huge audiences and dedicated social followings.
  2. Everyone (Including This Cat) is Online – Access to broadband and growth of smartphone use are increasing the amount of time people allot to digital media (consider the last time you had dinner with college kids). Average time spent with digital media daily has more than doubled since 2008.
  3. Mobile has Eyeballs, Poised to Gain in Ad Spend – As offline attention shifts online, share of ad spend for the channel disproportionately lags media consumption time attributed to mobile and represents further monetization opportunity.
  4. Tech-Enabled Content Creation = Still Humans, but Scalable – Leveraging technology to test headlines to serve the most clickable and sharable content to the right individual (cookies, anyone?) enables content creators to employ repeatable methods of attracting audiences. Tech-enabled content creation techniques offer more scalable, formulaic patterns to develop successful content.
  5. Powerful Programmatic Pipes – A decade of investment and innovation in ad tech (including by Catalyst in our portfolio companies MediaMath and Videology) have enabled monetization of the “long tail” of content and made revenue possible without the need for an expensive sales team. Ad-targeting publishers now earn higher prices for their non-premium content with data-supported programmatic than under the ad network model of Web 1.0.

Catalyst believes that the most impressive changes have been driven by upstart new media challengers who, rather than simply translating old media to online, are using technology in innovative ways to drive growth and improved revenue consistency. In our content research memo, we explore the industry trends and attractive features of new media challengers, and our accompanying market map frames the content landscape (including the old media stalwarts, new media challengers, social media platforms and everything in between). As we examine the new generation of content businesses, the following attributes stand out among the leaders:

  • Innovative models that offer repeatable, scalable, tech-supported methods of attracting audiences. Given ourbackground in SaaS investments, Catalyst can apply our framework for analyzing ROI on a “per customer” (or in this case, “per visitor”) basis to assess whether new media challengers are succeeding at adding customers profitably and consistently.
  • Engaging content with a targeted message to maintain and grow its audience. Similar to our commerce theme, we are interested in businesses that target a small but committed audience by focusing on a defined subject matter and are therefore attractive for advertisers seeking to target a specific audience (i.e., high interest in a subject translates to high purchase intent). Further, engaged audiences facilitate building communities that produce user-generated content, which perpetuates the cycle of engagement and loyalty.
  • Innovative monetization approaches, including businesses with proven, scalable branded content and native advertising strategies to monetize content without alienating their audience, or shoppable content sites (e.g., Naturally Curly and Uncrate) that wed a captive audience with the platform to convert. Catalyst has experience with B2B/B2B2C business models, and the diversified revenue base (traditional advertising in addition to native ads, transaction revenue, data sales, etc.) represents an attractive opportunity.

Catalyst Investors employs a proactive, research-based approach to investing. We target sectors that are experiencing above-averagegrowth. If you are a growth-stage content company seeking investment, our team would love to start a dialogue. Please send inquiries and business plans to [email protected]

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