A year of SPACs, copycats and scandals
In 2021, the media landscape was transformed by the ongoing uncertainty as the pandemic dragged into its second year. While some in the digital advertising and publishing business celebrated record quarters in growth and revenue, others have been challenged in the second half of the year with workforce demands and a squeezed supply chain.
“Q4 2020 was a relative bright spot for the ad market last year, with heavy spending on political campaigns and a general return to spending after cutbacks early on in the pandemic. The strong Q4 last year makes for a tougher comparison than the previous two quarters,” Peter Vahle, senior forecasting analyst at Insider Intelligence, told TheWrap.
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In the case of Ozy Media, the struggle was due to reasons other than economics, as the Silicon Valley startup sustained reports about its troubling business practices. Facebook, now Meta, found itself in a similar position after a series of exposés by The Wall Street Journal exposed the company’s research on its products’ harmful effects and led to congressional hearings and calls for more regulation. More than a dozen additional outlets piled on with nearly 100 stories based on leaked internal documents from whistleblower Frances Haugen.
This year was also marked by fierce competition and more attempts to consolidate in the media and publishing sector. As ad giants like Facebook and Google continue to gobble up most of the revenue in the digital market, smaller publishers and news companies from BuzzFeed to Vox are going public (often via SPAC) or seeking mergers to stay competitive. BuzzFeed, in particular, took the leap to become the first publicly traded digital media company — and many of its rivals are curious how that is going to pan out.
Here are some of the major stories that have shaped the media industry this year.
- TikTok becomes a major contender at 1 billion users
Social app TikTok was among the businesses boosted by the pandemic this year. The Chinese-owned app rose to the top as a major platform especially attractive to younger Gen Z users, and competitors from Instagram to YouTube moved fast to copy the viral video formula.
This year, TikTok was on track to beat its social media competitors in attracting more users and gaining more engagement, already surpassing Facebook in usage time despite only launching five years ago. In September, TikTok hit its 1 billion monthly users milestone; 17-year-old Facebook reported 3.5 billion monthly users in Q2.
But the app’s popularity has not gone unnoticed by lawmakers and critics concerned over the proliferation of misinformation on the site as well as consumer safety issues. TikTok is increasingly under fire for usage by drug cartels, white supremacists and anti-vaxxers.
2. Ozy’s downfall and “Lazarus moment”
In September, the world saw media startup Ozy Media get taken down after a devastating report from The New York Times revealed it was misrepresenting its products to partners and investors and inflating online metrics. Ozy’s founders Carlos Watson and Samir Rao were ousted after Rao impersonated a YouTube executive on an investment call with Goldman Sachs.
All that led to the company’s abrupt closure just days after the report as virtually every board member resigned — though Watson then announced Ozy was back in business and having a “Lazarus moment.” Since then, the media company has struggled to recover even as Watson teased new episodes of “The Carlos Watson Show” — whose status as a talk show without a network or formal distribution deal had been a key element in the scandal that led to the company’s undoing.
3. Clubhouse’s rapid rise and fall
In 2020, Clubhouse introduced social audio in a pandemic year where perhaps people were tired of having Zoom meetings and was met with a lot of initial success. But since experiencing a spike in popularity in the early months of 2021, the app’s growth soon slowed to a crawl.
Experts believe the company’s slow integration of key features and poor scalability has negatively impacted the platform. Instead, social media users are turning back to more robust social platforms, such as Facebook and Twitter, to cast a wider net. While Clubhouse may not evolve into a major social media player, it did inspire a lot of copycats on the other platforms — from live rooms to social audio on Facebook, Twitter, Spotify and LinkedIn.
4. BuzzFeed bets big on commerce
In June, digital-first news site BuzzFeed announced plans to go public via a special purpose acquisition company, 890 5th Avenue Partners, and acquire media company Complex Networks. The move, which came one year after BuzzFeed acquired HuffPost, inspired competitors from Bustle Media Group to Vice consider the option to go public either via SPAC or acquisition.
However, BuzzFeed’s bet on ecommerce as a major growth area comes with many challenges ahead — trade wars, a squeezed supply chain and its own ambitious projections of commerce revenue reaching $150 million in 2022 and $330 million in 2024. The company began trading in early December and has so far seen its shares plummet more than half since opening at $10.95. (The stock closed at $5.47 on Monday.)
While BuzzFeed has “solid” margins, Doron Gerstel, CEO at global ad firm Perion, told TheWrap that the company’s advertising revenue may take a hit given the current landscape. “BuzzFeed’s audience is large enough to create demand, but is BuzzFeed sophisticated enough to build a logistical moat around its business during the container crisis?”
5. Consolidation and competition
In the latest string of media consolidations, Vox said in December that it plans to merge with Group Nine Media, publisher of Thrillist, PopSugar and Seeker. The all-stock deal is expected to close in early 2022 and is separate from the SPAC that Group Nine formed earlier in the year. Vox CEO Jim Bankoff will stay on as CEO of the combined company, with Group Nine CEO Ben Lehrer joining the company’s board of directors. Vox, which maintains New York Magazine, Vulture and SB Nation, will benefit from a larger audience to better attract advertisers.
Merger fever gripped the media landscape this year. Last summer, German conglomerate Axel Springer was in talks to buy political news site Axios. The merger was nearing a close before the editor-in-chief of Axel Springer’s Bild Julian Reichelt was ousted amid sexual harassment accusations. Axios pulled out of the deal, while its rival site Politico was bought up by Axel Springer in August for $1 billion. Axel Springer also acquired and invested in various American media companies, from Ozy Media to Thrillest Media Group.
6. Jack Dorsey leaves Twitter for fintech
In November, Twitter CEO Jack Dorsey stepped down after 16 years at the social media giant once favored by Donald Trump. Dorsey, who continues to lead the fintech company Square, said he felt that a founder-led company comes with too many limitations. Analysts saw the move as a breath of fresh air for the platform, which has mostly been stagnant in growth and products, only recently introducing a subscription service, Twitter Blue. With Dorsey gone, experts are expecting to see the company lean into more monetization, whether through crypto integrations or more subscription services.
“This is emancipating and freeing up for opportunities like fintech,” Peter Csathy, chairman of CREATV Media, told TheWrap. “Not having the founder as CEO opens up a new life for it. They have been slow in rolling out monetization features, and that needs to change for them.”
With Twitter Blue, the company is betting its new subscription service can help digital publishers generate more dollars than traditional advertising, but its success will hinge on how much time users spend consuming their content. The new premium service, at $2.99 per month includes an ad-free reading experience with a Top Articles feature that shows users the most popular articles in their network from the last 24 hours. With ad-free articles, Twitter said it aims to help each publisher make 50% more profit per user than they would have through serving ads. There are currently 300 news publishers — from BuzzFeed to Reuters — included in Twitter’s network providing ad-free content.
7. The Facebook Files media consortium
It was a difficult year for the social media giant. In October, a former Facebook employee blew the whistle on her former employer and leaked thousands of internal documents to media outlets and lawmakers that confirmed many of the criticisms leveled at the company over the years. Frances Haugen’s leaks revealed the extent to which Facebook leaders knew about their products’ impact on teenage mental health, content moderation challenges overseas, human trafficking activities and much more. In the weeks that followed, the Facebook parent was hit with a massive storm of negative stories about its business practices and platforms — and more than 97 articles have been published by some 17 media outlets that formed a media consortium to coordinate coverage.
In the same month, the company rebranded itself as Meta as it vies to become known for more than its social media platforms. Instead, it said it is doubling down on the metaverse — a future accessed by augmented and virtual reality. That shift may be an acknowledgement of the regulatory issues it faces as a dominant — and, some argue, anticompetitive — player in the social media and ad space.
And despite the increasing calls for government regulation of Facebook, both in the U.S. and overseas, the company continues to report strong financial growth — with the stock price jumping nearly 29% in 2021.