The digital age has put traditional newspapers in the precarious position of having to compete with a plethora of online publications – some reputable, some not.
Newspapers recognize that it doesn’t always make sense to try and build operations to go head-to-head with online publications or digitally native media companies. This strategy would take too long and require too many resources.
Newspapers also recognize that startups’ distinct technological and cultural innovations, such as the creation of algorithms and other news personalization efforts, can only help them step up their game.
As such, an increasing number of public newspapers have become investors – putting capital in and acquiring startups to maintain a competitive edge. Since 1997, there have been 59 known investments by publicly traded newspapers in startups, according to Crunchbase data. 1
To give that some context, just three of those deals were done before the year 2000. Sixteen were executed in 2015 and 2016 combined.
Here’s how those investments stack up by stage:
News Corp., for example, has been a very active investor, funding 24 deals since 2000 and acquiring 22 companies since 2003. Over time, News Corp. participated in several of streaming TV provider Roku’s funding rounds. In September 2017, the company also participated in Tab Media’s Series A round. Tab Media describes itself as a global youth media startup for people under 25. Also in 2017, News Corp. acquired News Technology Services, which develops enterprise mobile apps and offers analytics services.
Gannett Co. Inc., meanwhile, has acquired 19 companies over time including a recent $130 million purchase of WordStream, a SaaS company that helps small and medium businesses acquire customers via paid digital media.
For its part, The New York Times has made nearly two dozen early-stage investments including putting capital in theSkimm – a millennial-focused media company known for its daily newsletter and following among young professionals; and Shine – a daily text service that sends users tips and content and Keywee, which provides data-driven content marketing for brands and publishers. It also has acquired three companies including The Wirecutter, a product recommendation website; Fake Love, a VR and experiential design company; and HelloSociety, an agency that works with social media influencers. The $30 million buy of Wirecutter in 2016 reportedly marked The Times’s first M&A activity in more than eight years.
Jacob Smilovitz, director of M&A and investments for The New York Times, told Crunchbase News that the Times’s acquisition and investment strategy is “to help people understand the world by providing journalism worth paying for.”
The paper is constantly looking for founders “who care deeply about their audiences and are building premium content experiences that improve the lives of their users,” he added.
Investments and acquisitions must fit within the paper’s core strategy.
“So the select opportunities we end up pursuing often exhibit the key characteristics of The New York Times itself: a mission-driven purpose, deep user engagement, and attractive digital unit economics,” Smilovitz said.
Wirecutter is an example of The New York Times working to enhance a company’s offerings while integrating with its newsroom.
“Wirecutter had a lot of fans before we acquired it, so we focused on ways we could make the Wirecutter experience better for new and existing users alike — such as developing more Wirecutter guides in more topic areas, making Wirecutter’s product experience easier to use and pursuing content collaborations with The Times newsroom — all while not interfering with what made the site great in the first place,” Smilovitz said.
Brian Lam, founding editor of Wirecutter, now mostly advises The New York Times. He admits that he never had a goal of being acquired but he had thought of collaborating with the paper “because of shared values.”
“I thought we could help the Times improve their recommendations,” he said. “And after realizing we were bad at certain things like design, and realizing the culture fit at the Times was as perfect as it comes–we both put reader interest, content quality, and longer-term thinking ahead of short-term gains–it was clear that this was the place for us.”
Wirecutter’s choice to strictly focus on product reviews made it an attractive acquisition target, Lam believes.
“Even though news, entertainment, and other content would have easily boosted revenue in a short amount of time, we simply had no interest in that,” he said. “That helped the Times acquire a company that had nearly no overlap with the things they already did well, and it helped us as an acquisition target because we were considerably good at what we do when you look at the size of company, lack of any funding, and profitable nature.”
The acquisition has been good for Wirecutter in that it has enhanced its reputation and integrity, Lam believes. It has also helped the startup become “much better” at product and exploring alternative revenue models, according to Lam.
“We are developing new content from the right place — reader service first and foremost — and we are also aware of a second mission, which is to support the NYTimes in their journalistic endeavors through helping its revenue diversity,” Lam said.
To Lam, The New York Times was not just about “chasing money” but more about executing a vision.
“That’s why we sold to the NYTimes – they are here to do it the right way, not the easy way,” Lam said. “I know there are, and always will be, challenges and opportunities to grow and mistakes to learn from. That’s normal. But I feel that the acquisition, financially, and spiritually, is a strong example of what can happen when there is a cultural fit between two companies, and leadership puts human beings (readers and staff) at the heart of their business thinking and decision-making. Why this is so rare today, I have no idea.”
The trend of public newspapers investing and acquiring startups will likely only pick up, rather than slow down. For those of us who work in the media business covering startups, watching all this unfold is truly fascinating.
Top Image Credit: Li-Anne Dias
The funding data presented here is based off of reported funding rounds in Crunchbase, which (like all private market datasets) is subject to reporting delays. We looked at investments made by a list of publicly-traded newspaper companies including The New York Times, Tronc, News Corp., News Corp Australia, Gannett Co, New Media Investment Group, Daily Journal Corporation, Daily Journal, Lee Enterprises, The McClatchy Company, and A. H. Belo Corporation.↩