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There’s a new trend in our industry: Big media and tech companies are investing in news startups, pouring tons of money into all kinds of products such as aggregators, readers, content and social.

From Yahoo to News Corp to The New York Times, you’re seeing a move of companies, both online and traditional media forms, pouring money into largely untested apps and products. But why?

A major reason that big companies acquire smaller startups is to capture innovation that has not taken place inside the company. Another key reason is that the companies anticipate future earnings from a new company.

One of the biggest acquisitions of late is a general example of these investment strategies: Facebook’s purchase of WhatsApp for $19 billion dollars. Why? An innovative platform to expand audiences beyond what Facebook already has; a product perhaps better (or far different) than Facebook’s messenger; and a hope of future earnings – if not on digital advertising than perhaps on digital data.

Consider, now, why media and tech companies are investing. Axel Springer, the German newspaper and media company, told The Wall Street Journal that it was getting into the venture game to think more broadly about innovation. The Journal noted:

Springer does not invest in startups (for) financial reasons alone, as they want to add value with content partnerships, ad partnerships, and access to technology platforms.

A major reason that big companies acquire smaller startups is to capture innovation that has not taken place inside the company.

This past week, The New York Times and Springer invested in Blendle, essentially an iTunes for news whereby you pay per article. The two now share a 23 percent stake in a Dutch company that has just 130,000 users.

The Times is now getting its feet wet in the game with what seems to me to be an untested investment of $3 million. Springer has also invested in the U.S. news startup Ozy, giving it $30 million in funding. Ozy is a content startup that has the tagline “Smarter, Fresher, Different.”

That was big news last week, but the Financial Times has reported that European media companies seem to be particularly interested in venture acquisitions. The reason:

European media groups have expanded their efforts because they face threats to their traditional print and analogue business models.

But closer on the homefront, we’re seeing more companies forming venture arms to invest in new companies. Perhaps the biggest might well be Comcast Ventures. The media company’s venture arm has invested in 67 startups.

We’re seeing more companies forming venture arms to invest in new companies.

Perhaps most notable to news industry watchers is the massive funding to Vox Media, a content-company that we all now know well for Klein’s Vox, but includes other properties such as SB Nation and The Verge. Its total investments in Vox are now up to $61 million.  Comcast has also invested in Flipboard, the personal newsreader, and NextDoor, which has some industry watchers excited for the potential for hyperlocal socially generated news.

Time Warner Ventures has invested in media companies as well. Perhaps most surprising to me was the investment in Bustle, the millennial women-oriented site with lifestyle content — founded by the purported dude-bro Bryan Goldberg of Bleacher Report. The $5 million to Bustle is an interesting investment as the site has received quite a bit of pushback from feminists and is entering into a crowded niche market.

One of the earlier acquisitions, and by early I mean 2013, was News Corp’s purchase of Storyful for $30 million. Storyful is a social media news company that acquires citizen journalism content from all over the world and verifies it, a shortcut for a media company looking for reliable material.

Social media companies have also gotten into the game. LinkedIn made the realization that it needed its platform to be more than just about stalking people to find out their latest job moves. To be a dynamic source for daily engagement, LinkedIn had to add something. Hence Pulse, the news aggregator that promised to “(elevate) daily media consumption to foster informed discussion.”

Social media companies have also gotten into the game.

According to TechCrunch, LinkedIn gave this reason for acquiring pulse for $90 million:

LinkedIn argues that it is acquiring Pulse because it wants the site to ‘be the definitive professional publishing platform — where all professionals come to consume content and where publishers come to share their content.’

LinkedIn previously had no real news content, so this may help the company compete with Facebook’s potential to share news, or at least it may think this can be the case.

And perhaps a sign of what is yet to come, the biggest of the big are seeing news startups as competitors. Yahoo bought Summly, a news aggregator that provided 400-character snippets of news via an algorithm through an iPhone app.

The reason ReadWrite gave for Yahoo buying the app was to “shut it down.” The app, developed by a 15-year-old, does not on first glance appear to compete with Yahoo News, so the purchase seems curious. Summly’s tagline by the way is “sentences that matter.”

So the early list I have for big company acquisitions and funding efforts boils down to these investments, and I’d be interested if you have more to add to the equation (reach out to me via Twitter at @nikkiusher).

  • Comcast Ventures: Flipboard, Vox, NextDoor.
  • Time Warner Ventures: Bustle.
  • News Corp: Storyful.
  • Axel Springer: Ozy, Blendle.
  • The New York Times: Blendle.
  • Yahoo: Summly.
  • LinkedIn: Pulse.
  • Modern Times Group (Sweden): Has a digital accelerator, non-specified.

Let’s keep an eye out for this trend. Speculation is wild now, and many products are untested. What remains clear is that the energy is fantastic in this sector of the news industry.

Nikki Usher  
   
Nonresidential fellow


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