Venture capitalists invest in new media despite risks- report
A Reuters report said venture capital firms continued to back up new media websites despite the hazards. The investors are hoping that the startups will be able to generate money from advertisers. The advertising market has long posed challenges for traditional media firms.
According to the report, the venture capitalists are hoping that the fresh approach of startups to working with brands will be able to lure advertisers to giving more of their dollars to the new media firms. These approaches include making eye-catching headlines, interesting slide shows and building a large audience base through social media platforms like Twitter and Facebook.
Vox has received new funding close to USD 34 million in a round led by venture capital company Accel Partners. The proceeds brought to about 70 million raised by the publisher behind sports and technology-focused websites SB Nation and The Verge. Vox also said last week that it had purchased Curbed Network. Based on reports, the price tag for the acquisition was from USD 20 million to USD 30 million.
Social news and entertainment firm BuzzFeed also gathered USD 46 million from venture capitalists. Tens of millions of dollars were also received by Business Insider and Refinery 29.
However, the report said there were risks in the investments. It cited Demand Media Inc as an example. The website experienced a fall in traffic as well as its advertising revenues in recent quarters after Google implemented a new search algorithm that weeded out content it looked at as low-quality. Another example was that of AOL Inc's USD 150 million investment of Patch. Continued weak ad sales have led to heavy cuts and a potential sale of the Patch network, the report said.
Evercore Analyst Dough Arthur told Reuters, "The bottom line with content on the Internet is it's hard to get paid - particularly if the content is ad driven."