Melanie Faizer

Only three media companies — Buzzfeed, Vice Media, and Vox Media — meet the definition of a “unicorn,” or a startup valued at more than $1 billion. The three have very different growth stories (see the chart below), but they all have attracted large, young and returning audiences – and major investors, both public and private.

Publicly traded companies (whose capital comes from stock markets) often invest in proven startups with a goal of eventually integrating them (or one of their products) into the company. Disney, for example, intending to benefit from Vice’s cable TV launch, invested $400 million in the company in 2015. At about the same time, NBCUniversal, a wholly owned subsidiary of Comcast, invested $400 million in Buzzfeed to facilitate a television partnership, and also invested $200 million in Vox.

Private investment, though, has a different end game. Private equity is a large infusion of money (often in the hundreds of millions) by investors who raise those funds from institutions and wealthy individuals. (Compare that to venture capital – a type of private equity – which tends to flow to earlier-stage startups and takes a smaller financial stake.) Private equity firms (such as TPG, which invested $450 million in Vice Media in 2017) take a large, long-term stake in a more established company with a goal of eventually selling the company or stake at a substantial profit. In the newspaper space, for example, private equity (and hedge fund) deals have become more commonplace, as evidenced by the 2019 purchase of Gannett by GateHouse Media,^[1] whose holding company, New Media Investment, is managed by Fortress Investment Management.

Unicorns typically have three options to satisfy their public and private investors, namely:

1. Selling shares to the public in an initial public offering, or IPO. But like all companies that grow fast and feel pressure to generate revenue, Vice, Vox and Buzzfeed have experienced setbacks.^[2] All three companies have struggled with profitability, and all have laid off employees. Buzzfeed has been criticized for allowing advertisers to influence content; it has also struggled with public perception of its seriousness as a news producer. Most recently, its workforce unionized, creating more internal conflict. Vice suffered from accusations of fostering of a ‘boy’s club culture’ that resulted in Shane Smith’s departure as CEO. Circumstances like these can erode confidence in the companies’ focus and sustainability, and thus weaken prospects for a successful IPO.
2. Selling the company (in whole or in part) to another company, but to date, none of the legacy media companies already invested in these unicorns has taken the plunge.^[3]
3. Remaining private, as they are now, but private equity investors will at some point expect a return on their investments. This puts a privately held company in a challenging position, forcing it to rely on a limited pool of private investors to grow (as opposed to selling shares to the public), and as a consequence, limiting its liquidity and growth potential.

Despite having achieved scale and visibility, the long-term prospects for these unicorns remains up in the air.^[4]

Melanie Faizer is a senior lecturer in Journalism & Electronic Media at the University of Tennessee, where she teaches courses on media entrepreneurship, digital news reporting, and editing. She used to work for Bloomberg News. Reach her on Twitter at @melaniefaizer.