Evolve Media’s President On The Future Of Digital Media: Facebook Will ‘Own’ You

Brian-Fitzgerald-Evolve-MediaEvolve Media co-founder and President Brian Fitzgerald has been in digital media since the dot-com era. He’s bought and sold companies and lived through boom and bust cycles.

As the industry continues to evolve – with waves of investment in digital media companies and ad tech consolidation – Fitzgerald is taking action.

In the past year or so, he’s made six acquisitions: Martini Media, TotalBeauty.com, Dogtime Media, AfterEllen.com and Australian media properties Urban Geek and Volt.

The acquisitions follow Evolve’s strategy of focusing on publishers with a strong niche. According to Evolve, its business generates $100 million in revenue per year, with 85 million unique visitors per month across its 40 properties.

Besides Evolve’s acquisitions, Fitzgerald advises or invests in numerous tech and media companies. A decade ago, he flipped Quizilla to Viacom. He was an adviser to Vidible, which sold a few years ago to AOL. And he still runs Gorilla Nation, the ad network that first got him into the digital media business back in 2000.

Fitzgerald talked to AdExchanger about today’s media climate, his biggest pet peeve –  viewability measurement – and why Facebook is striking a devil’s bargain with publishers.

AdExchanger: Why buy all these digital media publishers, and why now?

BRIAN FITZGERALD: Why now is an easy answer: Valuation expectations have plummeted. We are buying distressed businesses with good assets and reducing overall expenses and head count. All these businesses we tracked for years. They raised a lot of money and at various stages in the life cycle valued themselves at $100 million, $50 million. We were never going to play in that world, at those prices.

How have these acquisitions fared in your portfolio?

We just did our 2015 audit, and AfterEllen, TotalBeauty and DogTime grew traffic 48%within one year, and revenue by more than 100%. We were able to achieve those milestones while still reducing headcount by more than 50%. That’s proof that we had a good asset wrapped within a distressed environment.

Running a standalone business, you don’t have the individual scale to get L’Oréal or Revlon interested, but when I take TotalBeauty and add it in with other properties, now I’m No. 5 in comScore for beauty and fashion. That’s how I can amplify revenue. I’m not adding any salespeople, I’m just giving the team another great product to sell. 

Why are some publishers struggling, when digital media investment overall seems hot?

In the broader ecosystem, there are headwinds making it increasingly difficult to be a publisher. There is an increase in advertiser demand funneling through programmatic channels, yielding lower CPMs. There is a dearth of demand in the mobile ad marketplace, and consumers are shifting to mobile consumption. So 50% to 60% of the audience is shifting to mobile, but you can’t monetize it nearly as well as you can PC audiences. Then you’ve got a real problem, compounded with the rapid proliferation of ad traffic campaign auditing.

What is the issue for publishers around ad traffic campaign auditing?

Being able to buy only viewable media and nonhuman traffic is fantastic for the marketplace, but it’s not fantastic when there is no reputable, accountable, single third-party auditor that can provide unified measurement against which we are all held accountable. If every “accredited” vendor produces different viewability scoring for the same exact ad creative at the same moment in time and those discrepancies are 40%, how do you run a business?

What’s wrong with how the current system is set up?

Viewability and non-human traffic scoring is a black box, and our interests aren’t aligned with the agencies or vendors. Agencies and marketers have no incentive to push for a unified standard or vendor because if they pick one vendor that scores 20% less than my vendor, then they just got 20% more traffic for free.

For fraud, if one vendor finds 3% nonhuman traffic, then why bother using a vendor? That’s the vendor’s worst nightmare. You need them to be afraid. So they find 20% nonhuman traffic and they have a new customer. 

Let’s talk about the publishers that aren’t struggling. What’s your take on the wave of investments and acquisitions in digital media companies, along with billion-dollar valuations? 

There is a lot of PR-manship and optics going on. Take Vox. Did Vox raise $200 million at a $1 billion valuation from Comcast? In my opinion, no way. What I loosely understand is that Comcast was an investor in Re/code, which was a broken business losing millions of dollars. Vox picked up Re/code [right after the investment]. When you blend hard cash with a “value” of an asset, I could say that asset’s worth $200 million, and that means we need to peg my value at $1 billion to own 20% of the business.

These aren’t public valuations, but when advertisers and brands read about it, they think, “They must be the next big thing, the Condé 2.0,” which then only helps their brand halo and the traction they are getting in the advertiser marketplace.

What about Vice?

The Vice brand is real. The money raised is real. Everyone wants to copy that Vice success, but that’s lightning in a bottle. They didn’t have much of an audience at all, but they definitely had a coolness factor and got people to buy into it. Vice is a global marketing firm shrouded in the veneer of a lifestyle publisher. Their audience online is not that big. If you look at their custom entity, they own 5% to 10% of that traffic. No one ever questions that because they are Vice and do no wrong. They make most of their money in content marketing. Vice makes $10 million of branded content, then the brand takes it and puts it on their Facebook page.

Brands are paying a huge premium to have the cool kids create content that hopefully speaks to millennials. Their secret sauce is that they understand the millennial male, and now the millennial female. Brands will pay an absurd amount of money to align with that.

What are you doing on platforms, and how are you thinking about monetization there? 

Historically, we don’t chase the new shiny thing. We wait to see the shakeout. Otherwise you are investing a lot of resources in head count, building a strategy, pivoting on that strategy and changing again. Great example: We do nothing on YouTube. We talked to publishers that had a huge number of subscribers and streams, but no one would click out to their site. And they were expending considerable resources managing a channel that made no money. The vast majority of publishers are not allowed to sell their own ads into their YouTube channel.

Yes, you can do branded content, but my bet all along is that YouTube will find a way to audit and charge you for branded content on YouTube. Google is a public company and the only way to maintain enterprise value is by showing top-line revenue growth. Over time, they will continue to pull levers to make more money. The revenue split used to be 30% to them and 70% to the publisher, and one day they decided they wanted 45%. Facebook will do the same thing.

What’s your position on Facebook Instant Articles?

We are getting into doing more Facebook video and we are exploring Instant Articles. But my bet is Facebook is going to do the same thing [YouTube did], which is change the revenue split. That’s why I haven’t been all in on Facebook. Publishers are thinking quarter to quarter, month to month, and big platforms know it. Platforms are playing 10 years out.

Mark my words: One to two years from now, Facebook will slowly, incrementally change the revenue split on Instant Articles. Once you get addicted to the revenue as a publisher and it’s part of your model, it’s impossible to get off it.

Facebook has all the power. It will back into, over time, owning a lot of these media companies.

This is part of an interview series with media leaders about the future of digital advertising. Check out previous interviews with The AtlanticMicForbes, The New York TimesThe Washington Post and Ziff Davis – and more to come.

This interview has been condensed and edited.

 

Add a comment

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>