It could almost be a headline from the Daily Mash: octogenarian billionaire investing millions in youth media is surprised when it ends badly.
But when Rupert Murdoch, 89, pumped the thick end of £4.6 million into Tab Media, an online news magazine for students, that’s exactly what happened.
In just three years since NewsCorp invested, after continually failing to make a profit, Tab Media has been sold for just £750,000.
It is far from alone among digital media companies whose sky high valuations have collapsed. The deflating of the balloon was happening long before Covid 19 came along. But the fall in advertising spend has accelerated their demise.
Another Murdoch investment, Vice, as well as BuzzFeed, Vox and others once heralded as the future of news and journalistic content, have all been humbled.
Among those famous fallers are plenty of smaller enfants terribles of the digital world.
And, as invariably happens in capitalism, a consolidator has emerged to snap them up at a bargain price and make money from them.
Last year, The Daily Mash, famed for its brilliantly daft satirical stories such as today’s “People without tattoos labelled ‘freaks’ and ‘attention seekers’, fell into its arms, and today was the turn of Tab.
The company is called Digitalbox, and it has created technology designed to make online magazines super-efficient on mobile devices. The tech is intended to mean magazine pages upload in double quick time, bringing a better experience for readers and, as a result, higher rankings on the all-important Google and social media searches.
Chief executive James Carter is a former commercial and ad executive from glossy mags such as FHM which have failed to survive the turmoil that the Internet has wrought on the paper magazines of old. “Publications I’ve worked on like FHM just don’t exist any more,” he says
He explains: “We decided three years ago that publishing would be all about mobile delivery and have been totally obsessed with it ever since.”
At the time, he says: “Magazine were telling us it was impossible to make money from mobile. We should focus on desktop, but we begged to differ. We doubled down on mobile.”
Digitalbox now creates content and sells advertising through the automatic trading system known as programmatic. This is where advertising space is bought and sold automatically using analysis of audience data to ascertain where and when the buyer wants to place the ad, and at what price.
“The days are long gone when we would wander down Charlotte Street going to the ad agencies, pitching to them,” says Carter. “It’s just really hard to make money like that now after the ad agency’s payment, your production budget, the fact you’ll only win on one in 10 pitches.”
He says the new breed of online magazine is rapidly realising that their hopes of reaching sustainable profits are doomed, with coronavirus bringing a cold dose of reality to their investors.
He says: “The early optimism has been beaten out of them. This moment in time will make a lot of people run out of patience with these kinds of investments and look for an opportunity to cut loose.”
That opportunity could well be Digitalbox.
Although it paid a fraction of The Tab’s value from just a few years ago, Carter insists: “We paid a full price.”
The Tab gets about 8 million visits a month from its 5 million unique users and Carter says he has no intention of changing the editorial.
“The audience is sufficient,” he says. “The focus is just around monetising better.”
He reckons the transformation once magazines are on his platform is rapid, once his algorithms have worked out the new demographic they are searching for. With the Daily Mash, the process took about three months to bring in new advertising revenue and audiences.
In medialand, it’s a truism that if you can reach a big enough audience, you get exponentially higher valuations for your advertising space at the programmatic auctions. Digitalbox, only valued at £4.6 million today, is not there yet, Carter admits: “As you scale up you will get there but you need something 500 million in your audience to qualify. We are at 150 million now.”
Having invested in the software platform, the more publications Digitalbox pushes through it, the greater its profitability. The group today raised £1.2 million from investors, leaving it with around £1 million cash after The Tab takeover.
Carter says it has scope to add a further three or four publications to the platforms without having to substantial re-engineer its operations.
Expect more magazine takeover headlines soon.