Media Summit: Industry is headed for a cash crunch as VC-backed US co’s burn cash for scale

Paul McIntyre
By Paul McIntyre | 21 April 2015

Australia’s media sector is facing a cash squeeze as waves of mostly US-based media companies spruiking their tech creds for venture capital funding seek to justify their business models with fast global rollouts.

Neil Ackland, CEO of the local youth-skewing online media outfit Sound Alliance  warns of a cash crunch for the local Australian media market, pointing to the Australian arrival of Mashable, Vice, Buzzfeed, Huffington Post, Business Insider, Gawker and others rumoured to be landing such as Vox Media. 

“The challenge we have here is you’ve got big companies, essentially start-ups, that have raised significant investment funding out of the US and their game is about scale, it’s not about profitability,” says Ackland, who will speak on the theme during the Big Picture session at the Media Summit on May 22. 

So they’re coming here to play a scale game. They can afford to burn cash. A lot of these publishers are raising money on the basis of being a tech business rather than being just a content play and that’s why they’re getting such big valuations. But to justify their valuations they’re going after global scale.

“So for us what it’s really about is how local publishers and media need to prepare for this. The game is becoming global so we’re all being compared to global products that have access to much bigger resource pools in terms of their technology, product offering and their content. That’s definitely going to impact on our market in the next two or three years. If you work on the theory that the US is two or three years ahead, it’s why we think it’s really important that we’re not looking to the Australian market for our lead.”

The closure of Wendy Harmer’s The Hoopla last month is a case in point - Harmer said the economics became too hard as the sector was “evolving at dizzying speed and increasingly becoming one for players with very deep pockets”.

While MamaMia said last week it was looking to counter the trend with its expansion plans into the US, the traffic is pretty much one way. Book Early Bird tickets for the Media Summit here.

Already stung by plunging CPMs for online display advertising -  which would not sustain the editorial resource Ackland needed to engage an under 30 audience - Sound Alliance was one of the first Australian publishers to turn to native ad formats with its launch of Junkee.com 18 months ago.

It has worked handsomely – including a youth-orientated travel media site funded by Qantas - but Ackland remains mindful of the US tech and media Armada crossing the Pacific.

The company briefed corporate advisory firm Grant Samuel earlier this year to map potential JV and alliance partners or a possible IPO to counter the competition Ackland thinks is coming hard and fast.

Ackland will discuss these themes and other big picture content and distribution trends at the Media Summit with Citi’s Justin Diddams, Shine Entertainment’s  Mark Fennessy, IPG Mediabrands global CEO Henry Tajer, OMD CEO Peter Horgan and MCN CEO Anthony Fitzgerald.

For more on the AdNews Media Summit and the stellar line up, see the event page.

Early Bird tickets are still avialable.

The Media Summit is being spearheaded by a joint keynote address by Telstra's MD, Media and Marketing, Joe Pollard and Qantas' group executive of brand, Olivia Wirth.

IPG Mediabrands is the event's major sponsor. Supporting sponsors are: AdRoll, ARN, Amobee, Fairfax Media, Outbrain and Rocketfuel.

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