The digital media industry is facing an extremely competitive revenue landscape. In times like this, it's sometimes better to link arms with other, similar, companies, backed by an even bigger, more profitable company.
Discovery Communications on Thursday announced a $100 million minority investment in a new entity that will merge three digital media companies -- Thrillist Media Group, NowThis Media, and The Dodo -- with two companies, Seeker and SourceFed Studios, that are already owned by Discovery.
The digital media companies will maintain independent editorial operations, which seems to make the deal announced today more of a partnership than an outright merger or acquisition. But the new entity, Group Nine Media, will enjoy a larger consumer reach than any of its individual components, a fact that executives hope will attract advertisers.
Ben Lerer, CEO of Thrillist Media Group, was named to the additional post of CEO at Group Nine. Eric Ashman, president at Thrillist, was named president at Group Nine as well.
Mr. Lerer is also managing partner at Lerer Hippeau Ventures, which has invested in Thrillist, NowThis, and The Dodo, which was started by Mr. Lerer's sister, Izzie Lerer. Their father, Ken Lerer, is also a managing partner of Lerer Hippeau Ventures. (Discovery is already an investor in The Dodo.)
European publisher Axel Springer, which controls Business Insider and has invested in Thrillist and NowThis, will be the second-largest shareholder in Group Nine Media. Discovery Communications is the largest.
"I think advertisers want fewer, bigger partners, and they want bigger data sets and they want to go deep and wide, and that's one of the reasons to do this," Ben Lerer said in an interview with Ad Age.
Mr. Lerer said that thinking up linear TV extensions of some of these digital brands was "one of the shared points of interest" of doing the deal with Discovery Communications, whose cable channels include Discovery Network, Animal Planet, TLC and many others. But he cautioned that it will take some time. "We're going to figure this out, but it is not that tomorrow you're going to suddenly see us announce five television shows," he said. "But I would love that to be the case ... "
Eventually, the digital publishers that comprise Group Nine will move to a shared content management system called Pinnacle, which Thrillist uses. Mr. Lerer said the brands may come to share one office as well. There will also be dedicated human resourse, finance, corporate development, and legal staff.
Discovery, according to the announcement, will be able to purchase a controlling stake in Group Nine "in the future," if it so chooses. By forming a strategic partnership with these millennial-focused digital media companies, Discovery will gain further traction with an in-demand demographic, and will be able to offer up Group Nine's scale as a digital component of a larger advertising purchase.
Summing up the appeal of the deal, Mr. Lerer said it's intended to "move past the sort of hand-to-mouth VC startup world" and "build a great big business for the long term."