Bustle Digital Group — owner of Bustle, Inverse, Input, Mic and other titles — could eventually join the ranks of startups going public via a special purpose acquisition company (SPAC).
During an interview about the state of BDG and the digital media industry at the end of 2020, founder and CEO Bryan Goldberg laid out ambitious goals for the next few years.
“Where do I want to see the company in three years? I want to see three things: I want to be public, I want to see us driving a lot of profits and I want it to be a lot bigger, because we’ve consolidated a lot of other publications,” he said.
He added that those goals connect, because by going public, BDG can raise “hundreds of millions dollars,” which Goldberg wants to use to “buy a lot of media companies.”
That might seem like bluster after a year in which many digital media companies (including BDG) had to make serious cuts. But Goldberg said that the company would be profitable in 2020, with revenue that’s “a little bit under $100 million.” And it won’t be the first digital media company to take a similar route — Group Nine created a SPAC that went public last week.
“I want to prove that we can be highly profitable,” he said. “A lot of startups don’t have that goal. A lot of VCs tell their startups: Don’t worry about profits, don’t worry about losing money. I don’t believe in that.”
In addition to his plans to go public, Goldberg also discussed how acquisitions have helped Bustle’s business, his joint venture to purchase W Magazine and digital media’s “overcapitalization” problem. You can read our full conversation, edited for length and clarity, below.
TechCrunch: The last time I caught up with someone at BDG, it was with [the company’s president Jason Wagenheim] and that was when you guys were dealing with the initial fallout [from the pandemic]. Now we’re a lot further into whatever this new world is, so what is your sense of where BDG is now, versus where it was in the early days of the pandemic?
Bryan Goldberg: It might be the craziest, most eventful six months for many of us in our lives. And certainly, for those of us in this industry, the difference between April and October, it’s really hard to fathom, it’s complete night and day. April was a very frightening time for everyone, personally and professionally across the country, across the world.
From an advertising standpoint, it was a really scary time, because we have clients across every industry, and every industry was impacted differently. We have clients who were greatly impacted — theme parks, car makers, hotel companies, airlines — and then we had clients who were not as badly affected, such as a lot of CPG clients, who everybody depended upon so much during the pandemic.
There was a huge pause in our business in in March, April and May. For a lot of clients, tossing advertising was a sort of knee-jerk reaction to the sudden shock of COVID, and so we saw a huge negative impact in our second quarter. What we started to see in the third quarter, and especially now in the fourth quarter, is now that the shock of COVID is behind us, the macro trends that were catalyzed by COVID are now moving into the forefront.
The story of media is no longer about the shock of COVID. The story of media is now about all of the changes to our world, and changes to our industry that were brought about as a consequence of COVID.
The good news for our company, and the good news for other digital media companies, is it looks like the future is being accelerated. It looks like people are watching less television, and so advertisers are moving their budgets into digital faster than they would have had it not been for COVID. Even things like live sports, [their] TV ratings are way down. And a lot of advertisers are saying, “Is there efficacy anymore in cable television or broadcast television?” And the magazine industry was heavily impaired, simply because magazines are a physical medium, and people didn’t want to pass around magazines or read magazines at the dentist’s office, so we probably saw some print budget move into digital as well.
Industry analysts now are going to take up their estimates of what digital revenue is going to look like in 2021, 2022 and beyond. I also think we’ve seen a world in which a lot of brand advertisers are starting to think about what happens when they start to spend beyond Facebook and Google. For most of the last three years, there’s been so much talk about the duopoly, the idea that Facebook and Google are going to eat almost every last dollar of advertising. What we’ve seen in the last three months is advertisers saying that this needs to be the moment in which they learn how to deploy advertising spend digitally beyond Facebook or Google.
No, it doesn’t mean they’re all pulling out of Facebook — Facebook and Google are doing just fine. But there are still tens of billions of dollars that need to be deployed outside of Facebook and Google. And you’re seeing winners such as Snapchat, Pinterest. Both had incredibly strong earnings. They’re benefiting from the same thing that benefits Bustle Digital Group and a lot of other digital media players who aren’t Facebook and Google, which is you’re seeing big ad spenders finally deciding that now’s the time to find other ways to deploy advertising spend.
I think those are the two big trends: Dollars moving to digital out of TV faster than we thought, and major advertisers using now as a time to find other channels beyond Facebook and Google.
So when you look at how that is impacting Bustle’s business, has it returned to pre-COVID levels?
For us, when we reflect upon the year 2020, we see that we had a great first quarter, we see that we’re having an incredible fourth quarter, and we have a big, epic crater in the second and third quarters. So when we look at the year, we basically have to say to ourselves, if it were not for that crater in the second and third quarters, what would this year have looked like? We would have had revenue well in excess of $100 million. Now, we’re gonna have revenue a little bit under $100 million.
But when we think about how we prepare for 2021 and set goals for 2021, we have to set goals for 2021 as though COVID had never happened, we have to set goals for 2021 without using Q2 and Q3 as a sort of excuse for lowering expectations. Because the fourth quarter, the quarter we’re currently in, has exceeded our wildest expectations.
People sort of sat up and took notice of the company because you had a pretty aggressive acquisition strategy. I imagine that strategy had to change a little bit in 2020. To what extent do you feel that ambition is something that you can pick up again?
So to be clear, not only do we feel great about our strategy, our strategy was critical in helping our company survive and ultimately thrive in the wake of the virus. You know, we made two acquisitions [in 2019] — in the science and technology category, we bought Inverse, which is a science and technology publication, and then Josh Topolsky launched a tech-and-gadget publication for us called Input Magazine that’s growing very quickly.
It’s critical that we had that strategy, because no single advertiser category has performed better for us in 2020 than tech — we more than tripled our revenue from technology clients this year, because technology has thrived through COVID. Had we not had an acquisition strategy, had we not diversified into tech media publishing, we certainly would not have had the outcome we had in 2020. That’s just the reality.
Categories like beauty, fashion, retail were very hard hit. Those have traditionally been our bread and butter, and they’re going to be great again, in 2021. But this spring, beauty companies weren’t doing so well, because people weren’t leaving the house. So the strategy worked, in part, because we diversified the categories in which we created content, which allowed us to diversify the advertiser base. And we’re gonna continue full speed ahead in 2021.
Now, you know, we did six acquisitions in 2019. I don’t know if we’ll do six acquisitions in 2021. But I want to do a lot more than one acquisition in 2021.
And when you think about acquisitions, is that mostly about continuing to move into new content areas?
Yeah, primarily, it’s about new audiences and new content areas. And there are so many categories in which we currently don’t have a presence — you know, there’s some obvious ones, we don’t have a publication dedicated to food, we don’t have a publication yet to cater to health and wellness, we don’t have a publication dedicated to sports, which is obviously an area that that’s near and dear to me. [Goldberg co-founded Bleacher Report.] So there are plenty of new categories for us to move into, ideally through acquisition — though ultimately, we’re not afraid to launch publications, given the success of Input Magazine.
How are you thinking about that build-versus-buy decision?
In general, we prefer to buy because I do think that there are great media brands out there right now that could use help and that could benefit from what BDG brings to the table. And when I look at some of the deals we’ve done in the past, we’ve really helped not only save but really improve publications, especially from a business and technology standpoint.
We just entered a joint venture to purchase W Magazine, because we believe that the brand can do big things, we think we can make the product better, we think we can make the site better, we think we can make the email newsletter better and we think we can help them with sales strategy.
What we do is we take great brands that essentially need some rejuvenation, and some new technology and innovation behind them, and we help make them more fresh and more innovative.
What specifically was exciting to you about W and how do you think it can be rejuvenated?
When you get a chance to buy a brand that has almost 50 years of history, that’s always exciting, because brands that can stand the test of time, brands that can exist for decades, they don’t come around every day, and there’s something precious about that. In a world where new companies are launched every single day, something like brand legacy becomes a scarcity. It would take many decades for a new publication to earn the reputation and the authority that W Magazine spent 50 years building, you just can’t build that overnight.
And I’ve told people, when we launched our M&A strategy, I said the part of media that takes the longest is building the brands. It took over a decade until people had heard of Bleacher Report. It took many, many years until everyday consumers knew [what] Bustle was. I’m an impatient person, and I hate waiting, and I hate the fact that building the brand takes the longest, so when you can buy a brand that’s a household name like W Magazine, you don’t get a lot of chances to do that, and you’ve got to jump on it.
Our partners on that, including Karlie Kloss, Kaia Gerber, Lewis Hamilton, Jason Blum and Sara Moonves … I think they recognize that the W brand had magic to it, and what it really just needed was the entrepreneurial spirit of having a digital native startup behind it to bring new life to a highly regarded brand.
Those are the sorts of deals I’d like to do when we can: Buy brands that mean something to people, that have authority, that have credibility, that have legacy and then bring all the things that I’ve done my whole life — innovative technology, attention to distribution, building great sales teams who know how to advance new sales products.
That’s a big part of it for us, we really try to come out with cool new sales products. For example, we just launched card story formats, because we wanted there to be new narrative products on the internet that didn’t look like just a typical article, things that could be more interactive, that could you feel like a true 21st-century advertising product. I think that’s so cool, combining a classic magazine that’s 50 years old, with cutting edge, new technology. That’s what we do, that’s what we love to do and that’s what I think we do better than anyone else.
In this case, the print magazine is still going to be a part of the strategy?
Yeah, it is. I believe that print is a fantastic channel. And when we think about the business and we think about distribution, print magazines are a channel, TikTok is a channel, email newsletters are a channel, our website homepage is a channel, Instagram is a channel, YouTube is a channel. We want to be great at maximizing every channel in its own way.
Magazines will always exist, there will always be consumers who love magazines, just as there will always be consumers who love vinyl records. It might only be reaching a few hundred thousand people, unlike TikTok, which reaches tens of millions of people, but those hundreds of thousands of people who have W Magazine on their coffee table, often they’re amongst the most influential people in fashion today.
When media properties get acquired, there’s usually an assessment: What are the parts of the business that are working, where are the redundancies? At the same time, I think there’s always a fear, at least on the journalist side, of what this means for the newsroom. How do you decide which are the areas that still deserve serious investment?
Most of the cutting we’re going to do, when we start to do cost cutting, is legal costs, subscription costs, rent costs. When there are layoffs, typically, the layoffs are in the business or back office roles. And that’s no disrespect to, you know, accountants and sales people — most of whom shouldn’t have much trouble finding a new job.
But when we buy W Magazine, or we buy on a cool new publication like Inverse, it really is the writers and the editors who are the creative energy behind the brand, they are bringing the brand to life. We try to make it so that editorial staff cuts are the last cuts we would make, and in most cases, we don’t really have to make any cuts around editorial.
What else does 2021 look like for you?
Look, I want to take this company public; I’ve admitted that in the past. I’ve never said it quite this clearly: I want this to be a public company. This was never a company that was built to be flipped, this was never a company whose ambition was to be owned by a bigger company. This is a company that I think can go public. And I would like for it to go public.
I think that the SPAC revelation that’s taken place in the last year, it’s not for every startup, but I do think it’s a good fit for this startup.
The reason I think it’s a good fit for this startup is one, I know what I want to do with the capital, I want to raise hundreds of millions of dollars, and then I want to go buy a lot of media companies. A lot of companies go public and say they’re raising money for a specific reason, but no, they’re just going public because they want to get liquidity. I want to get access to capital that I can use to go quickly consolidate much faster than we’re going now.
And I want to prove that we can be highly profitable. A lot of startups don’t have that goal. A lot of VCs tell their startups: Don’t worry about profits, don’t worry about losing money. I don’t believe in that. When I look two or three years out, I want us to be really profitable. I want us to be valued as a multiple of our profits. I think media companies have been held back by aiming to have revenue multiples for their valuations. I want to have EBITDA [profitability] multiples for my valuation.
Where do I want to see the company in three years? I want to see three things: I want to be public, I want to see us driving a lot of profits and I want it to be a lot bigger because we’ve consolidated a lot of other publications.
Obviously, those plans are about Bustle Digital. But in some ways, it sounds like a sign that you are very confident about the digital media business in general. And certainly when I talk to VCs, there’s not a lot of excitement on the digital media side. What is it that makes you still feel like not only that there’s a sustainable business, but like there’s a large public-scale business?
If you look at the the hardship that the industry faced in 2018, 2019, that was a capitalization problem. That was about companies like BuzzFeed, Vox and Vice raising too much money too fast and not being able to grow into the very high expectations that had been set for them. The expectations were set too high, too much money was raised. That’s a very different thing than are these quality companies or not? I don’t think anyone has ever doubted that Vox and BuzzFeed are quality companies. But they set expectations way too high, way too early, way too fast.
Media is not supposed to be a business where you double revenue every year. Media is a business about consistent quality growth and the ability to drive profits. I think that the Voxes and the BuzzFeeds of the world overcapitalized, set the bar too high and forgot the fact that media companies should have healthy financials and should be focused on the bottom line.
Now they have fixed a lot of those problems: Vox will be profitable this year, BuzzFeed should be profitable this year, we should be profitable this year. That’s a huge achievement, especially in this year and bodes incredibly strong, incredibly optimistic things for the future. Digital media companies need to brag about the fact that we can be profitable when most DTC companies are not profitable right now. We should be bragging about the fact that two, three years out, all of us could be driving eight figure profits. That’s really impressive.
I want all of us to drive huge profits in the years to come. I think that public markets will favor that and value that more so than venture capitalists have. I don’t think VCs care about profits. I think they’re wrong, and I think that going public is a great way for digital media companies to walk the walk.
So Bustle Digital Group is on track to be profitable for 2020?
On track for a very small profit in 2020. It would have been a lot bigger profit if not for COVID. You know, back in March, in April, we did not think there was any chance of turning a profit this year or even coming close. Because of the strength in Q4, we’ve exceeded our revised expectations.
One of the other things I’d asked Jason about back in April was about this question of advertising as the core of the business model. We’ve seen large and small experiments with subscriptions, but with these digital native companies, it still seems fairly focused on advertising. Do you feel like that’s going to work for Bustle in the future?
I think 80% of revenue from advertising, 20% from commerce is a healthy place to be in the future.
But make no mistake, advertising is our primary business model, and I think a great business model if you have scale and if you’re good at it — you can’t always blame things on the business model, some companies just don’t execute. We’ve always been focused on execution, and that’s why advertising has always served us incredibly well.
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