Venture capital firms have had a major impact on the transformation of the digital media industry, providing significant funding for start-ups within the field. Over time, the industry has proven to be an intelligent investment, bringing millions to venture capital firms. In recent years, and with the continued advancement of technology, the number of digital media start-ups has multiplied, creating an even more competitive market than ever before. However, this heavy competition has certainly not driven out investors.
The future seems bright – and Ashley Brasier, Partner at Lightspeed Venture Partners, is just one investor who has identified the potential for those companies entering the digital media space.
What is Digital Media?
To understand the benefits of this new, trending market, it is imperative to understand exactly what the topic at hand is. Digital media, in essence, is digitized content that is transmitted over the internet or computer networks. It can include a wide range of communication platforms, including text, audio, video, and graphics.
Digital media is an avenue of bringing content to an audience, similar to that which the American newspaper is recognized for successfully doing over the last hundred years. Today, with the growing trend of technology and the transition to an eco-friendly world, more and more online services are replacing old methods of media.
For example, profit margins for newspapers have drastically declined as clients seek companies that support online news sources. This has created a shift in ownership, giving room for hedge funds to take over. Additionally, platforms are changing: clients of The New York Times are most likely now paying a monthly subscription for content rather than receiving newspapers at their front door.
The products related to digital media are endless, and the most popular are pertaining to e-commerce, television, publishing, education, marketing, and technology. Recognizable digital media companies in the United States – and those that have gained large investment support and consumer traction – include BuzzFeed, Refinery29, Mashable, Vice, and Cheddar.
The most popular digital media space among all generations comes from social media platforms, including Facebook, Instagram, Twitter, Snapchat, and LinkedIn. Each platform provides its own distinctive benefits to its users, and its popularity varies greatly depending on the generation at hand.
Making a Profit
The big question – and one that was especially prominent at the introduction of the industry – is how these online services can make money. Venture capital firms are investing billions annually into new start-ups, and the return is positive, meaning that digital media companies certainly can – and do – turn a profit.
The revenue stream for an online service is quite simple. According to Lightspeed Venture Partners, a San Francisco-based venture capital firm, there are three identifiable avenues that offer the possibility for these companies to generate a profit.
- SubscriptionSimilar to The New York Times platform, digital media sites are requiring consumers to pay a subscription fee. The challenge is creating content that an audience is willing to pay for. Depending on the audience at hand – their generation, their wealth, and many other factors – subscription fees can fluctuate immensely and may need to change with an evolving platform. For example, Netflix started off at $7.99 per month for their basic subscription, but now offers a premium subscription for $15.99 per month.
- CommerceSelling products that your audience will want is the ‘next step’ in the business model. Once a company has a following, and has collected an audience with similar interests, they can transition to an e-commerce store. The company can sell their products to their established customer base.
- ExperiencesInstead of selling products, these companies are selling experiences. Millennials have often been identified as the generation who would rather spend on experiences than products. Many companies are adapting to this changing trend and are advertising to meet the new demand for a purchased experience.
- AdvertisingAlthough not as popular as it once was, advertising is still an avenue for revenue. Companies can pay specific amounts for their products to be advertised on various platforms. For example, YouTube has advertised for customers who do not pay for the services – before watching a video, the user must watch an advertisement. Hulu, an online video streaming platform, inserts advertisements as commercial breaks.
Lightspeed Venture Partners identified one common necessity in all four avenues: creating an established audience.
Lightspeed Venture Partners is a venture capital firm that focuses on early stage investments in the enterprise, technology, and consumer space. As of 2019, the company has funded over 300 start-ups since its launch in 2000. Lightspeed Venture Partners recently brought on a new Partner, Ashley Brasier, who is an advocate for pursuing opportunities in the digital media space.
Ashley Brasier, Lightspeed Venture Partners
Ashley joined Lightspeed team in 2018. With a long background in the technology space, she is well aware of the current and future benefits of investing in companies related to digital media. She has both the education and experience working in the industry to support her claims.
Brasier, a Stanford MBA graduate, has a uniquely blended background in businesses and media and entertainment. While attending Duke University for her undergraduate, Brasier earned her Bachelor of Arts in Visual and Media Studies. This program is highly reputable in the industry and focuses on how social, cultural, and political worlds are shaped by media technologies. Students gain an in-depth understanding of the expansive history of the field, including popular media ideas related to advertising, photography, television, film and video, new media and games, as well as professional contexts such as the courtroom, gallery, hospital, and classroom.
According to the Trinity College of Arts and Sciences at Duke, students engaged in the program are “gaining critical understanding of these complex and rapidly evolving contexts” through “the integration of theory and practice (or creative thought and critical making) and the development of a repertoires of twenty-first century competencies in research, art theory, historiography, argumentation, analysis, computation, and multimedia storytelling.”
Ashley Brasier was also the Vice President of the Arts, Media, and Entertainment Club (AME) at Stanford. AME’s objective is “to increase awareness in the arts, media and entertainment arenas through education and professional opportunities, network-building with alumni and industry representatives, and showcasing its creative talent and artistic diversity within the Stanford GSB community.”
While involved with the club, Brasier attended numerous outings to visit media companies in New York and Los Angeles. Her trips included visits to:
- YouTube, a video-sharing website created in 2005;
- HBO, a premium cable and satellite television network and the oldest of its kind;
- Netflix, a subscription-based streaming OOT service which offers a wide selection of films and television shows;
- Vice, a digital media broadcasting system which has expanded to include web series, a news division, a film production studio, and a record label;
- The New York Times, an internationally renowned newspaper which now offers subscription services to its customers;
- Musical.ly, a social media service that allows users to create and share short videos; and
- Disney, one of the largest and most diverse multinational mass media and entertainment conglomerates, which expanded to live streaming in 2017.
Each company provided Brasier with a unique perspective into the digital media world and allowed her to come to understand the changing trends and the potential in the future. Brasier has also served as Senior Associate Consultant at Bain & Company and Category Manager at Thumbtack.
Her experience in the digital media space, paired with her education at Stanford, provides a deep understanding of the benefits of the industry. Today, Ashley is an investment partner at Lightspeed Venture Partners where she directs her interest and passion to the digital media and creative space sector.
Lightspeed Venture Partners in the Digital Media Sector
Brasier is excited about the potential of the space and is glad Lightspeed has already blazed a trail here.
In 2012, Lightspeed Venture Partners became one of the first investors in Snapchat, a mobile application that allows friends to share photos with one another. The differentiating aspect of this application in comparison to its competitors was that users could control how long their message could be viewed. Photos that were previously deemed as not ‘Facebook ready’ could now be shared, but with viewing time as minimal as seconds.
During the seed round for $485,000, Venture Capital Partners was the only investor. At that time, Snapchat had less than 100,000 users. Today, the company is valued at $24 billion; Venture Capital Partners’ chunk of the company is around $2 billion. What initially started as a way to just share photos with friends is now a platform for marketing events, news content, entertainment, and much more.
Goop is “A Modern Lifestyle Brand.” Founded by Gwyneth Paltrow in 2008, Goop started as a weekly newsletter providing New Age advice. It was an avenue for Gwyneth to “organize her unbiased travel recommendations, health-centric recipes, and shopping discoveries for friends,” and a way she could “get her own questions – about health, fitness, and psych – answered.” It was in 2009 that Paltrow made her first $45 off an advertising partnership; a time when she had approximately 150,000 subscribers.
In 2014, after Gwyneth Paltrow gained her following on her lifestyle blog, she decided to push into the world of e-commerce. Paltrow expanded to selling everything – including vitamins, beauty goods, and household products. In 2017, Goop launched its own products: Goop Wellness. Sales skyrocketed from $45 million to $60 million.
What started as a blog was now a multi-million-dollar company. Seeking more growth opportunities, Gwyneth Paltrow completed a Series C funding round. Lightspeed Venture Partners recognized Goop as the next true luxury brand and contributed a $50 million investment. Their investment brought the value of the company to $250 million. The weekly Goop newsletter has transformed into a sales platform for health and wellness, exemplifying how digital media growth can be maximized with the right content and the right investment team.
Founded in 2017 by Jon Steinberg, Cheddar is a streaming news network that broadcasts live from the New York Stock Exchange, NASDAQ Market site, and the Flatiron building in New York City. Today, the company also streams from the White House lawn and the briefing room in Washington, D.C. Cheddar videos are distributed on a multitude of platforms, including live audio on iHeartRadio and video output on Sling TV, YouTube TV, Facebook Live, Amazon Prime Video, Twitter, Vimeo, Philo, Pluto TV, and PlayStation Vue.
According to Lightspeed Venture Partners, “Cheddar is post-cable TV network using modern cloud-based infrastructure to shoot, live switch, and stream the network…Cheddar is for people in their 20s and 30s.”
Current streaming methods as well as traditional cable charge the user for their services or insert commercial breaks for advertising. Cheddar, however, is ad-free, utilizing “innovative products placement in fashion, food, and technology.” They do also offer a paid-for subscription, which increases the number of free broadcasts the user can access.
Lightspeed Venture Partners contributed in the company’s first financing round in 2016. During this round and prior to launch, Cheddar successfully raised nearly $3 million. Additional investors included Lightspeed’s very own Jeremy Liew, as well as the WGI Group, Homebrew, Jerry Speyer, and David Fiszel. Later that year, Lightspeed Venture Partners assisted Cheddar with raising another $10 million, alongside Comcast Ventures and Ribbit Capital. In 2017, Cheddar funded another $19 million. This time, Lightspeed Venture Partners provided a $2.5 million convertible note, allowing for their shares to increase in value but for Cheddar to maintain a certain amount of equity.
Only three years later, Cheddar is now valued at $160 million. The post-cable network has paired with industry leaders including, Bustle, Vanity Fair, and Conde Nast Entertainment. It now has four channels, offering an exclusive opportunity for various niches.
The above-mentioned investments by Lightspeed Venture Partners prove the profitability of investing in companies within the digital media industry. While the industry is every changing, and so this will always be an aspect that investors have to be aware of, the profitability can’t be denied. All investments require a keen eye, but this is definitely a platform for success.
The Future of Digital Media
Each of the companies that Lightspeed Venture Partners has invested in has multiple similarities. First, each has a niche. Each company has identified its potential audience and has directed its services to those specific individuals. By doing so, they have implemented target marketing in a new, innovative way.
Secondly, each company has unlimited potential for growth. Starting at the basic structure, either with just one blog or one picture, each company created its application with one singular goal in mind. For Snapchat, it was to share a picture that was time limited; for Goop, it was to post a blog; and for Cheddar, it was to stream news to a specific group of people. However, with time and increased funding from firms such as Lightspeed Venture Partners, each company has grown exponentially.
The world of digital media provides a unique opportunity – it allows for companies to expand with the changing demands of their consumers. No longer are they limited to the access of television, print, and costly creation; instead, with all services rolled out on web-based platforms, companies have the ability to alter and update their platforms without disrupting their services.
If necessary, companies can also modify their revenue models. They are no longer limited to ads and sponsorships; now, there are alternative avenues in subscriptions, e-commerce, and even unique advertising techniques such as product placement.
While it certainly looks bright, the ultimate future of these companies depends on their individual ability to overcome the inherent challenges within the industry. First, they must find their niche. Success can no longer be found by targeting a broad audience.
Second – and most importantly – companies must provide value. There is a massive amount of information and data available to consumers today. As a result, a company must bring value to their customers’ lives not only to get their attention in the first place but also to keep customer retention rates up. Part of this process will include brand awareness. Companies will need to understand and market their specific brand. With heavy competition – and shifting behaviors from one generation to the next – consumers tend to select a brand that they believe in, and strictly support that brand.
Companies will also need to keep up with technological innovations and trends. Streaming tools may be popular now – but who knows what the future will hold. For companies that are successful at overcoming these challenges, Ashley Brasier feels that they will find much success in the future. Through her position at Lightspeed Venture Partners, she can be expected to be working closely with many successful digital media start-ups in the near future.