The digital publishing industry was hit with a surprise late last week as reports broke indicating that digital media darling Mashable was sold to Ziff Davis for just $50m.

That's a small fraction of the $250m investors had valued the company at in its most recent funding round last year.

The company was a poster child for the rise of digital publishers. Founded in 2005 by then 19 year-old Pete Cashmore in his home in Aberdeen, Scotland, Mashable grew its audience to 30m-plus and its social media followers to more than 14m before it raised outside capital for the first time in 2014.

At the time it decided to take investor money, Cashmore boasted that Mashable was profitable and spoke of a bright future. "What's exciting is that we are only just beginning to realize the potential we have to build a new kind of company, which is equal parts media and technology," he stated.

But in just a few short years, Mashable's fortunes appear to have reversed. While the company reportedly achieved good revenue growth, it apparently spent far more than it took in; the Wall Street Journal says the company was set to realize a sizable loss in 2017.

But Mashable isn't the only digital publisher that appears to have hit a bump in the road. According to the Wall Street Journal, an even larger name in the digital media space, BuzzFeed, "is on track to miss its revenue target this year by a significant amount" and as a result, the company's plans to go public next year are looking less viable.

Is there a digital media crash taking place?

Talking Points Memo's Josh Marshall suggests that "there's a digital media crash...but no one will say it" and even for those who believe such an argument is exaggerated, it does appear that an important shift is now taking place.

The rise of digital publishers like BuzzFeed and Mashable has been fueled by the rise of the digital ad market. As advertisers shifted more and more of their money to digital, the piece of the pie available to top digital publishers grew.

These digital publishers were eager to capitalize. Not only did they prove adept at leveraging their young brands and impressive audiences, they were quicker than many established publishers to embrace new digital ad formats. BuzzFeed, for instance, was a native advertising pioneer and up until recently, actually favored it over display advertising.

In Mashable's case, the company built on its success as a tech blog and expanded its audience by extending its coverage to topics like entertainment, culture and business. Last year, it embraced video in a big way in an obvious effort to take advantage of advertisers' seemingly insatiable demand for video ad inventory. And it even operated Mashable BrandLab, an agency-like division that "helps...clients become content creators and amplify their social media assets."

But despite their ability to grow their audiences, innovate, and develop offerings designed to help them get cozier with advertisers, it's now clear that the laws of gravity applied to digital publishers too. In other words, they face many of the same challenges as the established publishers they have eclipsed online.

Good content, especially video content, is costly to produce regardless of whether you're New Media or Old Media. Initiatives designed to forge stronger advertiser relationships, such as Mashable's BrandLab, are also expensive and as the Wall Street Journal noted, hard to scale up. And despite the fact that they probably should have known better, upstart publishers proved they can splurge on non-necessities like swanky offices and high-profile hires just as well as their older competitors.

At the same time, the digital ad market has changed. Advertisers are more savvy and thanks to concerns over issues like brand safety and viewability, publishers don't have it as easy. Growth of both ad blockers and ad fraud is problematic and, perhaps most importantly, the so-called duopoloy of Google and Facebook has only strengthened. This has meant that even though the digital ad pie is growing, lots of the growth – virtually all of it according to some estimates – is going to Google and Facebook.

Where to from here?

Obviously, it's not all doom and gloom for digital publishers. BuzzFeed might not be able to go public in 2018, and the price Ziff Davis paid for Mashable is certainly a huge wake-up call, but just as many disrupted established publishers have not gone out of business, there's no reason to believe that the survival of the brightest stars of digital publishing will be disappearing any time soon. At least not yet.

It is clear, however, that those looking to avoid the fate of the companies they so thoroughly disrupted will need to make big changes, and that will give established publishers who have been transforming themselves into digital publishers time to play catch up.

Patricio Robles

Published 23 November, 2017 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2566 more posts from this author

You might be interested in

Comments (0)

Comment
No-profile-pic
Save or Cancel
Daily_pulse_signup_wide

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Digital Pulse newsletter. You will receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.