Tag: EC Media

Posted on

Nextdoor’s SPAC investor deck paints a picture of sizable scale and sticky users

The SPAC parade continues in this shortened week with news that community social network Nextdoor will go public via a blank-check company. The unicorn will merge with Khosla Ventures Acquisition Co. II, taking itself public and raising capital at the same time.

Per the former startup, the transaction with the Khosla-affiliated SPAC will generate gross proceeds of around $686 million, inclusive of a $270 million private investment in public equity, or PIPE, which is being funded by a collection of capital pools, some prior Nextdoor investors (including Tiger), Nextdoor CEO Sarah Friar and Khosla Ventures itself.

Notably, Khosla is not a listed investor in the company per Crunchbase or PitchBook, indicating that even SPACs formed by venture capital firms can hunt for deals outside their parent’s portfolio.

Per a Nextdoor release, the transaction will value the company at a “pro forma equity [valuation] of approximately $4.3 billion.” That’s a great price for the firm that was most recently valued at $2.17 billion in a late 2019-era Series H worth $170 million, per PitchBook data. Those funds were invested at a flat $2.0 billion pre-money valuation.

So, what will public investors get the chance to buy into at the new, higher price? To answer that we’ll have to turn to the company’s SPAC investor deck.

Our general observations are that while Nextdoor’s SPAC deck does have some regular annoyances, it offers are clear-eyed look at the company’s financial performance both in historical terms and in terms of what it might accomplish in the future. Our usual mockery of SPAC charts mostly doesn’t apply. Let’s begin.

Nextdoor’s SPAC pitch

We’ll proceed through the deck in its original slide order to better understand the company’s argument for its value today, as well as its future worth.

The company kicks off with a note that it has 27 million weekly active users (neighbors, in its own parlance), and claims users in around one in three U.S. households. The argument, then, is that Nextdoor has scale.

A few slides later, Nextdoor details its mission: “To cultivate a kinder world where everyone has a neighborhood they can rely on.” While accounts like @BestOfNextdoor might make this mission statement as coherent as ExxonMobil saying that its core purpose was, say, atmospheric carbon reduction, we have to take it seriously. The company wants to bring people together. It can’t control what they do from there, as we’ve all seen. But the fact that rude people on Nextdoor is a meme stems from the same scale that the company was just crowing about.

Underscoring its active user counts are Nextdoor’s retention figures. Here’s how it describes that metric:

Image Credits: Nextdoor SPAC investor deck

These are monthly active users, mind, not weekly active, the figure that the company cited up top. So, the metrics are looser here. And the company is counting users as active if they have “started a session or opened a content email over the trailing 30 days.” How conservative is that metric? We’ll leave that for you to decide.

The company’s argument for its value continues in the following slide, with Nextdoor noting that users become more active as more people use the service in a neighborhood. This feels obvious, though it is nice, we suppose, to see the company codify our expectations in data.

Nextdoor then argues that its user base is distinct from that of other social networks and that its users are about as active as those on Twitter, albeit less active than on the major U.S. social networks (Facebook, Snap, Instagram).

Why go through the exercise of sorting Nextdoor into a cabal of social networks? Well, here’s why:

Posted on

5 takeaways from BuzzFeed’s SPAC deck

Digital media outfit BuzzFeed announced today that it will go public via a SPAC, or blank check company. BuzzFeed also disclosed that it will purchase Complex, another media company, for $300 million in cash and shares in BuzzFeed itself; the SPAC deal will help finance its purchase of Complex.

The transaction will see BuzzFeed merge with 890 Fifth Avenue Partners Inc., a public company, with the combined entity sporting an enterprise valuation of around $1.5 billion after its completion.

BuzzFeed’s SPAC partner is bringing $288 million in cash to the table, and BuzzFeed intends to raise another $150 million in a convertible debt offering.

In raw numbers, BuzzFeed is a large company with hundreds of millions of dollars in yearly revenue and a roughly break-even business in recent years. The company’s investor presentation anticipates a return to growth after a mostly flat 2020, and rising profitability over time.

So let’s get into the company’s investor presentation. We want to know about its historical growth, anticipated growth, revenue mix and profitability, as well as how the company thinks about its news division. Let’s go!

I’ve broken each of our points into its own mini-section, so if you want to skate ahead to any particular point, feel free!

Historical revenue growth

Why is BuzzFeed buying Complex? In part, because it adds audience scale to its platform, a key to the company’s expected future advertising revenue growth (more on that in a moment). But also because Complex adds a lot of revenue to its overall top-line picture.

For example, in BuzzFeed’s historical revenue figures we see the following numbers:

  • 2019: $425 million
  • 2020: $421 million

But the company’s historical results are inclusive of Complex. Here’s the breakdown of the company’s historical revenues (gray) and Complex’s own (black). The combined figures are what BuzzFeed notes in its trailing metrics:

Image Credits: BuzzFeed SPAC deck

From this breakdown, we can see that BuzzFeed anticipates 19% growth from Complex in 2021, and just under 23% growth from the group it’s acquiring in 2022.

Per a later slide, BuzzFeed grew 4% in 2019, inclusive of historical Complex numbers. That figure fell to -1% in 2020.

Our read of the company’s historical revenue growth is that it weathered a turbulent 2020 in reasonable health; digital advertising took a huge hit in the first half of the year, likely impacting BuzzFeed’s operating results. To see it manage an essentially flat revenue result last year feels pretty OK.

Future revenue growth

Posted on

Twitter’s acquisition strategy: eat the public conversation

Evan J. Zimmerman Contributor
Evan J. Zimmerman is the founder and CEO of Drift, a genomics software company, and chairman of Jovono, a venture capital firm.
More posts by this contributor

The last few months have been interesting for Twitter.

After years of no innovation at all, Twitter is making big product changes. It has acquired Breaker and Revue, and presumably has more M&A coming. It’s coming out with Spaces. The only thing it clearly isn’t working on is an edit button.

The core idea is that Twitter is doubling down on multichannel engagement for creators so that they never have to leave for anywhere else.

Strategically, though, what is a microblogging service doing buying a social podcasting company and a newsletter tool while also building a live broadcasting sub-app? Is there even a strategy at all?

I humbly propose this: There is a strategy. Twitter is trying to revitalize itself by adding more contexts for discourse to its repertoire. The result, if everything goes right, will be an influence superapp that hasn’t existed anywhere before. The alternative is nothing less than the destruction of Twitter into a link-forwarding service.

Let’s talk about how Twitter is trying to eat the public conversation.

Why now?

Twitter’s problem is pretty simple. It’s this.

Twitter revenue quarterly growth 2013-21

Twitter revenue quarterly growth 2013-21. Image Credits: Macrotrends

Another way of putting it is: Twitter is not generating as much money from ads as it used to. Ad revenue has failed to grow because Twitter is generally considered to have a poorly performing product for marketers. As a result, its stock price has been flat for years.

The irony, though, is that Twitter became more socially important during this period of financial stagnation to the point that the president of the United States nearly launched several wars on the platform!

The core reason is that since becoming a public company, Twitter has been considered by most to be one of the most boring tech companies productwise. Yes, people joke about the lack of an edit button, but the platform really has been slow to innovate in any real way.

Twitter was one of the most dynamic companies around, going from the fail whale company to being the company that invented the hashtag and acquiring some of the hottest companies, from Periscope to Vine.

But it all failed. Twitter rarely used acquisitions successfully. It stopped putting out new features and barely even managed simple improvements. Despite describing itself as “what’s happening now,” it missed every boat. Until this year.

What changed?

  1. Twitter started to face its first real competition in years due to the social media renaissance. Twitter’s strength has always come from being where the news happens. Podcasts, Clubhouse, newsletters and other new channels are true competitive threats.
Posted on

5 ways to raise your startup’s PR game

Adam LaGreca Contributor
Adam LaGreca is the founder of 10KMedia and previously led communications for DigitalOcean, Datadog and Gremlin.
More posts by this contributor

There’s a lot of noise out there. The ability to effectively communicate can make or break your launch. It will play a role in determining who wins a new space — you or a competitor.

Most people get that. I get emails every week from companies coming out of stealth mode, wanting to make a splash. Or from a Series B company that’s been around for a while and hopes to improve their branding/messaging/positioning so that a new upstart doesn’t eat their lunch.

You have to stop thinking that what you are up to is interesting.

How do you make a splash? How do you stay relevant?

Worth noting is that my area of expertise is in the DevOps space and that slant may crop up occasionally. But these five specific tips should be applicable to virtually any startup.

Leverage your founders

This is especially important if you are a small startup that not many people know about. Journalists don’t want to hear opinions from your head of marketing or product — they want to hear from the founders. What problems are they solving? What unique opinions do they have about the market? These are insights that mean the most coming from the people that started the company. So if you don’t have at least one founder that can dedicate time to being the face, then PR is going to be an uphill battle.

That doesn’t mean there isn’t plenty to do to support these efforts. Create a list of all the journalists that have written about your competitors. Read those articles. How can your founder add value to these conversations? Where should you be contributing thought leadership? What are the most interesting perspectives you can offer to those audiences?

This is legwork and research you can do before looping founders into the conversation. Getting your PR going can be like trying to push a broken-down car up the road: If the founders see you exerting effort to get things moving on your own, they’re more likely to get beside you and help.

Here’s an example: It may be unreasonable to ask a founder to sit down and write a 1,000-word thought leadership piece by the end of the week, but they very likely have 20 minutes to chat, especially if you make it clear that the contents of the conversation will make for great thought leadership pieces, social media posts, etc.

The flow looks like:

  1. You come up with topic ideas based on research.
  2. The founder picks their favorite.
  3. You and the founder schedule a 20-minute chat to get their thoughts on paper.
  4. You write up the content based on those thoughts.
Posted on

The NFT craze will be a boon for lawyers

The non-fungible token (NFT) mania has inspired Ethereum fans to spend more than $224 million on crypto collectibles so far in 2021 through marketplaces OpenSea and Rarible, but many buyers may not understand what they actually own.

“An NFT is not that different from any other crypto purchase in that you are buying control over information in an entry in a ledger,” said attorney Nelson Rosario, one of the founders of Smolinski Rosario Law.

NFT buyers don’t actually own the media files associated with their blockchain receipts, whether those files are JPEGs or GIFS or MP3s. The best way to know which aspects of the NFT craze will outlast this trendy boom is to look at the history of comparable assets. As it turns out, people have been making crypto collectibles for nearly seven years.

Zebedee co-founder Christian Moss, who has been working on blockchain-based games since 2014, said he stopped making Bitcoin-based collectibles because transaction fees shot up. To make matters worse, some buyers viewed tokens as investments instead of as toys.

“They were tokens on Bitcoin,” Moss said. “A lot of developers ended up trying to pump their tokens and prices. … It felt like people who played those games felt like they were investors on the board. I don’t want my game to be an investment vehicle. Then players might try to sue me if they lost their tokens. It changed the dynamic of the game.”

These days, Moss helps people earn small amounts of bitcoin by playing mainstream video games like “Counter-Strike.” That way, there’s no confusion about how to value virtual assets; cryptocurrency is money and in-game assets are toys.

“NFTs aren’t game items at all; they are receipts,” Moss said. “If you have the receipt, you might be able to get an item in a game, but they can’t allow a Zelda sword NFT [in “Counter-Strike”], for example, because that might be copyright infringement. There are legal implications there.”

Indeed, legal implications are the crux of the NFT trend. Whether a court would protect the receipt-holder’s ownership over a given file depends on a variety of factors.

“It’s great if the artist intends to transfer any copyright for a work of art to an NFT purchaser, but can that be perfected to the point where a court of law or copyright office would recognize that transfer? That gets into additional questions of jurisdiction,” Rosario said. “Brands and platforms need to make sure they have the right agreements in place to govern these relationships.”

With regard to NFT sellers who take screenshots of other people’s content and profit from a corresponding NFT, Rosario said it’s hard to say whether that violates any laws.

“You probably start by looking at Twitter’s terms of service and begin the investigation there. It really depends,” he said, adding that impersonation or stealing someone’s passwords are different issues entirely.

And there are still open questions beyond copyright issues and fraud, such as sanctions and porn regulations.

Finding a space for adult content

A growing number of adult content creators are selling erotic NFTs on platforms like Rarible, often earning hundreds of dollars per photo. One such artist, PolyAnnie, said she has earned more from selling NFTs on Rarible alone than her average annual earnings across platforms like OnlyFans, Patreon and ManyVids combined.

“I sold 90 NFTs, bringing in 10.11 ETH in 5 months,” she said. “I purchased 18 NFTs from other creators, too.”

Some jurisdictions have age-verification requirements for platforms with adult content, while other jurisdictions make platforms potentially liable for child porn or revenge porn if the platforms don’t heavily moderate explicit content. As such, platform providers tend to be conservative about their terms of service.

“A lot of these NFT platforms don’t want to deal with the risks of sexually oriented content,” PolyAnnie said.

That’s why some sex workers have had their content censored by platforms like Rarible. As for the most popular NFT platform, OpenSea, which raised a Series A round from a16z earlier this month, CEO Devin Finzer said his team moderates the platform and limits search results for adult content, so those NFTs can only be found by someone going directly to the creator’s profile.

“We haven’t exactly nailed it down, but one option is a separate section of our site for that type of content,” Finzer said.

Posted on

NFTs could bridge video games and the fashion industry

Non-fungible tokens (NFTs) offer new ways for consumers to collect, wear and trade fashion online, and now that most fashion shows have scaled back or gone virtual, they may become an important tool for the industry.

Because some of the most profitable NFTs are produced by celebrities with teams, it makes sense that music corporations, fashion brands and designers are venturing into the NFT market as well. Just this month, sneaker brand RTFKT Studios garnered $3.1 million in seven minutes by selling crypto collectibles. In December 2020, NFT startup Enjin partnered with Netherlands-based fashion house The Fabricant on a virtual collection. Real-life fashion brands use NFTs for marketing in virtual worlds like Minecraft, plus several Atari and Microsoft video games.

The fundamental value NFTs offer to bridge virtual fashion items with video games is the option to secure custody of the item for use in other games or mobile apps.

“Brands are coming up with some creative solutions because the pandemic is persistent, and fashion is something that is so close to our identities,” said Bryana Kortendick, Enjin’s VP of operations and communications. “You can snap a photo of yourself wearing your Atari-branded NFTs. You’ll also be able to wear them in video games.”

Breakout NFT star Beeple said he imagines a future where fashion NFTs could be redeemed for specific items in physical stores, especially at luxury retailers like his former client Louis Vuitton.

“You can relate NFTs to clothing in new and interesting ways,” he said. “This will be seen as the next chapter of digital art history. This is a continuation of digital art history that started decades ago, by that I mean art made on a computer and distributed through the internet.”

Fashion designers like Schirin Negahbani are already creating NFTs that represent actual clothing. Precisely because multimillion-dollar NFT sales are breaking records, spectators have been prompted to question the role speculative trading plays in this trend.

Textile designer Amber J. Dickinson says fashionable NFTs shouldn’t primarily be viewed as speculative trading opportunities. “The way I think fashion translates to the digital world is to view an NFT as a collectible piece of the garment for history,” said Dickinson, known for hand-made silk scarves and her work with Alexander McQueen. “I would only buy art as a piece that I liked. Whether digital or in the real world, I don’t take an investor’s point of view.”

There are many fashion fans who disagree with Dickinson, preferring to invest through assets like Birkin bags. They may have a different approach to NFTs. The DIGITALAX crypto fashion platform, for example, is being built with a plethora of trading features. As for Dickinson, she said she is still looking for her tribe of crypto-savvy artists on Twitter.

Posted on

10 VCs say interactivity, regulation and independent creators will reshape digital media in 2021

The digital media industry will give us plenty to talk about this year.

When we last surveyed venture capitalists about their media investments, the big topic was the impact that the pandemic would have on the industry, and on the prospects for new startups.

Obviously, the pandemic hasn’t gone away, but when asked to predict the biggest storylines for 2021, VCs pointed to themes as varied as new distribution models, new kinds of interactivity, new tools for creators, the return of advertising business models and even the role of media in a democratic society.

“We are headed toward a content universe where consumers’ power of choice grows to new heights — what premium content to consume and pay for, and how to consume it,” Javelin’s Alex Gurevich wrote. “The consumers will have the final choice! Not traditional media and content distribution companies.”

For this new survey, we heard from 10 VCs — nine who invest in media startups, plus a tenth who’s seeing plenty of media pitches and was happy to share her thoughts. We asked them about the likelihood of further industry consolidation, whether we’ll see more digital media companies take the SPAC route and of course, what they’re looking for in their next investment.

Here’s who we surveyed:

Read their full responses below.

What do you think will be the biggest trend or story in digital media in 2021?

Daniel Gulati: Defining media’s role in a democratic society. What accountability exists when an individual company’s pursuit of scale leads to the spread of disinformation? When a platform’s terms of service appears to collide with constitutional rights, who makes the call and what happens? To what extent should governments support the viability of local media organizations in the face of global competition and a rapidly changing digital landscape?

These are high stakes issues that will be front and center through the year.

Alex Gurevich: The continued disruption of content distribution models, whether that’s the debundling of cable via the plethora of SVOD services, or the way new content is released (i.e., on-demand at home versus movie theaters). We are headed toward a content universe where consumers’ power of choice grows to new heights — what premium content to consume and pay for, and how to consume it. The consumers will have the final choice! Not traditional media and content distribution companies. The pandemic has greatly accelerated this trend.

Matthew Hartman: The two largest social networks, Twitter and Facebook, removed the account of a sitting president and a set of related, follower accounts. This has fundamentally reset the media stack. This will accelerate action the government had already planned to take, including to reshape Section 230. The ripples will be felt throughout media, affecting how news is distributed through social media, what startups can use bigger platforms to grow, what the exit options are for small talent acquisitions and the fragmentation already occurring.

Second, the rise of synthetic media. Algorithmically enhanced or created media is a shift we identified at Betaworks in 2018 and in 2021 it will only increase in scale and scope. Yes, this affects deep fake detection (with companies like Sensity.AI leading the way) and other nefarious uses — but it will also start to fundamentally reshape the way media is created, from the cost of animation to the cost of writing stories, to editing and creating CGI.

Third, game streaming will continue to grow, with audiences that are starting to blow away those of regular TV. An enormous number of people tuned in last year to watch Alexandria Ocasio-Cortez play Among Us on Twitch with popular streamers (she hit 435,000 concurrent viewers at one point). And that wasn’t even close to the biggest event ever on Twitch, David Martinez, aka TheGrefg, hit 2.4 million concurrent viewers for the unveiling of his new Fortnite skin. Game publishers have finally started to understand the power of streamers not just to launch a new game, but to revive old ones, with games that groups of streamers can play together (like Among Us or Rust) soaring in popularity this past year.

Jerry Lu: The emergence of interactive media platforms outside of just gaming.

Because of their isolation due to COVID, people are yearning for social interaction and we’re seeing greater engagement across platforms like Twitch and Zoom, which make interactive communications possible. Previous iterations of media platforms were top-down broadcast, whereby companies produced content they thought consumers would like. Over the past five years, we’ve started to see a greater shift toward the long tail, whereby content comes straight from the consumer.

Gaming and esports were at the forefront of this shift from passive content viewing to interactive entertainment experiences. I believe that 2021 will be the year when we see platforms beginning to embrace interactivity as a form of audience participation, blurring the line between viewer and active participant. I’m excited at the prospect of seeing this form of interactive content consumption applied to other sectors, like education, childcare and commerce, to name a few.

Jana Messerschmidt: We will see a proliferation of products that enable content creators to build businesses outside of traditional media companies. These creators will leverage their existing brand, following and social media engagement to become entrepreneurs, building revenue streams across multiple different products.

There are a plethora of new tools for creators: for writers (Substack, Medium), personalized video shoutouts from creators (Cameo*, PearPop), new audio platforms (Clubhouse, LockerRoom) or all-in-one tools for creators that include merch, subscriptions, tipping and more (FourthWall). Now is the time for creators to be rewarded by their fans for their content creation.

Historically, the big social platforms (Facebook, Instagram, Snap*, Twitter, TikTok) have failed to create meaningful paths for their creators to monetize. They make money from advertisers and thus their resources are focused on those advertising customer demands.

  • denotes Lightspeed portfolio company

Michael Palank: If 2020 was the year every major media company either announced or grew their direct-to-consumer video/audio/gaming offering, 2021 will be the year where those offerings optimize and differentiate or die. We expect the hunger for original content to continue, but we feel the type of content will continue to diversify from both a story and IP perspective and a format perspective. It is not unthinkable that a major media company like Apple, Amazon or Disney looks to acquire Clubhouse in 2021.

As the lines between video games and filmed entertainment continue to blur we can also envision new companies popping up to take advantage of this trend. I also feel these content platforms will need to differentiate by way of better discovery and personalization.

I fully expect every major media company from Disney to Apple to Amazon to Microsoft will be looking for new and innovative ways to separate themselves from the rest of the pack in 2021.

Marlon Nichols: I think that the continued creation of streaming platforms from content creators/owners (e.g., Disney+, HBO Max, etc.) will force downward subscription pricing adjustments across the board and streaming platforms will need to revisit advertising as a revenue stream. That said, we know that watching ads on a paid platform won’t fly with consumers so I believe we’ll see contextually relevant product placement become the accepted form of brand/content collaboration going forward. I led MaC’s investment into Ryff because of this thesis.

Pär-Jörgen Pärson: Institutions and legislators will have a big effect on social media platforms. I think there will be pushes on antitrust behavior, and social networks will have to behave like media — meaning that they also need to take responsibility for the content that’s on their platform, not only from a user agreement standpoint like today but from an editorial standpoint. I think we’ll see many more editors-in-chief in this industry, as editorial becomes more and more important in our polarized world. This has the potential to change the social media platform landscape quite dramatically, and I’m not entirely sure yet on the long-term impact commercially.

M.G. Siegler: It’s sort of boring, but I wouldn’t be shocked if we see a swing back toward advertising-based models. I think there are two parts to this: First, if and when the pandemic recedes, I think a lot of traditional big advertising players like travel, will come roaring back. Second, it feels like there’s been a move away from advertising to paid subscriptions for a while now and I think these things are cyclical.

To be clear, I think both will continue to exist, I just think that after years of underindexing on paid subs, now we’re perhaps on the verge of overindexing on it … Obviously, advertising never went away, I just think it may be due for a bit of a renaissance (though I say that hoping the powers that be make those ads a better user experience — I think that’s the only way there’s not another backlash against them).

Laurel Touby: The biggest trend in digital media will be companies that don’t call themselves media companies, but that clearly draw from the business model playbook of media companies. For example: Companies that monetize their communities by giving sponsors and advertisers access to their audiences; or technology startups that sell wearable products and upsell their customers with access to premium high-value content.

Hans Tung: Contextual social networks: Video and livestreaming with the likes of TikTok and with other players like Instagram and Snap will continue to drive creativity and engagement. Clubhouse is now garnering a lot of attention as audio captures the attention of a new generation. This also creates new opportunities for established audio players like YY or Ximalaya. At the same time, apps like Clubhouse are an evolution of Snap or Twitter where influencers of all sorts gather to build a new following on new platforms.

However, one of the most interesting things we’re seeing is the emergence of contextual social networks that are focused on solving real-life problems. We see a lot more companies taking the best of audio and video experiences and experimenting with the next iteration of apps like Headspace and Calm, to solve societal issues, personal issues such as how to deal with anxiety, etc. These social networks may not scale as quickly or grab headlines like Clubhouse but they’re designed to bring people together to solve problems. We are also seeing professionalized networks such as Valence or Chief use these audio/video networks to address issues for a particular gender or underrepresented group, or apps that create virtual networking for communities.

Digital media delivered with differentiated experiences: Peloton may not immediately jump to mind as a digital-media company but they are one of the best at producing a high-value experience using extremely high-quality content that goes far beyond simple fitness or even the need for hardware. Increasingly more categories will become “Netflix-ized” where content is king and the experience is delivered through your smartphone.

As with Peloton, the experience is further enhanced with social interaction, such as leader boards, access to the best instructors, etc., which in turn expands the reach of the content. It’s a powerful loop that is driven by quality content, and the components feed off each other to make it more accessible. If you then couple it with Affirm to make it more affordable, you’ve got a flywheel on steroids. This pattern will emerge in other categories.

Consumerization of enterprise communication: Another aspect of media is communication, which we are seeing evolve in the enterprise space. It started with Slack a few years ago and Zoom more recently. Now with companies like Yak or the emergence of various conference apps, we see a higher usage frequency between companies, companies and their customers, and within the enterprise itself.

How much time are you spending looking at media startups right now?