The fact that there is a public debate about the maturation of digital media is a fair sign that real change is afoot. That one of New York’s most prominent angels is branching out from his collective of founders to a mega fund is another, reasonably symbolic, clue.
To be clear, this isn’t about finality or absolutes, and we should especially not think in that fashion in a field such as digital media and its technologies – a field that is forever transforming. We should, however, consider the subject of maturity in its relative sense, in comparison to points of reference: a time, a sector, a different pace, perspectives that always evolve.
Media, as a segment, has always been unique (and fortunate) in its public relations. After all, it’s perhaps the only sector that reports on itself. The challenge then is to sift through the noise and vested interest. To help us out, we can rely on the cold, disinterested financial markets.
Here’s what we have observed:
(1) There has been venture capital consolidation, leading to fewer individual points with bigger and possibly less adventurous pools to deploy.
(2) There is an increased emphasis on revenues and earnings (as distinct from pure potential and option value), accentuated by post-IPO flagship properties that have been penalized as the operation has not kept up with the optionality.
(3) A significant portion of M&A activity has consisted of smallish “acqui-hires“ that take out the upside of willing sellers before the startup has hit its theoretical stride.
(4) Cash accumulation by some of the largest competitors continues, and sometimes the cash is even sent back to shareholders through dividends or buybacks.
(5) Many of the sector leaders have underperformed relative to analyst growth expectations in the latest reporting period.
With this backdrop, a number of predictions are in order. Think of these as New Year’s forecasts if you like, considering the season, but more truly they’re observations for the visible future.
There are two overarching themes in these assorted observations and the handful of forecasts presented: On one hand, convergence and overlap (of sectors as well as capital sources); and, on the other, a progression from an era that was arguably defined by its financial ventures to one that is more highly strategic in nature.
Seeing these parallel patterns from another angle still, we note a transition from the more or less speculative gambit to a market that is structured, calculated, and framed within a narrower band of potential outcomes. We are seeing, in short, that digital media is verging on adulthood at last.