Four years ago, indie youth digital publisher Sound Alliance generated virtually no money from native advertising. Last week, its native advertising prowess was the main reason given by listed outdoor advertiser oOh Media in paying $11.05 million for 85% of the company, giving Junkee Media (the company rebranded last year) a $13 million valuation.
The sale underlines how much money there is in advertising that cuts through to millennials. In an age of ad-blockers and plummeting interest in display advertising, branded content, or “native advertising”, has been an oasis of profit for media companies, and it has fuelled the growth of those best able to latch onto it.
Critics lament a world in which freelance writers can only secure a decent return on their journalism when a corporate sponsor is happy to fund it (native advertising pays far better per-word rates), but defenders say at least native is transparent — the company doesn’t usually get a benefit unless it’s clear who has sponsored an article. Oversees, companies like BuzzFeed and Vice have built up heady valuations largely based on their ability to reach millennials and sell brands to them through such native advertising. But Junkee Media shows it’s not just American start-ups that have been able to make use of the trend.
Junkee Media publishes the eponymous Junkee, as well as music websites FasterLouder and InTheMix. All these titles carry native advertising, but its portfolio also includes two websites entirely funded by brands. Lifestyle website The Cusp is funded by Westpac, while travel website AWOL is entirely paid for by Qantas.
“Native advertising is increasing in importance every year in Australia,” Brendon Cook, the CEO of oOh Media, said in the announcement.
“This reflects trends in the US, where native advertising is growing at 17% per annum.
“The acquisition of Junkee Media was a natural next step for oOh! as it is a clear market leader and has sent the benchmark for native content engagement in a mobile and social world.”
Cook later told The Australian Financial Review the company was interested in using some of Junkee’s snappier content on its display screens “You can’t just have digital screens playing ads, you’ve got to create bespoke content,” he said.
According to PwC’s recently released Media and Entertainment Outlook, out-of-home advertising (billboards, street furniture like bus shelters, transit advertising, etc) had the strongest growth of any traditional advertising medium in 2015 (5.3%). The outdoor media company has money to spend and is putting it into content (it already owns several other youth websites, though none with the reach or brand recognition of Junkee’s stable).
“It’s a bold move,” said Ben Shepherd, the head of strategy and innovation at media agency OMD. He was the commercial director of Sound Alliance, which turned into Junkee Media, from 2010 to 2012. “The outdoor segment is buoyant at the moment with strong revenue growth, so [oOh] needs to use this extra cash flow to find future growth.”
Sound Alliance changed rapidly with the launch of Junkee three years ago. In a highly crowded field of youth-focused pop culture websites, Junkee carved out a niche through covering culture with an eye to being, as CEO Neil Ackland put it, “smart, ballsy or funny”. It grew its audience rapidly, helped along by tapping the networks of many of Australia’s best young writers. Its traffic relied on a mix of short, snappy takes on things generated elsewhere and long-form or introspective pieces, some of which were funded by advertisers. In two years native content across Junkee and other websites in the stable was responsible for half the company’s revenue. Sound Alliance changed its name to Junkee Media last year to signal the shift and offloaded some websites that didn’t easily fit into its native advertising strategy, such as gay and lesbian title SameSame (which was sold to Evo Media).
Shepherd says while the company always had fairly diversified revenue streams — it had a ticketing business, ran events and had an experiential advertising agency attached to the business — it did spot the challenges in the display advertising market and “took proactive steps to hedge against the lowering of CPMs [cost per thousand impressions, a standard way of quoting ad prices online] and reduced yield the medium faced”.
In late 2014, Junkee content director Tim Duggan said if the company hadn’t jumped on native advertising, “we probably wouldn’t be here”. While native advertising was developed oversees, no other local media company jumped into it as early or as wholeheartedly as Junkee Media. “Brands tend to be more open to experimentation on youth campaigns,” CEO Neil Ackland told Crikey in 2014. “It’s not been that difficult to get interest from brands and media agencies around what we’re doing.”
Since then, several global media companies with a focus on native content have cemented their presence in Australia. Shepherd says Junkee succeeded in crowded market through “a strong local lens and a locally focused team and board”.
“Junkee‘s model was based on the local market, not something developed in the US and ported to Australia,” he notes. “They are easier to work with than the other players in the space. Junkee wasn’t the first to do what they do but they merchandised it well and more importantly, executed well.”
Staff were briefed on the sale last week, and have been told no big changes to their day-to-day roles are expected from the sale. Junkee Media’s management team are staying on board, and the team is remaining in their current Surry Hills office in Sydney.