Vice Media is feeling the heat.
Former A+E Networks exec Nancy Dubuc took over the reins of Vice Media as CEO from cofounder Shane Smith in March amid a string of controversies and a rough market in the digital media industry.
According to a report from The Wall Street Journal published Wednesday, Vice Media’s revenue will be flat relative to last year at $600 to $650 million. The report also outlined the company’s dip in Comscore traffic and challenges growing its advertising business, which relies on selling advertisers sponsored content that mimics editorial articles.
In short, living up to its eye-popping $5.7 billion valuation is proving a challenge for Vice. On Thursday, Disney, which is one of Vice’s biggest backers, said that it had taken a $157 million write-down on its original $400 million investment, equivalent to a 40% decline.
Like other digital publishers, advertising has historically made up the bulk of Vice Media’s revenue, but the company’s business is split up between web publishing, a TV channel run with A+E Networks, licensing, and an advertising agency.
For the web publishing business, traffic to its websites is down and the company is reportedly considering folding several of its sites together. On the TV side, Vice’s weekly news show on HBO is winding down this year and the company is prepping a new live nightly show called “Viceland Live” for its Viceland channel. And the agency business that once contained several ad agencies is now consolidated into one umbrella organization called Virtue Worldwide.
Dubuc is trying to turn things around. Through a hiring freeze and attrition, Vice Media plans to slim down its staff by 10% to 15%, per the Journal’s sources.
“They need to rightsize their business — that is muddied by the promises that they made to investors and the promises that they didn’t deliver on to other investors,” said Ian Schafer, a former agency exec who founded ad agency Deep Focus.
Another media buyer source at a large agency suggested that the combination of the new hiring freeze, dip in traffic, and the company’s cultural reputation, had put Vice at a tipping point with advertisers.
“The bluff and hype that fueled the business has finally caught up, and now the skepticism many advertisers had is proven justified,” the buyer said. “Adults are now in the room at Vice and uncovering what many have suspected for years.”
Vice Media pushed back on the narrative that its web business is struggling.
“At a time of seismic change across the media landscape, Vice has never been better positioned to continue its remarkable growth, further cementing its status as one the most impactful and innovative youth brands worldwide,” the company’s board of directors said in a statement. “From its deep library of critically-acclaimed programming, to its diversified revenue streams and channels across digital, mobile, television, film and branded content, Vice’s audience has never been bigger, more global, more diverse or younger.”
Vice Media needs a turnaround story — particularly for advertisers
Over the past few years, Vice Media has increasingly moved into television and entertainment to diversify its revenue while also running more than a dozen web properties. In addition to running the “Viceland” cable channel, there’s also an arm of its business called Vice Studios, which makes content for networks like HBO and BBC.
Meanwhile, Vice Media’s web publishing business that turned the company into a sprawling media giant is losing some of its reach.
According to Comscore, Vice’s sites reached 27 million unique visitors in September, which is year-over-year increase from 20 million but a drop from 49.1 million in March 2016.
In addition to its own web properties, Vice Media handles ad sales for other websites that are pulled into its monthly total numbers, including Ranker, Snopes, and Metalinjection.net. With traffic from those sites included, Vice Media’s total reach hit 68.5 million monthly uniques in September, according to Comscore.
Vice Media has far more competition than a few years ago
Similar to other digital media companies like BuzzFeed, Refinery29, and Vox Media, Vice Media leaned heavily into branded content and making custom digital ads for brands that looked like editorial content.
Advertisers have since cooled on some types of branded content and publishers are revamping their businesses with more data and measurement options for advertisers.
A few years ago, Vice Media was seen as one of a handful of go-to publishers for reaching millennials. But today, marketers are spreading their ad budgets out to other channels — like influencer marketing — to reach younger consumers and are looking for solid results from their campaigns, Schafer said.
“Brands felt that Vice was a shortcut for both creative services and ad inventory to reaching what was becoming an increasingly hard to reach demo,” he said. “Vice became the default for that for a period of time and that’s when they were riding the most high.”
Now, Vice is stretched between proving to investors that it can be financially stable and keeping up with a changing advertising industry that’s dealing with major trends like in-housing, a shift towards data-driven advertising, and the growing threat of Facebook and Google.
“If you’re trying to save your company or preserve a valuation at the same time as you’re trying to be everything that advertisers want, you might find that those two things don’t meet,” Schafer said. “That’s a tough pill to swallow.”
Its agency business is one bright spot
Meanwhile, Dubuc is working to turn around Vice Media’s culture after an investigative piece from The New York Times in December looked at the company’s problematic culture. A number of women from Vice Media’s now defunct ad agency Carrot described a string of sexual misconduct at the company. Carrot has since been folded into the company’s in-house creative agency called Virtue.
The agency is one bright spot that Dubuc talked about at a board meeting, per the Wall Street Journal’s reporting. Virtue is Vice’s 12-year-old, full-service creative agency and has made both sponsored content for brands as well as providing more traditional advertising services like branding and production.
Shifting from an ad-supported business to either an agency or licensing business will be tough, according to sources.
“It’s difficult to see how Vice will sustain an ad business unless they merge with a more established player or focus on building new advertiser-friendly products,” the media buyer source said.
Schafer pointed out that Vice Media has strong investigative content in its HBO show and its written journalism, but linear programming doesn’t monetize the same way.
“I thought they had built a successful, great brand identity, but I’m not sure if they succeeded in building a really great brand.”