The Strategy Behind Discovery's $100M Bid for Millennials

The Hollywood Reporter

What beats investing in one millennial-focused digital media brand? How about investing in five? So goes the wisdom of Discovery Communications' $100 million bet on newly formed Group Nine Media, a consolidation of youth-friendly online publishers Thrillist, The Dodo and NowThisMedia, as well as Discovery's Seeker and SourceFed Studios. As part of a deal revealed Oct. 13, Discovery gets a 35 percent share in Group Nine, with the option of acquiring a controlling stake.

The roll-up has created a video-focused new-media company with 3.5 billion global monthly video views and more than 12 billion monthly social impressions across such platforms as Facebook and Snapchat, immediately giving it the scale that could take an independent digital startup years to build. "If you're in the business of selling advertising, scale and the ability to target play a really big role," says Ben Lerer, the Thrillist co-founder who will run Group Nine as CEO.

Read more: Discovery Invests $100M in Digital Media Group With Thrillist, NowThis

The deal puts Discovery in business with the Lerer family - Kenneth Lerer co-founded NowThis through his Lerer Hippeau Ventures, his son Ben Lerer was CEO of Thrillist and now runs Group Nine, and his daughter Izzie Lerer will continue to oversee The Dodo. But perhaps more importantly it also gives Discovery a stronger digital foothold. 

The company has made digital bets before, operating a small portfolio of YouTube channels that over the last year it has focused on creating content around science and technology under the new brand name Seeker. Meanwhile, SourceFed Studios was formed out of its acquisition of Philip DeFranco's YouTube channel. "We were in need of scale within that attractive 18-34 audience," says Discovery's chief commercial officer Paul Guyardo. "We needed more brand recognition. Seeker is a relatively new brand. And we needed additional resources to really grow our verticals. If you look at this deal, it really provides all of that and then some." 

Discovery's move follows several other traditional and new-media tie-ups. Disney put $400 million into Vice Media last year, Turner has made a bet on Mashable, and NBCUniversal made twin $200 million investments in BuzzFeed and Vox Media.

But by rolling up with other similarly minded brands, Thrillist, NowThis and others have a leg up that they might not otherwise have had. "Even being a really strong digital brand, floating out in the market on your own is scary," explains Ben Lerer. "You don't know what your next round of financing looks like. And you rarely get to be a must-buy and you're always a nice-to-have."

He notes that the there is alignment between the brands that make up Group Nine and Discovery's channels, including Animal Planet and TLC. Even so, he says the goal is to build brands that can attract audiences separate from those who already watch Discovery's TV networks. "The idea isn't to make them cookie-cutter digital version of traditional brands," he says. "Discovery could easily go and do that on their own.We're building brands that we think people want and care about. Some of them match up really nicely with Discovery properties, but the idea was to invest in something that has its own heartbeat and its own spirit and has a reason to exist beyond just checking some box." 

A sales agreement with Group Nine will allow Discovery to package linear TV and digital for advertisers, key to the company's efforts to reach a broader audience no matter where they're watching video. "No one is giving up on linear business," says Guyardo. "This deal was to lean into digital natives to attract a young audience." 

But some are skeptical whether the Group Nine pact will help Discovery as viewer habits shift. Says Pivotal analyst Brian Wieser, "This is not a panacea for investors' concerns that they're not positioned well for the modern era of premium video content development and consumption."

A version of this story first appeared in the Nov. 4 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

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