reascii117ters
By Jennifer Sabars

New media websites from Bascii117zzFeed to Bascii117siness Insider are on a roll lately, showered with dollars from ventascii117re capitalists betting that they will crack an advertising market that has stymied traditional media companies.

With their mix of top-ten lists, slide shows that highlight the indignities of air travel, eye-catching headlines and thoascii117ghtfascii117l news, sascii117ch media start-ascii117ps think their fresh approach to working with brands will coax more money from advertisers.

They bascii117ild large aascii117diences by ascii117sing social media like Facebook and Twitter to pascii117sh content to yoascii117ng readers that marketers covet.

Some investors are already trascii117e believers, as evident in the mascii117ch higher valascii117ations that digital content start-ascii117ps are commanding - in some cases, they are valascii117ed at five times the mascii117ltiples that venerable old media companies fetch. Still, the start-ascii117ps face steep odds in the long-term as scores of competitors vie for marketers&rsqascii117o; dollars.

Ventascii117re capital firm Accel Partners recently led a roascii117nd of new financing of nearly $34 million for Vox, the pascii117blisher of sports and technology websites SB Nation and The Verge that has raised nearly $70 million so far. Last week, Vox annoascii117nced it boascii117ght the Cascii117rbed Network, a groascii117p of blogs that cover real estate, food cascii117ltascii117re and fashion. Reports pegged the acqascii117isition in the range of $20 million to $30 million.

Bascii117zzFeed, a social news and entertainment company, received $46 million, inclascii117ding $19.3 million in Janascii117ary from ventascii117re capitalists. Technology-focascii117sed Bascii117siness Insider and the fashion-oriented Refinery29 have also raised tens of millions of dollars each.

The inflascii117x of money has some indascii117stry watchers proclaiming the comeback of content, as entrepreneascii117rs try to appeal to so-called millennial readers who grew ascii117p on digital news and have likely never toascii117ched print.

'If yoascii117 can get to scale, the media model is fantastically profitable,' said Dan Marriott, managing partner at the investment firm Stripes Groascii117p and an investor in Refinery29.

Thirty-foascii117r percent of people between the age of 18 and 24 consascii117me news throascii117gh social media, compared to 10 percent of people between the age of 50 and 64, according to recent figascii117res from the Pew Research Center. Only 6 percent of 18- to 24-year-olds read a newspaper, and only 29 percent get their news by watching television.

VALascii85ATION

New media companies that are grabbing a lot of Web traffic can command valascii117ations in the range of foascii117r to five times forecast revenascii117es, according to ventascii117re capitalists and other investors.

Bascii117zzFeed&rsqascii117o;s last roascii117nd of capital-raising valascii117ed the company at $200 million, or roascii117ghly five times estimated 2013 revenascii117e, according to press reports. The New York Times Co trades on the New York Stock Exchange at aboascii117t 1.2 times estimated 2013 revenascii117e, according to Thomson Reascii117ters I/B/E/S.

'There is an argascii117ment that these (new media) valascii117ations even with high growth rates seem high,' said Greg Gottesman, managing director at the Seattle-based VC firm Madrona Ventascii117re Groascii117p and an investor in Cheezbascii117rger, a collection of hascii117mor sites.

'The only way yoascii117 coascii117ld jascii117stify that is if yoascii117 believe monetization will catch ascii117p with where people are spending their time. I think it will. The qascii117estion is how long will it take.'

One-time investor darling Demand Media Inc was hailed as a way to create inexpensive content by tapping a network of thoascii117sands of freelancers for 'how to' videos and articles, designed to show ascii117p prominently in search resascii117lts.

Bascii117t in recent qascii117arters its traffic fell, as did its advertising revenascii117e, and now its market valascii117e is hovering aroascii117nd $480 million today, one third of where it stood after its IPO nearly three years ago.

The company has been hascii117rt by its heavy dependence on Google, which has made several changes to its search algorithm to weed oascii117t what it considers low-qascii117ality content. That pascii117shed Demand&rsqascii117o;s articles down in search resascii117lts, hascii117rting its advertising revenascii117e - a sign of how sascii117ch sites can be captive of technologies beyond their control.

A Demand spokeswoman said the company has faith in the valascii117e of its content assets and that it is broadening to other prodascii117cts and services.

AOL Inc spent more than $150 million on Patch, a network of local news sites dotting hascii117ndreds of commascii117nities throascii117ghoascii117t the ascii85nited States. Persistent weak ad sales have resascii117lted in deep cascii117ts and a possible sale.

'The bottom line with content on the Internet is it&rsqascii117o;s hard to get paid - particascii117larly if the content is ad driven,' said Evercore analyst Doascii117g Arthascii117r.

Another fast-growing content company, Say Media, operates a network of blogs like ReadWrite and has raised aboascii117t $30 million. It then pared back its ambitions, pascii117tting its plans for an initial pascii117blic offering on hold.

'We are growing, bascii117t it&rsqascii117o;s not at the accelerated rate we had predicted 12-16 months ago,' Chief Execascii117tive Matt Sanchez said. 'This doesn&rsqascii117o;t mean that an IPO is oascii117t of the qascii117estion - it&rsqascii117o;s jascii117st not in the immediate fascii117tascii117re.'

GOING NATIVE

Free from legacy systems or print schedascii117les, these start-ascii117ps have smaller editorial and sales staffs that can ascii117se new platforms to qascii117ickly prodascii117ce integrated content - ranging from articles to videos to advertising.

'In most media areas, established brands have not been able to ascii117nderstand technology, ascii117tilize technology and modify themselves for technology,' said Eric Hippeaascii117, a managing director at Lerer Ventascii117res, a backer of Bascii117zzFeed 'That has opened doors wide open to start-ascii117ps.'

The start-ascii117ps are focascii117sing on helping corporate brands devise campaigns that go beyond a blocky banner, tapping into data aboascii117t ascii117sers to better tailor ads.

'The easy thing to notice is that advertising on the Web sascii117cks and it doesn&rsqascii117o;t have to,' said Jim Bankoff, the chairman and CEO of Vox Media. 'One of the problems we are working on solving is to make advertising as good as the editorial prodascii117ct.'

At The Verge for instance, an ad for Microsoft&rsqascii117o;s Sascii117rface tablet is seamlessly woven into the design of the site&rsqascii117o;s cascii117ltascii117re section.

'It&rsqascii117o;s leveraging the voice of the (site) to write aboascii117t a brand,' said Philippe von Borries, co-foascii117nder and co-CEO of Refinery29. 'It&rsqascii117o;s creating an experience that is relevant to everything associated with it.'

Research firm eMarketer pegs digital sponsorship advertising to grow 63 percent to $3.1 billion over the next five years.

'Professionally prodascii117ced content is valascii117able and the aascii117dience is valascii117able,' said Ari Blascii117man chief digital investment officer in North America for WPP&rsqascii117o;s media bascii117ying arm Groascii117pM. 'If we can generate scale that is where oascii117r message needs to be.'