Atlas Obscura is hoping to turn a profit before another funding round this year, at a time when the publisher faces lower valuations and more discerning investors as deal activity slows.
Atlas Obscura’s revenue more than doubled to $18 million last year, up from $8 million in 2021, Chief Executive Warren Webster said. Its travel planning business doubled its revenue year-over-year and became profitable in the fourth quarter of 2022. Its entertainment business (books, TV, movies, and podcasts) is already profitable.
But the next challenge is to make its digital publishing business profitable this year before seeking more investment. Webster declined to say how much Atlas Obscura lost last year.
“Overall, we expect to be profitable this year. That’s our plan,” Webster said. “Probably the biggest change within our business is that we’re thinking more about sustainable profitability rather than just growing revenue at all costs. I think that’s probably from driving, driving, driving the top line and not being so concerned about the bottom line Healthy corrections to the start of the day. We worked it out and made sure that every project we did and every division within the company was profitable or on the path to profitability.”
Atlas Obscura is currently searching for a new Head of Brand Partnerships and Media Director. Webster said the company is on track to be profitable in the second half of 2023 and the fourth quarter of 2022.
Atlas Obscura restructured its travel business last August to save costs by outsourcing some operations and “cutting some positions,” Webster said. He did not say how many people were laid off or how much money the moves saved the company.
A former Atlas Obscura employee who left before the layoffs told Digiday on condition of anonymity that they heard the company was having trouble raising investment. Atlas Obscura’s last funding round was a Series B in 2019, raising $20 million from investors including Airbnb, A+E Networks and venture capital firm New Atlantic Ventures.
Webster said he is currently “taking the temperature” of investors, but is holding off on the next round of funding until business and markets improve.
“We want to make sure we raise money when the business is profitable and growing organically. That’s always the best time to raise. When the market is at its best. So we take our time,” Webster said. “I think by the middle of next year, my prediction is that things will become clearer in the venture capital and funding space.”
Atlas Obscura isn’t alone in taking this approach. Many publishers are feeling the pressure to right-size their organizations, according to conversations with two media investors and a consultant. The recent wave of media layoffs also proves this point.
Data from capital market research firm Pitchbook also bears this out: In the fourth quarter of 2022, there were only five venture capital deals in the US involving publishing companies (defined as print and Internet publishing service providers, such as newspapers, magazines, and books), of which total The transaction value was only $4 million. That was down from 15 deals in the same period in 2021, 14 deals in 2020 and 13 deals in 2019. It was the lowest fourth-quarter deal count and deal value since at least 2015.
“[Private equity] Companies around the world are scrutinizing their potential investments more carefully.I think we’ll see some potential investors not committing to new investments until they see the next market performance [three to six] months,” Andrew Perlman, co-founder of venture capital firms North Equity and Recurrent Ventures, said in an email.
Sam Thompson, senior managing director at M&A advisory firm Progress Partners, called Atlas Obscura’s strategy a “cool headed” one.He says now is the time for media companies to take advantage of market slowdown “Clean up” their business before investors come back, especially companies looking for mid- to late-stage investors.
“I’m sure publishers’ CFOs are working overtime right now to restructure their businesses to be as solid, if not profitable as possible,” Thompson said.
Future funding rounds will be smaller, Perlman predicts. Right now, most companies are focused on “optimizing operations and profitability,” he said.
When it came to what kind of companies Recurrent wanted to invest in, Perlman said the company wanted “an authoritative brand in its space, a loyal and fanatical audience, diverse revenue models, and strong partnership opportunities.” The firm’s M&A strategy focuses on focuses on deals that add value to its existing verticals because it focuses on “how the market evolves,” he said.
Notably, venture capital firm Lerer Hippeau — co-founded by Ben Lerer, who sold Group Nine Media to Vox Media last year — is no longer investing in new media companies, and media is not currently a priority sector for the firm, a spokesperson said. People say. The firm has recently invested in areas such as Web3, health, data and software platforms. Lerer Hippeau’s last investment in a content production company was in 2020, when it invested in Meet Cute, a company that produces short-form audio rom-coms, according to its website.
what this means for valuation
Last week, CNBC reported that Vice News was restarting its sales process at a valuation of less than $1 billion, down from $5.7 billion in 2017. The company was founded in 2021 and instead raised $135 million from existing investors, seeking a valuation of about $3 billion as it tries to go public through a special purpose acquisition.
Vice’s drop in valuation came as no surprise to media investors interviewed by Digiday, as valuations continue to slide amid an uncertain ad market and a slowdown in the private market due to high interest rates. With low demand and low competition, the “irrational” prices people pay for businesses have returned to reality, Thompson said.
But Vice’s valuation stands in stark contrast to Axios’ sale last August to Cox Enterprises, which valued the company at $525 million, roughly five times its projected 2022 revenue of more than $100 million. However, Axios is profitable — Vice is not (although CEO Nancy Dubuc told The New York Times the company aims to break even this year).Thompson said the Axios sale and Vice’s valuation “will be used as the market [comparisons]”
Times like these — when competition is low — are also times when traditional media companies go out and buy assets to grow their businesses, Thompson said. Insider reported this week that Vox Media is seeking to raise $200 million to make that happen.