Grace Blue Partnership

by Lindsay Stein

Publishers like Vice and The New York Times have increasingly encroached on agencies’ advertising and custom content businesses, but VaynerMedia did the reverse last week with its purchase of PureWow.

With business partners Steven Ross and the team at RSE Ventures, VaynerMedia CEO Gary Vaynerchuk bought the women’s lifestyle publisher as the first property in Vayner’s newly created sibling company, The Gallery.

It may be a model other agencies will follow, giving shops a new route to growth and some closer connections to consumers in the process. But don’t expect to see Young & Rubicam, for example, buy The New York Times.

“No question, this is the start of a very significant trend,” said Jay Haines, founder of Grace Blue, which created a global partnership with consultancy and mergers and acquisitions adviser SI Partners last year. Agencies have been asking more and more about how to deliver content in a faster way across multiple channels, Mr. Haines said. And what faster way than owning the publishers that disseminate the content?

The VaynerMedia PureWow deal shows “the formulation of what modern creative companies should look like,” he said.

Jesse Brody, partner at Manatt, Phelps & Phillips, said the industry should “absolutely” see these types of deals carrying on in 2017. “As publishers have been aggressively been going after business that was normally solely in the realm of the agencies and creating native ad and other branded integrations, cutting out the agency altogether, it makes sense that agencies would now react in this way,” he said.

In addition to diversifying and potentially helping agency businesses, such deals could help publishers expand content development and video capabilities quickly by borrowing from their new owners, rather than having to grow them organically, Mr. Brody added.

But not everyone agrees that agencies buying publishers will become a major trend. “I don’t think there’s going to be a lot of that going on,” said Seth Alpert, managing partner at the investment bank AdMedia Partners. “Large publishers are unaffordable,” he added.

Publishers building custom content studios from the inside out is more likely to continue because they already have writing teams in-house that they can repurpose, Mr. Alpert suggested.

“Will a relatively small agency buying a relatively small media company turn into something significant together? Who the heck knows!” he said. “But I have to believe that the [PureWow] media business was small and probably facing some headwinds and I suspect the opposite on the agency side.”

PureWow’s monthly unique visitors in October 2016 were 11.6 million, compared with 4.4 million in October 2015, according to ComScore.

Mr. Brody said the acquisition was a smart move “since it appears that this deal is only the start for VaynerMedia, who will be looking to gobble up additional media companies to allow them to create and distribute branded content that targets consumers in multiple demographic groups.”

While Andrea Redniss, senior VP at MediaLink, doesn’t see any ad shops buying “extremely large publishers” anytime soon, she still believes that agencies will keep snapping up small or medium publishing or content companies.

She said that in the case of Vanyer, PureWow already has an authentic voice and a built-in audience of millennial and younger women, which will help Vayner more easily reach consumers in that demographic.

Chris Still, chairman of Advertising M&A, a mergers and acquisitions company focused on advertising, digital and marketing services, said agency networks have owned contract publishing companies for years, citing Omnicom’s Redwood Publishing for example, but there was typically “little relationship” between media agencies in the group. “The great thing about 2017 agencies, like VaynerMedia, is that they are run by smart entrepreneurs, like Gary V., who are not constrained by convention,” he said.

So what do these deals mean for the line between advertising and editorial?

Ryan Harwood, CEO of PureWow, who has been named CEO of The Gallery, said VaynerMedia’s ad business and PureWow’s editorial content will not mix. “PureWow will not publish paid articles featuring VaynerMedia clients without marking them as sponsored,” he said.

“The true synergies of the deal were on the creative and content creation side of things, not the client side,” he added.

Mr. Vaynerchuk echoed that sentiment. “I want us to be as successful as possible in producing stories at the highest level, whether on behalf of our clients as we do at VaynerMedia or editorially as Ryan has done with PureWow, and we’ll now do with additional properties that we build or acquire within The Gallery,” he said.