April 14, 2024

Is digital media a viable opportunity for family offices?

pe investing in mediape investing in media

The digital media landscape has revolutionised the way we consume information and entertainment. With the rise of social media platforms, streaming services, and mobile devices, the way we interact with media has changed significantly over the past few years.

This shift in media consumption behaviour has created a new avenue of opportunity for fund managers and family offices to invest in digital media, and for private equity investors to take a closer look at the potential of this industry.

Data – the new oil

One of the most significant factors driving the digital media landscape’s growth is the sheer volume of data generated by digital platforms. With each click, search, and interaction, users generate valuable data that can be used to better understand consumer behaviour and preferences.

This data is essential to businesses of all sizes, and many companies are willing to pay a premium for it. Fund managers and family offices have recognized the value of this data and are increasingly investing in companies that collect and analyse it.

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Internet access – a human right

Another factor driving the digital media landscape’s growth is the increasing number of people accessing the internet. In many parts of the world, access to the internet has become a basic human right, and governments and private companies alike are investing heavily in infrastructure to connect more people to the internet. As more people come online, the potential audience for digital media continues to grow, presenting even more opportunities for investors.

Growing and driving growth

Social media platforms, in particular, have become a major force in the digital media landscape. Platforms like Facebook, Instagram, and Twitter have millions of active users and generate billions of dollars in revenue each year. These platforms offer a unique opportunity for fund managers and family offices to invest in companies that can leverage the power of social media to reach a massive audience.

One example of a company that has successfully leveraged social media is TikTok. The video-sharing app has quickly become one of the most popular social media platforms in the world, with over 1 billion active users. The platform’s algorithm-based approach to content delivery has made it particularly attractive to advertisers, who can use the platform to reach a highly engaged and diverse audience. In 2020, TikTok generated over $2 billion in revenue, and its parent company, ByteDance, was valued at over $100 billion.

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Previously a no-go area

Private equity investors, in particular, need to take a closer look at digital media investments. Historically, private equity investors have been hesitant to invest in the media industry due to its volatility and the rapidly changing nature of the industry. However, the digital media landscape offers a more stable and predictable investment opportunity, with many companies generating significant revenue and growth.

Investing in media

Investing in digital media can provide fund managers and family offices with several benefits. For example, companies that operate in the digital media space tend to have a lower overhead cost compared to traditional media companies, which can lead to higher profit margins. Additionally, digital media companies tend to be more agile and adaptable, allowing them to pivot quickly to meet changing consumer demands and industry trends.

Areas with potential

One area where private equity investors can find opportunities is in the streaming media industry. Streaming services like Netflix, Amazon Prime Video, and Disney+ have experienced explosive growth in recent years, with millions of subscribers around the world. These platforms offer a unique opportunity for private equity investors to invest in companies that can deliver high-quality content to a massive audience.

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Another area where private equity investors can find opportunities is in the advertising technology or “ad-tech” industry. Ad-tech companies help businesses deliver targeted ads to consumers across a range of digital platforms. With the increasing importance of data in advertising, ad-tech companies have become critical to many businesses’ success. Private equity investors can invest in ad-tech companies that are developing new technologies to better target and deliver ads to consumers.

What are the risks?

However, as with any investment opportunity, there are risks associated with investing in digital media. The industry is rapidly evolving, and companies that were once dominant can quickly become irrelevant. Additionally, the industry is highly competitive, with new companies emerging all the time. Therefore, fund managers and family offices need to do their due diligence and carefully evaluate potential investment opportunities to mitigate these risks.

Final thoughts

The digital media landscape presents a viable opportunity for fund managers and family offices, as well as private equity investors. 

The industry’s growth has been driven by the increasing volume of data generated by digital platforms, the growing number of people accessing the internet, and the popularity of social media platforms. Private equity investors, in particular, should take a closer look at digital media investments, particularly in the streaming media and ad tech industries. 

With the right investment strategy, the digital media landscape has the potential to deliver significant returns for investors.

By Shishir Baxi

Shishir Baxi is Dubai-based senior communications and marketing professional. He is a Director of Business Development in a consultancy. He has set up two full-service communications agencies, working with brands across many industries with over twenty years of experience working in multiple regions, including Europe, Africa, and India.

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