Why Are Corporations Buying Digital Assets?
It’s 2022, and the futuristic trends continue to emerge… Today, many firms have chosen to follow an “aggregator” business model in order to merge with and acquire (often digital) businesses that generate consistent revenue. In large part, professionals have seen these aggregators buy up ecommerce companies (like Amazon sellers).
For years, investor-backed corporations have chosen to follow this aggregation business concept. By definition: Aggregation is the act of a larger company buying up smaller entities that will (hopefully) add to that business’s overall mission.
This business model is depicted by teams like Thrasio’s–a group that acquires, maintains, and aggregates ecommerce businesses (many of which are well-known on Amazon’s marketplace).
On the other hand, similar businesses have appeared–which focus on acquiring websites that distribute informational content. Most recently, startups are being formed to purchase, operate, and grow content websites, blogs, and online portals, read more.
These teams hope that “digital demand aggregation” (as it has been named) is the future of online content for both website owners and visitors. Over the next five (plus) years, there is a chance this industry will see an increase in the quality of digital content, a boost in website valuations, and growth in online competition.
Why are Aggregators Acquiring Blogs?
Rather than turning to the nightly news or local radio station, the average person gets information from independent industry experts. This trend has driven the success of independent journalists, chefs, travel experts, and others who deliver helpful, truthful content.
By spreading reliable information, these DIY website owners are generating revenue from display advertisements, affiliate marketing, cost-per-click deals, and other income channels.
Currently, 80% of ecommerce advertisers thrive off affiliate partnerships with content websites. As ecommerce continues to thrive, there will be a consistent need to stimulate sales with online content. Furthermore, 40% of ecommerce merchants designate affiliate programs as their top acquisition channel when it comes to sales.
Most digital asset owners began by blogging about the activities in which they are experts. Whether it’s cooking, sports, travel, or something else in a given niche–professional bloggers who have opened “digital property” on the internet are now cashing-in on their passion project.
Digital asset owners and content creators use informative blogs to generate traffic, cultivate an audience, and monetize the information. When corporate aggregator firms step in, their goals are to buy well-performing digital assets. With investors at their back, aggregating companies can often offer standardized processes, larger professional teams, and bigger budgets.
“The need for high-converting traffic will increase over the next few years, as the ecommerce sector grows, and competition in ecommerce increases,” said Benjamin Schardt, the Co-Founder & Co-CEO of one digital demand aggregator startup. “We believe there is a bright future for digital demand aggregation.”
Investors Look-on as Aggregators Dig for Digital Treasure
Rather than excavating the earth or diving deep under the sea, aggregating firms are discovering digital treasure. To these corporations, the “hidden gems'' come in the form of content websites that bring in passive income. The most in-demand assets are niche content sites that make hundreds of thousands in USD each year.
If the “digital treasure map” is correct, many of the assets along the way are already profitable. Without as much worry designated to income, blog owners often have pain points that aggregators can solve. Aggregators hope their business plan acts as a solution or exit strategy for individual bloggers and small teams that have reached operational limits.
For example, if digital asset owners formed a blog as a side-business or passion project, they may reach a time when the project reaches operational limits. If this is the case, aggregators can often turn a business that started as a side-hustle into a full-time project.
When looking to acquire an individually-owned website, aggregation corporations enlist their large teams to standardize processes. These firms often bring together professionals to work on the website’s SEO plan, marketing map, content strategy, social media, website development, and advertising/sales processes.
In the end, the result should be a more profitable and efficiently-run website that sits under the aggregator’s “umbrella” of digital brands.
Digging up Content Gold
For aggregators, the “secret treasure map” starts with mining data and uncovering leads that might be “hidden gems”. Using a dedicated M&A team, these firms must conduct a due diligence effort in order to evaluate and put a price on the digital assets they’ve discovered.
By the end of this search, firms hope to provide a mutually-acceptable acquisition contract to blog owner(s). These contracts allow site owners to join the team and grow with their asset–otherwise the asset owner steps away and sells.
While investors must be satisfied, there are other considerations that aggregators must make beside profit and revenue numbers. Once the asset changes hands, the aggregator’s team must work to assess and retain a website’s “DNA”.
This procedure keeps the characteristics that make the website special, retains content and tonality that the audience finds helpful, and improves upon the more obvious drawbacks of the asset.
“We know that when we step in, the blog has already gained an organic following and invested audience. We conduct interviews with the owner to assess the content and tonality that makes the asset special,” said Schardt. “We want to keep that established base and implement our team of professionals to scale up.”
Without changing too much of the blog’s content, corporations utilize their teams to increase the asset’s value. In June 2021, one exemplary startup acquired its first asset, called reisefroh.com.
Since then, this German travel blog has undergone a substantial increase in revenue due to newly-defined processes around sales optimization, traffic stimulation, and content management, according to TreasureHunter.media.
“In the future, we also hope to use our network and portfolio of sites to find comparable synergies that end in mutual growth,” concluded Schardt.
Only time will tell if the “digital asset aggregation” concept will be truly fruitful. Yet, if aggregators are correct–the internet landscape will be changing rapidly. In the future, aggregators expect to own a solid chunk of “internet property”--putting themselves in a good position if competitive asset grabs occur.
“We have goals to grow these assets 10x in the years after acquisition,” said Schardt, whose team is in the process of onboarding new websites. “As we look forward, we intend to acquire several assets from North America, Europe, and all around the world.”