What is Media for Equity and The Key Benefits?
Media for Equity, as an investment model, is a newer concept in the business market. To put it plainly, Media for Equity is an alternative investment model where companies are trading equities to media conglomerates in exchange for advertising space.
When did it appear in the business market?
The Media for Equity investment model has been in the market since the ‘90s, but it has only gained popularity in the 2000s, especially in the British, Nordic and German space.
What is the recent history of the Media for Equity investment model?
The Media for Equity investment model has been adopted by a series of successful German Startups, such as Zalando and About You. Both companies have seen tremendous growth in an otherwise short time span.
For example, Zalando saw a rise from $6 million to $1.8 billion in 4 years, while About You became a unicorn in 2 years after completing 2 Media for Equity deals.
What is the ideal market target?
To begin with, startups and scaling companies as well as internet-based startups are the ideal companies to implement and complete a Media for Equity deal. The reason behind this logic is the following:
- Startups usually have a limited budget to develop their infrastructure and they end up not having the budget nor the capabilities to run a successful marketing campaign.
- Scaling companies usually need to scale up their products/services very quickly and a wider exposure through various channels of media will provide the necessary means to do this.
- Internet based companies will target audiences that are not accustomed to Internet based activities, thus increasing the revenue.
What are the key benefits of implementing a Media for Equity deal?
There are two perspectives from which we should look at the key benefits of implementing a Media for Equity deal. There is the startups/scaleups perspective and there is the media companies perspective. From the perspective of startups/scaleups, here the key benefits of such a deal:
- Media mix
TV advertising, radio advertising, billboard advertising, print and outdoor advertising means that a Media for Equity deal will get your startup/company an exposure through all media channels available.
- Expert media planning
Media planning is included in Media for Equity deals and it is handled by the media company, which manages all aspects of the advertising including: demographic metrics, identification of target audience and fitting the message in order to get to these audiences, the right time to broadcast the advertisements, and so on. As a startup, you won’t have to worry about this aspect, especially given the fact that you will most likely lack an expertise on advertising planning.
- Discounted prices
Given the fact that media exposure is very expensive, a Media for Equity deal comes with high discounts, which a startup/scaleup can’t get if they bought just media coverage or advertising space/time.
- Adjustable advertisingThe media content is very adjustable. If it is not achieving the desired results, it can be changed until the stated goals are realised.
- Quality media
The quality of the media advertisements is usually superior as the creation of the ads is handled by a media agency that functions within a media conglomerate. Aggregate Media helped Diversify reach a target audience of 70,000 people with well-designed print media.
- Short timeline of implementation
The usual timeline of the implementation of the Media for Equity deal spans from 12 months to 24 months. If we take examples such as About You, in two years your startup can become a unicorn.
From the perspective of a media company, the key benefits are also numerous:
- Competitive advantage
One advantage of a media conglomerate offering Media for Equity deals is the competitive advantage. On an European level, there is not a lot of Media for Equity investment funds. A media company engaging in such deals would not have to worry about competition.
- Diversification of income
Media groups can diversify their sources of income by joining or creating a Media for Equity fund, a model which has been given a boost during the pandemic, when many people have tuned into TV. Media outlets can also use the Media for Equity deals as a pipeline for getting new customers.
Case study: ProSieben has executed a lot of Media for Equity deals and it has created a whole unit with the companies they built through these deals. It then bought the unit (Nucom Group) - diversifying revenue - from media to media related business models.
When it comes to using traditional media such as print, a Media for Equity deal can be a way to promote innovation. Traditional print media can be used for advertising in digital form, such as online newspapers. In a Media for Equity deal with Aggregate Media, Diversify got to 70,000 readers for one of their native articles with the help of both traditional and digital print media.
- Monetising media space
One of the most important advantages of setting up a Media for Equity investment fund is that a media conglomerate will be able to monetise its media inventory that otherwise would have not been used or monetised in an efficient way.
Media for Equity is a very good tool for media companies to enhance management of their inventory.
What you need to know?
First of all, in shorter terms, in a media for equity deal, advertising is offered instead of money. It is handled by the media conglomerate in such a way that it should reach the widest possible audience for the startup/scaleup/company to succeed and attract customers. Second of all, we have conducted a European wide research on the Media for Equity investment model.
Join us on the 27th of April at 4 pm CET/10 am EST as a panel of experts debate “The Rise of Media for Equity as an alternative investment model” and share their viewpoints on the research findings.
Whilst large TV stations in Western Europe such as ProSieben, Channel 4, Mediaset, and Media Funds such as German Media Pool have proven that the model works, "Media for Equity" still remains an untapped financial model in Eastern Europe.
Could “Media for Equity” become the new investment and revenue diversification model for startups and broadcasters in Central Eastern Europe?
Download a copy of the “The Rise of Media for Equity as an alternative investment model”