Compounding this downturn, the industry-wide slowdown in digital advertising spend last year further complicated the situation.
In his 2022 shareholders letter, O’Shaughnessy addressed the situation.
“Leaf Group, our collection of media and commerce brands acquired in 2021, has struggled. Those struggles accelerated as 2022 progressed,” he wrote. “In short, Leaf has underperformed our expectations and we overpaid. I screwed this one up.
“To make matters worse, we’re not out of the woods yet,” he continued. “Trends around advertising were not favorable as we exited 2022 and Society6 continued to see depressed demand and inflationary pressures. As a result, Leaf Group incurred substantial losses in 2022 which we expect to continue into 2023.”
Financial challenges persist for publishers
Leaf Group is by no means alone in its commercial straits, as the media industry has broadly resorted to layoffs, closures and cost-savings to cope with a depressed climate for digital advertising.
The fortunes of its art marketplaces followed a trajectory similar to other industries, such as the technology sector, that saw demand spike during lockdown only to normalize afterward.
While its diversified business model shielded Leaf Group from some risk, in this case, it also exposed the company to two parallel downturns: the decrease in lockdown spending and the drop in advertising demand.
Graham Holdings Group now finds itself in a position similar to that of Vox Media and Recurrent Ventures, which both acquired publishers during the pandemic only to reevaluate their value in a recessionary market.
Unlike Vox Media and Recurrent Ventures, which this week spun off NowThis and Saveur, respectively, Graham Holdings Company remains committed to Leaf Group and aims to shepherd it through this downturn, according to Mayfield.
“The team at Leaf Group will continue to work with Graham Holdings’ leadership to grow the business and drive results,” Mayfield said.
[ad_2]
Source link
