Michael Wolff

USA TODAY

Not too long ago, a senior figure at BuzzFeed told me at a private lunch that although BuzzFeed was going strong, everybody else in digital media was screwed. Shane Smith, the CEO of Vice Media, in Scotland last week at the Edinburgh International Television Festival, predicted an apocalyptic wave of digital media consolidation that would help Vice while it hurt everyone else.

Not dissimilarly, Nick Denton, whose Gawker Media was forced into bankruptcy and a sale after sustaining a $140 million privacy judgment, told me the silver lining for him was that he knew it was time to get out, and his employees would have fought to prevent him from selling the company — but now they had no choice. Gawker Media was sold this month to Univision for $135 million.

Gawker sold to Univision for $135M in bankruptcy auction

We are, all this might argue, looking at a last-man-standing period in digital media. Unlike in most roiled industries facing oversupply and rising costs, where the last man will be the largest company with the least amount of debt, in digital media — still, after 20 years, without any precise way to judge a winner — it is more about who has the best argument for why they should be a winner. It is more politics than business.

Let’s be more precise. There are two clear winners in digital media, Google and Facebook, and their imperial success has largely reduced everybody else to a vassal state, living off their patronage and goodwill. This duopoly has forced the cost of advertising down and the price of traffic up, meaning, for everybody else in the advertising and traffic business, prospects shrink.

True, there are other gambits. You can build a competing platform like Snapchat offering a different sort of social media approach and functionality (on the other hand, that turns out not to have worked so well for Twitter). Or there’s Verizon, consolidating AOL and Yahoo, the few big traffic pools outside Google and Facebook, hoping to profitably manage them with extreme cost efficiencies. Or recently, there is the rising example of CNN, able to leverage the content it profitably produces on a television platform into a digital brand extension, making it the largest online news provider and probably the most profitable.

For everybody else in digital media needing traffic and ads to support content production and supply profits, it’s a colder and colder world.

Against that background, BuzzFeed announced last week that it was reorganizing itself into two more or less stand-alone units, an entertainment side and a news side. BuzzFeed did not announce this as a defensive move. It tried, albeit sheepishly, to pass this off as new and bigger and better. CNN’s Dylan Byers, who has in recent months questioned BuzzFeed’s commitment to the low-CPM news business, found this reorganization to be another expression of corporate ambivalence about news. BuzzFeed heartily protested.

BuzzFeed to create two business units to focus on video

This is often a feature of digital media strategies: They are unclear because they are a series of hedges against the unknown. BuzzFeed has raised considerable capital, much of it from traditional media companies. BuzzFeed would like to be bought by one of those companies, which each, in its way, supplies the capital that allows BuzzFeed to argue it should be bought for a premium amount. News was once an argument about giving substance to BuzzFeed’sinsubstantial content. As the focus has shifted to video, entertainment content seems like the better argument.

Rieder: BuzzFeed a burgeoning journalistic force

As it happens, entertainment in this context is something of a misnomer. A good part of BuzzFeed’s revenue does not come from entertaining people or from being an entertainment brand, but from acting as an advertising agency for digital clients. But you wouldn’t, in your last-man-standing argument, call it that, because service companies are valued at a lower rate than digital businesses.

Vice tells a story that promotes it beyond digital media itself. It is some kind of supercharged media of the future — pan media with its cable channel brand extension, no matter how unsuccessful. Like BuzzFeed, Vice derives significant revenue from its work as an advertising agency rather than as a media company. It is perhaps one lesson, a central one, emerging from this stage of digital media: You can’t really hope to make your money from it. That is, it’s easier to collect fees from corporate clients than to build a valuable audience. (Curiously, the corporate clients pay you because they think you know how to build a valuable audience.)

Vice, like BuzzFeed, has lots of money in the bank, also supplied by traditional media companies. The Wall Street Journalspeculated last week that Disney was a likely buyer — an argument that might seem harder to make than for Disney acquisitions such as Pixar or Marvel that come with franchise characters.

Gawker, curiously, has been the one digital media company that actually made money in a simple media model: content that attracted both audience and advertisers. But that’s also a cautionary tale, because Gawker’s famous audacity or calumny that drew that audience also drew the lawsuit that forced its sale. Perhaps an even greater warning to other digital media companies, Gawker, at the height of the market — probably last fall, when Business Insider was sold for about 10 times its revenue — might have been worth as much as $400 million, instead of $135 million. Even though its value had dramatically fallen and its methods put it out of business, the argument this past week by many digital journalists was that it was, nevertheless, a great success. “Elements of its tone, style, sensibility, essential business model and its work flow have colonized just about every other media company,” The New York Times declared admiringly about Gawker’s otherwise failed business.

Rieder: The downside of Gawker.com's death

Digital media remains not just a tricky proposition but a largely theoretical one. Nobody really knows what it is or how it succeeds. It’s a dialectic, an argument about future possibilities. The goal, in some sense, is not even to finance the business but to finance the argument. Or at least not to go broke while you’re arguing.