Media capital is rapidly becoming an essential tool for both media companies and consumer brands. It allows media companies to access emerging advertisers and potential financial returns, while enabling high-growth consumer brands to scale effectively without significant upfront marketing expenditures. This approach has gained popularity over the past years, driven by a shift in the investment landscape marked by declining venture capital (VC) funding and rising digital marketing costs. A new report by MediaforGrowth (MFG), an investment firm based in London, delves into this growing trend, examining the key developments and the factors currently shaping the sector. Media capital, also known as media for equity, is a model in which media companies exchange advertising space for equity
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Media capital is rapidly becoming an essential tool for both media companies and consumer brands. It allows media companies to access emerging advertisers and potential financial returns, while enabling high-growth consumer brands to scale effectively without significant upfront marketing expenditures.
This approach has gained popularity over the past years, driven by a shift in the investment landscape marked by declining venture capital (VC) funding and rising digital marketing costs. A new report by MediaforGrowth (MFG), an investment firm based in London, delves into this growing trend, examining the key developments and the factors currently shaping the sector.
Media capital, also known as media for equity, is a model in which media companies exchange advertising space for equity stakes in consumer brands. Startups gain access to valuable advertising without the upfront cost, helping them scale faster and build brand awareness, while media companies secure stakes in young and promising businesses, diversifying their revenue streams beyond traditional ad sales.
According to the report, media capital activity has witnessed significant growth. Between 2018 and 2022, global media capital rounds rose by an impressive 85%, growing from 40 transactions to 72.
Over the past decade, 446 international brands have signed at least one media capital deal. In total, more than 1,000 brands have secured media capital, the research found.
Benefits of media capital for startups
The report also highlights several benefits to media capital. For startups, this approach allows them to accelerate brand awareness and business growth. Tryp.com, a late-seed startup, exemplified this when it secured US$3.3 million in media and venture capital (VC) just three years after its inception. The raise allowed it to expand its European footprint and strengthen its financial position.
Beyond funding, media capital also allows startups to lower customer acquisition costs and amplify reach. For example, Airtasker, an online and mobile marketplace for users to outsource everyday tasks, leveraged US$21.75 million in media capital to drive a 306% year-on-year (YoY) increase in completed tasks.
To date, over 1,000 brands have raised media capital to grow and increase brand visibility, with the largest number of completed in the e-commerce, healthcare, food and beverage, fintech, consumer electronics, and entertainment industries.
Notable brands that have raised media capital include Uber, Airbnb, Pinterest and Zalando. Fintech startups such as Bonify, a German financial planner; Paysend, a money transfer platform; Uala, an Argentinian neobank; Volopay, a provider of corporate financial services from India; and AssetVault, a UK startup providing digital legal and financial products; have also benefited from this investment model.
For investors, media capital offers a faster liquidity path. An analysis of 598 brands by MFG shows that 43 have gone public, and 135 have been acquired. On average, media capital-backed brands that got listed reached this status 12 months faster than general business-to-consumer (B2C) companies.
Benefits for media companies
For media companies, media capital offers compelling revenue opportunities. With many struggling with unsold inventory across TV, digital, print, radio and out-of-home channels, this approach allows them to invest their inventory in emerging, high-growth brands in exchange for an interest in the brands.
To pursue this opportunity, a number of media company have launched dedicated funds, with notable examples including SevenVentures (Germany) and Channel 4 Ventures (UK).
Besides media group-owned funds, independent funds also play a key role. These funds consolidate inventory from multiple media groups, offering growth-stage startups a broader range of media options. This model was pioneered by AggregateMedia in the early 2000s.
Though it is still early days for media capital, the model has already proven lucrative. According to a survey by MFG, 69% of media capital fund managers are already seeing financial returns, including portfolio valuation increases, dividends, or exit proceeds. Additionally, 56.2% reported strategic returns, such as diversification of advertiser base, and access to new markets.
Drivers of media capital
Investment activity in media capital is heavily shaped by macroeconomic trends. This shift has been particularly pronounced amid a slowdown in VC funding, resulting in fewer deals as growth-stage startups tighten their spending, especially on marketing.
Global VC funding began to slow in Q3 2023, and by the first three quarters of 2024, VC funding totaled a mere US$216.2 billion, down by nearly 80% from the US$387.6 billion secured during the same period in 2022.
At the same time, digital advertising is becoming more expensive and harder to control, with cost-per-click (CPC) rates rising across all major platforms, including Facebook, Google, and Amazon.
In 2019, the Facebook Ads CPC rate stood at US$0.45 in 2019, according to Business of Apps. By 2024, that rate had surged 40% to reach US$0.63. Similarly, on Amazon, online advertisers running ad campaigns on the platform paid US$0.81 per click in 2019, a price that surged 48% to US$1.2 in 2023.
Featured image credit: edited from freepik
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