Advertising: Vice Media Buys a Tech Company to Experiment With Content Distribution

ADVERTISING, journalism and technology continue to converge. The latest example: Vice Media’s acquisition of Carrot Creative, a digital agency that creates apps, websites and games for media companies and brands.

In its new home, Carrot will experiment with ways to distribute Vice’s editorial content. The agency will also focus on building digital initiatives for brands that work with Vice.

“We take our learnings as a media company and offer them to brands which are now trying to work like media companies,” said Andrew Creighton, the president of Vice Media. “It gives us an extra resource.”

A person familiar with Tuesday’s acquisition, who was not authorized to speak publicly, said the deal was valued at $15 million to $20 million in stock and cash.

Vice has long looked for ways to reinvent its business.

Vice, which began as a magazine in 1994, has since moved into video, television, advertising, music and events, among other fields. A spin through
Vice’s Brooklyn offices reveals as many studios, editing suites and lushly appointed meeting rooms as there are writers hunched over computers.

The company has grown through technology, Mr. Creighton said. “We started with desktop publishing,” he said, then “when we got into video we took advantage of the democratization of broadband and video production tools.” Two years ago, Mr. Creighton said, less than 10 percent of those who watched Vice videos were on phones. Now the number is escalating fast, and will most likely hit more than 50 percent in coming years.

“We’re growing into multiple new verticals,” said Mr. Creighton, pointing to news, fashion and sports efforts that will start next year. “We have a solid website, but we were focusing on content rather than tech, and now both go hand in hand.”

The acquisition of Carrot, said Mr. Creighton, will add to Vice’s technological capacity.

For example, Carrot has found that viewers take in and share material from either media companies or brands differently on different devices.

“The smaller the screen gets, the smaller the audience gets,” said Mike Germano, the chief executive of Carrot Creative. A smartphone has an audience of one, a tablet perhaps two and the TV many more.

He added that technology and content, brands and media companies, were no longer separate. Mr. Germano, who has worked with brands such as Ford, Jaguar and Red Bull, compares what he does to “Mutual of Omaha’s Wild Kingdom,” the animal-themed TV show that began in the 1960s.

“That was how people saw giraffes and lions for the first time, and that’s what we’re getting back to now,” he said. “When you don’t feel like you’re watching an ad, when they’re providing a service, that’s when you build a relationship with people.”

The changing nature of the industry, though, is also raising concerns. The Federal Trade Commission recently expressed concern that so-called native advertising or sponsored advertising could mislead consumers. “By presenting ads that resemble editorial content,” said Edith Ramirez, the chairwoman of the F.T.C., at a conference last week, “an advertiser risks implying, deceptively, that the information comes from a nonbiased source.”

Vice says it clearly delineates between editorial and branded content.

Such digital advertising has been on the rise as media companies look to bolster ad numbers.

Trade commission officials, citing recent surveys of online publishers, said that 73 percent offered native advertising and an additional 17 percent were considering it this year. About 41 percent of brands and one-third of advertising agencies use such methods, the officials said. (The New York Times is among the publications that will begin the practice in 2014.)

Mr. Germano noted that the proliferation of digital devices would change how people consume information, just as the Internet has changed how people buy things. And consumers, he said, can enjoy those just the same.

He cited a recent experiment in which a basketball player, Victor Oladipo, wore Google Glass to the N.B.A. draft, giving users of the website the Verge a player’s-eye view of proceedings.

“That’s not something that might make ESPN happy,” Mr. Germano said, “but it’s an example of how media is really changing.”

Amazon’s Profit Falls as It Spends Heavily on Distribution Centers

On Thursday, Amazon told investors it’s still not time for a drink.

The Internet retailer reported a 37 percent decrease in profits for the first three months of the year.

That drop was expected, and it was even a bit less than some investors had forecast, which initially helped lift the company’s shares slightly in after-hours trading. The stock eventually ended up falling about 3 percent in after-hours trading.

Amazon said its net income for the first quarter, which ended March 31, fell to $82 million, or 18 cents a share, from $130 million, or 28 cents a share, a year earlier. Revenue jumped 22 percent to $16.07 billion from $13.18 billion.

While the company’s profit was better than analysts had expected, its revenue fell slightly short. Wall Street analysts expected Amazon to report earnings of 9 cents a share and revenue of $16.16 billion, according to an average of their estimates compiled by Thomson Reuters.

Amazon previously told analysts to expect its sales to grow to between $15 billion and $16.6 billion, or somewhere from 15 to 26 percent.

“It’s more of the same from Amazon,” said Colin Sebastian, an analyst at Robert W. Baird & Company.

Mr. Sebastian added that the waves of investments that Amazon was making were unlikely to abate soon. “That’s going to be a continuing trend,” he said.

The seeming indifference of many investors to Amazon’s slim profits shows how much more effective the company has been at articulating its vision of future opportunities to Wall Street than another tech favorite, Apple.

Apple, which made a profit 116 times bigger than that of Amazon last quarter, has been plagued by investor doubts about its growth prospects, driving its stock down 33 percent over the l ast year.

Amazon’s shares are up 38 percent in that period.

Jordan Rohan, an analyst at Stifel Nicolaus, said investors had been reassured by comments from Amazon management that suggested the company was not being hurt as much by weakness in European economies as another e-commerce giant, eBay. “That’s an acknowledgment that the growth outlook for Amazon remains quite robust,” he said.

Amazon is spending heavily on fulfillment centers to speed delivery of physical goods to customers. It is also investing aggressively in data centers to expand its Amazon Web Services business, which provides start-ups and big corporate clients with computers and bandwidth they can rent as needed for their online initiatives.

Then there are the consumer devices that are becoming an increasingly important part of Amazon’s plan to deliver media electronically to customers. The company’s Kindle e-readers are now a full-blown family of tablet computers, which it sells for little or no profit, with the goal of making money over the long term by selling books, movies, music and other services.

Amazon is also developing a television set-top box that it is expected to announce in the fall, a device that could give its video services a more meaningful audience in living rooms. The company recently introduced pilot episodes for 14 original comedy and children’s television shows and is soliciting viewer feedback to determine which ones will be turned into full series.

In a conference call, Tom Szkutak, Amazon’s chief financial officer, repeated an oft-stated Amazon motto about its priorities. “We believe putting customers first is the only way to create lasting value for shareholders,” he said.