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Axel Springer Buys Vertical Media: What Does the Deal Really Mean?

Axel Springer Buys Vertical Media: What Does the Deal Really Mean?

The news will have come to no surprise to most people in Berlin’s tech and media circles – Vertical Media, publisher of leading German-language startup blog Gründerszene and its English-language sister VentureVillage, has been looking for a buyer for some time, while Berlin-based media conglomerate Axel Springer has been looking for a way into tech journalism for even longer. Boom – it was announced yesterday that Springer will buy 90 percent of shares in Vertical Media in a deal reported by Meedia as being in the ‘low single-digit millions’.

Gründerszene has been around since 2006 when it was created as the personal blog of Lukasz Gadowski, co-founder of Facebook-esque social media platform StudiVZ, and it was reorganised in 2008 by Team Europe – which Gadowski also co-founded and where he is a partner – as a journalistic effort as a part of Vertical Media.

Together with rival Deutsche Startups, Gründerszene spent the next few years establishing itself as a source of news and information for the German-speaking startup community. When the tech scene in Berlin really started kicking off in 2010 and 2011, however, it found itself slightly behind the curve, and following the emergence of two English-language portals in Berlin – Silicon Allee and TechBerlin – and in the face of increasing internationalisation of tech media coverage, Vertical founded VentureVillage, an English language blog with a lighter tone.

The company grew with the scene, and in November 2012, Vertical Media secured €600,000 in funding led by the Augsburger Media Group PDV Inter-Media Venture. It branched out into events, organising the hard-to-pronounce networking event Spätschicht and startup conference Heureka.

Looking for a Buyer

But as some people, us included, could tell you, creating a sustainable business model based around online tech journalism is difficult, and Vertical started looking for a buyer, seemingly paring down the number of journalists at VentureVillage to make the company more streamline.

And that brings us to Axel Springer. Unusually for such a large company, the media giant can often be extremely willing to innovate and try new ideas (even if implementing them goes at a little more corporate-like pace). But it has been actively looking for a way to break into the tech space, not only in Germany but abroad, as it continues down the path it has set for itself – and which it is following to an impressive degree – of shifting to digital as much as possible.

To that end, it has also started focusing on early-stage ventures. This has led to the Axel Springer Plug and Play accelerator, as well as in-house startup incubation.

Its latest acquisition will organisationally become part of the WELT Group – Die Welt is a centre-right leaning broadsheet and compact paper – and Stephanie Caspar, its managing director, said: “In Vertical Media we are investing in a young media company that is specialised in the digital economy and associated news for and about founders.”

A Boon for the Scene

Now then, what to make of the deal. First of all, yes, Vertical Media could be construed as a competitor to Silicon Allee, especially VentureVillage. But as all of us tech journalists in Berlin know, the more noise there is, the better it is for all of us. I know many of the people at Vertical Media and I genuinely wish them well, and hope that this deal will prove a boon for the scene in Berlin.

But what will it mean for readers? Well, here’s the second admission – I spent three and a half years working for Axel Springer, first on a Second Life-inspired project called The AvaStar, then I helped set up and run a (now defunct) English version of Bild.de known as Bild.com.

For those of you perhaps new to Germany or its media, let’s just say that the Bild Zeitung – Europe’s highest selling daily newspaper – is, well, divisive. You either read it or you hate it with a passion.
The reasons for this are varied, but as a tabloid, it is often looked down upon as gutter journalism. Trust me, however, the people who work there are incredibly good at their jobs. And the people at the top know the benefits of a hands off approach when it comes to editorial.

Keeping the Spirit

So Mark Hoffman, co-founder of Vertical Media, insists. Hoffman will hold onto the other 10 percent of the companies shares, and will stay as CEO. He told me on Friday that the deal would have no bearing on the way Vertical Media is run: “Editorial teams will stay as they are, we will not be moving to Axel Springer Haus … Axel Springer is quite interested in keeping the spirit of Vertical Media and this is only possible by not forcing us to change.”

Having previously acquired a stake in Hy! Berlin, there were rumours that Axel Springer would want to split up revenue-generating activities like events from editorial operations; so perhaps Heureka and the like would in future be organised by Hy?

Again, Hoffman was unequivocal: “We will still be in charge of our own events.”

Frankly, this I can all believe. Axel Springer isn’t in the business of changing things for their own sakes; they are in the business of building things and making money. Having searched for the right vehicle for their tech aspirations for well over a year now, they believe they have found it in Vertical Media. What exactly their plans are – I would imagine they will at least look for rapid international expansion – we’ll just have to wait and see.

As one former Vertical Media employee told me: “Finally! The Berlin startup scene’s worst-kept secret of 2014 is confirmed. It’ll be interesting to see where Springer takes the brands, and indeed whether it’ll keep them all.”

Indeed. Either way, the entry – finally – of one of the big boys into Berlin’s tech and startup world will certainly shake things up, for better or for worse.

Update: A spokesman for Axel Springer said: “Vertical Media will continue to work independently. Of course, future co-operations are always possible. There have already been co-operations between some of our brands and Vertical Media in the past.”

About David Knight

David is co-founder and Editor-in-Chief of Silicon Allee. Originally from London, he has lived in Berlin for over seven years, having previously worked for news portals including Bild.de and Spiegel Online before helping to found Silicon Allee in 2011.

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