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Vice Media cranks up news operations

Scott Martin
USA TODAY
Shane Smith with rebel fighters in Benghazi, Libya, after disembarking the fishing vessel Thaleel, that sailed between Misrata and Benghazi.

SAN FRANCISCO — What do military drones in Pakistan, arms expositions in Jordan and a naked beer-drinking man in Brooklyn have in common? They are all part of the go-anywhere storytelling style of Vice Media.

Vice's unvarnished view of the world may be the voice of a new generation. The Brooklyn-based company's edgy brand of journalism is scoring with Generation Y. Vice has blasted off from scrappy origins as a culture zine out of Canada to an online juggernaut of provocative media whose coverage spans the world's affairs.

Vice eschews traditional broadcast news for behind-the-scenes storytelling, offering an alternative to the likes of CNN. Vice reporters are "one of us" and sometimes what they report really "punches you in the stomach," says Tom Freston, a former Viacom and MTV executive who is an investor and informal adviser to Vice.

Now, Vice is boosting its operations. The publisher is building a Venice Beach, Calif., editorial bureau and is staking out San Francisco, focusing on new video production studios. That adds to its growing network of 34 bureaus worldwide.

Expansion at Vice comes as cash-strapped traditional publishers struggle with reinvention in the digital era and scores of well-funded online media start-ups emerge.

In October, Vox Media landed $40 million in funding from Silicon Valley venture firm Accel Partners to expand video efforts at its Web destinations The Verge, SB Nation and Polygon. Internet traffic-focused BuzzFeed this year attracted $19 million in funding, while Henry Blodget's Business Insider took in $5 million and is rumored for sale at $100 million.

"These are audience-building machines," says Rich LeFurgy, principal at online ad consultancy Archer Advisors.

Rupert Murdoch's 21st Century Fox in August injected $70 million into Vice, swelling the wealth of co-founder and CEO Shane Smith, 44, worth a reported $400 million on a $1.4 billion company valuation.

"Our audience is actually saying make more news," Smith says. "We tell stories that a lot of other people don't tell, and we tell them in a different way. That's what's really been resonating with our audience. So we're going to double down."

The publisher is adding "dozens" of new correspondents, hosts, producers and editors to build out a new Vice.com News section and a Vice News YouTube channel.

Vice, which states it is profitable but does not disclose figures, hauled in more than $175 million in revenue in 2012 and is on track to surpass that figure, according to unnamed sources who were not authorized to speak on behalf of the company.

Audience attractions

In the past year, Vice has made huge Internet traffic gains. Monthly unique Internet visitors to Vice have tripled to about 7.5 million, according to measurement firm comScore. Likewise, BuzzFeed has nearly doubled to 22.6 million monthly unique visitors. Vox Media's tech-focused Web site The Verge has more than doubled, to about 7.2 million.

Vice also operates a network of vertical interest sites such as Noisey -- which covers music, creates events and produces music videos in another line item of income -- that the publisher says amount to millions more viewers. Sometimes dubbed Vice's far-flung media empire spans books, its magazine, an HBO series and foreign television.

Video has been a big focus from Vice, Vox and others. Vice counts 4.8 million subscribers across its various YouTube channels. Smith, a star of its videos, personifies Vice's bold attitude. When Vice reached 2 million YouTube subscribers, Smith made good on a promise to go to work naked — sporting just tattoos, a cod piece and a beer.

"Vice is very much built on bad boy content. It's very edgy stuff from war zones, sex, drugs and violence," says Altimeter Group media analyst Rebecca Lieb.

Despite that image, Vice co-founders Smith and Suroosh Alvi, also 44, have stayed focused on their core belief: to tell stories that others don't tell, often with a personal perspective, and to serve the under served. And they are tackling issues such as the environment and foreign affairs that they say appeal to younger audiences.

Alvi took a recent trip to Pakistan to cover how U.S. drones have affected civilians there. He said there is a lot of preparation involved in getting set up with local contacts and there's always an element of danger. "Otherwise, you end up doing the story everyone else is doing and you're standing in that safe compound ... and you're not actually seeing what's really going on," he says.

Vice's mix of stories can also range from raunchy to ridiculous topics. -- a NSFW (Not Safe for Work) tabbed section of stories makes that clear.But Documentary pieces like its "The Real Walter White," a real-life notable methamphetamine cook by the same name as the star character in Breaking Bad, make it clear Vice knows how to tap into a media sensation. In one week, the video documentary scored 2.7 million views on YouTube.

Vox's The Verge knows how to grab audiences as well. Its editor of The Verge, the charismatic Joshua Topolsky, has made appearances on Late Night with Jimmy Fallon to talk tech and trade punchlines like old buds.

The Verge, too, puts out in-depth videos. The publisher also pushes long-form investigative stories online at a time when many publishers are obsessed with Internet traffic and story quantities. The Verge puts out high-quality video stories at lower costs than big broadcast news outlets, says Accel Ventures' Andrew Braccia, who sits on Vox's board.

Formed in 2011, Vox has "figured out how to speak to a new generation" as well as "abandoned the traditions of the traditional media outlets," Braccia says. "It has come out of nowhere to become one of the biggest media properties in the world."

Advertising questions

While Vox and Vice offer a smorgasbord of stories and videos, some with an evergreen shelf life, both also take a different approach to advertising from media giants of the past.

Vice and Vox make money from producing premium advertisements. Industry analysts call these sponsored units, or native ads, because of the way they are mingled with other media. Vice has an in-house advertising production agency in deals with Intel, Ray-Ban and North Face for partnership videos. Vice has tapped into an elusive 18- to 34-year-old audience that these brands want to reach with a similar look and feel to the publisher's media in their sponsored videos.

But Vice's advertisers may be limited to those unworried about adjacency issues of appearing next to a potty mouth story.

"Vice is pretty out there for a lot of advertisers," Lieb says. "While it does attract a very valuable demographic, it does so for somewhat prurient reasons."

Vox has likewise launched an inside unit to offer advertising services. These premium ads produced by Vice and Vox are the type that appeal to brand advertisers who have grown weary of traditional online ads that people try best to ignore. They also make journalism ethic wonks edgy over the thinning walls between advertising and editorial.

The FTC this month held a workshop on native advertising to examine the blending of advertisements within news, entertainment and other digital media, in the interest of heading off misleading advertising practices.

But some say that how publishers work with the Internet advertising business is fast changing. "Media companies will become not only story tellers with their audience but will enable brands with their tools to tell stories to their audience," says Accel's Braccia. "The most successful brands in the future will understand how to build that relationship."

Advertisers are biting for these premium ads. Sponsorship ad spending is forecast to grow 24% to $1.9 billion in 2013, according to eMarketer.

"The main thing that's really interesting about these properties is they have a tone and voice that speaks to these audiences that advertisers want to buy," says Archer's LeFurgy of interest in the new native ad units produced by publishers.

The New York Times in the next couple of months plans to offer a new native advertising platform in house for advertisers. Including a full content studio to service advertisers, The Times will offer analytics and other tools to serve up new ad forms.

The Times wants to offer high-quality native ads from its advertising unit that it says will be produced separately from editorial and distinctly labeled. For good reason: The Times reported shrinking digital revenue in its most recent quarter, down 3.4% from a year ago.

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