Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Vice Media: The Best Network Effect Is Still The Good Old Boy Network

Posted by Tom Foremski - January 23, 2012

Vice Media is a great success story: three friends in Montreal start publishing a magazine about tattoos and drinking and now run a media empire across 34 countries.

Vice could be worth $1 billion by the end of this year and become "the next MTV," writes Jeff Bercovici at Forbes:

...more than 800 full-time employees in 34 countries producing video, books, magazines, live events and music in partnership with some of the world's biggest companies, including Google and Time Warner. In 2011 it surpassed $100 million in revenue for the first time, according to people with knowledge of the company's finances.

For this year it's forecasting twice the revenue and 20%-plus margins. If it can hit those numbers, privately held Vice is likely worth $1 billion.

So, how did it do it? How did this new media success story happen? Did it make use of network effects in social media, such as viral videos, or nurturing passionate super-fans to spread to new audiences?

Sure, that helped a bit but it's most important network effect was tapping into the media industry's Old Boy network.

Vice Media's breakthrough began in 2007 when it teamed up with Tom Freston, the former CEO of Viacom, who brought his massive rolodex with him.

The capital for Vice's push into China -- and a comparably large one into India -- comes from a round of investment the company raised in April totaling somewhere between $50 million and $100 million. Freston was one of the investors (alongside the gigantic advertising firm WPP and the Raine Group, a media merchant bank) and has taken a leading role in setting Vice's international strategy.

"He's pretty much the best guru to have on growth into China or into India or just growth in general," says [Vice CEO Shane] Smith. Referencing The Lord of the Rings, he adds, "He's our Gandalf, guiding us through the mines of Moria or whatever."


Here's a great quote from Tom Freston, who helped build MTV, about the business opportunities on the Internet:

MTV was born at the start of a revolution, the cable revolution. Quarter after quarter more homes got cable TV, and we were kind of carried on that wave. And now it's happening again with digital-enabled television. In five years 50% of homes will have Web-enabled TVs, and you can bet in the Vice demographic it'll be even higher than that.


...

My favorite "Vice Guide" episode is CEO Shane Smith's visit to North Korea. It's a surreal experience, and very disturbing to know that human society can create such a bizarre world. This could very well be us, if our history had taken a bad turn, or as John Bradford said about a group of condemned prisoners, "there but for the grace of God go I."


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