How to spend $70 million entertaining the under-35 crowd

Cast members of Smosh film in online publisher Defy Media's studios in Beverly Hills last year.
Cast members of Smosh film in online publisher Defy Media’s studios in Beverly Hills last year.
(Katie Falkenberg / Los Angeles Times)

Good news for people who like funny dogssexy NFL quarterbacks and innovations pertaining to macaroni and cheese.

Online publisher Defy Media, which attracts millions of young adults and teenagers to such goofy information, announced last week that it picked up $70 million from investors. And it’s planning to spend most of that on increasing content production, and for the first time, advertising itself.

“As the success grew over 2016, people got more and more bullish on the business and we got the outcome we wanted,” Defy Media President Keith Richman said about the funding, led by Wellington Management Co.

The New York City start-up, which has a significant base in Los Angeles, publishes articles and videos through online brands including Smosh and Clevver. Ads alongside the content account for about two-thirds of revenue. Licensing videos to streaming apps from companies such as Verizon and Comcast brings in the rest of the cash.

The popularity of Defy Media’s websites and social media pages have made it a fairly lucrative property, and it talked about potentially selling during the recent financing discussions.

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But other media companies like BuzzFeed, Mashable and dozens more are fighting for the same audience. Whether there's enough time in the lives of the 35-and-younger crowd to go around remains to be seen.

The company's productions generate a twofold return on investment within a year. Richman said he doesn't expect it to stay so high forever.

“We have these great brands that both consumers love and advertisers want to monetize, and the production model has been remarkably efficient,” he said. But “as we do new types of programming, we can’t build a model around stuff from the past.”

Richman said varying the types of products and creating content that will remain entertaining for years are among the ways his company can stand out. For example, Defy’s Smosh team recently held a live show and is at work on a second feature-length movie.

Next year, the company also expects “explosive growth” in its own advertising budget from what had been $0 until this year, Richman said. Through outdoor ads, video teasers and other media, Defy wants more people to become aware of what it has to offer, he said.

Santa Monica leads the way in Silicon Beach rents

Rents in tech hubs Santa Monica and Playa Vista are among the most expensive in the nation, but still well below San Francisco and Silicon Valley, according to a new report.

Average asking rents are about $61.78 per square foot in Santa Monica and $54.93 in Playa Vista, commercial real estate services firm Jones Lang La Salle said.

Compare that to $102.16 per square foot in Menlo Park, which Facebook calls home, and $84.70 in San Francisco’s Mission Bay, the eventual headquarters of transportation company Uber.

The tech industry’s demand for space cooled off over the last year, with leasing volume down almost 10%, JLL said. Contributing were several big mergers or downsizings and a slowdown in venture capital investing.

Though the pace might have eased up, the tech industry remains the biggest driver in commercial real estate growth. Only 4.6% of tech firms cut their real estate footprint over the last year, compared with a 6.5% nationwide average, according to JLL.

Internet companies warned to watch out for hidden trackers

The New York attorney general’s office has a message for websites and apps after penalizing a pair of Los Angeles companies last week: You’d better figure out what’s going on under the hood.

Prosecutors settled with toymaker Mattel Inc. for $250,000 and video game developer JumpStart for $85,000 after finding they were among companies that violated a child privacy law.

The problem was software embedded in their websites that tracked the browsing habits of children for advertising purposes — without parental consent. The case started when an investigator noticed a payday loan ad on a website designed for children while browsing from a computer used in a payday loan investigation. The website’s advertiser apparently knew the user had visited payday loan websites before.

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That’s illegal under federal policies enacted a few years ago, and the cases marked the first time a state outed violators.

The law applies only to websites meant for children because lawmakers feared allowing online tracking of them endangered their safety. But the New York prosecutors want every online service operator to pay more attention to how third parties are latching on to websites through advertising and analytics technology.

Information about visitors might be ending up in the hands of unrelated firms, with or without the knowledge of the company that actually runs the website, and that should be of concern to everyone, the attorney general’s office said. Prosecutors called for companies to more adequately vet any outside services they attach to their website and app code.

City offers up new data-rich, interactive maps

Where could you push for trees to be planted in your neighborhood? How clean are streets you frequently visit compared with others in the city? What kind of infrastructure work is happening around you?

A recently released set of online maps from the city of Los Angeles can answer such questions. The resource is part of the city's push to publicize and increasingly act on the vast amount of data it has locked up in its systems.

Whisper continues fundraising

Chat and anonymous discussion app Whisper, which says it has 30 million monthly users, is in the midst of fundraising, according to people familiar with the matter but not authorized to discuss it. Fortune adds Whisper has talked to magazine publisher Time Inc. and the ad agency WPP about investing.

Fortune also named  Los Angeles Times parent company Tronc as being in the mix, but a source close to the company said discussions are only about licensing Whisper content. A representative for Tronc, which is looking to make tech investments that can accelerate internal initiatives, declined to comment.

Elsewhere on the Web

The city of Los Angeles released a new online guide to help walk start-ups through the process of setting up shop, including how to make basic legal filings and find a location.

Snapchat introduced new ways for advertisers to pinpoint specific users, including through lists of email addresses, according to the Wall Street Journal.

Video game developer Blizzard Entertainment has lost one of its most creative minds, senior vice president Chris Metzen to retirement at 42, according to Business Insider.

In case you missed it

Some Venice residents believe the connection to Los Angeles is holding the neighborhood back and are exploring a cityhood effort that would break free from L.A. government.

Although the cars look geeky now, the driverless vehicles of the next decade won’t look anything like the clumsy agglomeration on the rooftop of Uber’s early-iteration driverless Fords

On a short ride inside a self-driving Uber, a reporter learned to stop worrying and trust the algorithm.

Coming up

What’s being billed as the world’s first conference dedicated to Snapchat is set to happen Thursday in London. Snaphappen includes talks about what it takes to gain a big following on the video-sharing app and concludes with the Ghosties, an awards ceremony.

TechDay L.A., a start-up bazaar designed to give any member of the public a quick look at dozens of up-and-coming companies, takes place Thursday at the Reef in downtown Los Angeles.

Soylent, the maker of drinks and snacks meant to replace traditional meals, plans to launch a temporary cafe in the Arts District on Thursday. Among the items available will be Coffiest, what the company calls breakfast and coffee in one bottle. The cafe will be at 2010 E. 7th St.

Twitter: @peard33


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