More money moves to new media industry

Hot new media sectors show no signs of cooling as corporate investors, including much of the old media establishment, move to beef up acquisitions and investments in such areas as digital advertising, social networking and online video.

Just last week, NBC parent company General Electric unveiled plans for a $250 million fund, one of the largest dedicated investment vehicles to new media. The fund will invest in strategically compatible media and technology companies, with a focus on advertising services, digital content and the wireless industry. NBC Universal Inc. and the GE Media, Communications and Entertainment group will co-manage investments, which will range from $3 million to $15 million.

The fund has already disclosed its first investment, a $3 million stake in Adify, a San Bruno, Calif.-based startup that develops technology for serving ads online. GE’s infusion in Adify is part of a $19 venture financing round that also includes Venrock Associates and U.S. Venture Partners.

GE’s fund announcement comes amid a boom for early and expansion stage investment in digital media startups, with a number of companies securing funding rounds this year of more than $50 million. Some notable venture high-flyers include Amp’d Mobile, a mobile entertainment service that raised $108 million in March; Brightcove, a developer of technology for distributing television programming online raised a $60 million round in January; and HowStuffWorks, an online publisher of educational articles, raised $75 million in February, according to Thomson Financial (publisher of PE Week).

Media companies aren’t the only players investing in high-growth new media assets.

Cisco Systems, for example, has been an active acquirer lately as it seeks to capitalize on surging Internet video consumption and the rise of online social networking. This year, the San Jose, Calif.-based company has already purchased assets of Utah Street Networks, the operator of venture-backed social networking site and social networking software developer Five Across.

In a keynote speech at last week’s National Venture Capital Association annual conference in Washington, D.C., Charles Giancarlo, senior vice president and chief development officer at Cisco, called video “perhaps the biggest opportunity on the Net overall.” He also noted that unlike past period of innovation, today’s changes in the media landscape are largely driven by end users.

“It had been the case that technology had been driven mostly by the IT industry,” Giancarlo said. “Today the technology is being driven by consumers.”

For traditional media companies, however, the online investment push is largely a defensive strategy. With video accounting for an ever-growing share of Internet traffic, broadcasters and film studios are investing in technologies to curtail rampant piracy.

“It’s like whack-a-mole,” says Tom Blaisdell, a general partner at DCM, which led a $10 million round earlier this year in South Korean online video site Pandora T.V.

The film industry is bullish on prospects for image filtering technology to detect piracy, says Fritz Attaway, executive vice president at the Motion Picture Association of America, during a panel discussion on new media investing at the NVCA conference. But content owners aren’t solely focused on going after rogue sites, Attaway adds, as he notes that video producers are also adding more ways to let people access their online content legally.

As younger generations consume an ever-greater share of video and user-generated content on the Internet, broadcasters, publishers and film studios are also seeking ways to generate more ad and sales revenue from digital content.

“The trend for this year is going to be the experimentation around what that monetization is going to look like,” says Mike Marquez, senior vice president of strategy and corporate development at CBS Interactive.