The discussions around the latest financing round for Buzzfeed revealed, once again, that the company is still being misjudged. Here is why they’re the future of publishing.
In his latest column, David Carr writes about the uncertain future of spun-out print newspapers. At the same time, Andressen Horrowitz announces that they have invested 50 Million into Buzzfeed through a post that Chris Dixon, a partner in the firm, published on his private blog. They value the new-media firm at 850 Million dollars. If you have read any news about this, you’ve probably encountered the comparison to the price that Jeff Bezos paid for The Washington Post and how Buzzfeed’s value exceeds it by 600 Million.
The media landscape has been unraveling since the early 90s. No news here. News is, though, that so few journalist are able to report the fact that after all those years there is now a new breed of media companies that provide a plausible alternative to how media and news publishing companies have operated so far.
Technology is the backbone
For a venture capitalist, there is nominally little difference between Buzzfeed and Facebook or Twitter. They are investing into the technology capabilities of those companies, not into their editorial staff.
BuzzFeed has technology at its core. Its 100+ person tech team has created world-class systems for analytics, advertising, and content management. Engineers are 1st class citizens
There is a clear distinction here between Buzzfeed (or a Vox Media) and its predecessors. While traditional news organizations only involve themselves as much with technology as they feel necessary to accomplish their main objective (journalism), new media companies like Buzzfeed build technology that provides an abundance in scaling opportunities. That in turn makes them both profitable and susceptible to the interest of VCs and allows them, for now, to maintain an editorial stuff of 200, invest significant resources into investigative journalism and long-form reporting.
But there is more
As a media outlet, Buzzfeed is competing for the same advertising dollars as other media outlets, but they aren’t doing so with the same products. In his talk at the Guardian Media Summit a year ago, Jonah Peretti, Buzzfeed’s CEO, said that he considers display ads to be a historic mistake that soon will be corrected. While so many of us certainly can relate to the statement, I’m sure someone at Google and Yahoo will refer to how much money this “mistake” is making them. Fact is, Buzzfeed would never attempt to compromise the experience for the user by adding ads to its site. In fact, you don’t see any display advertising on the website whatsoever. Instead of charging advertisers money for displaying ads that nobody wants to see, Buzzfeed is charging advertisers for helping them to create content that both solve the communication need of the advertiser as well as ensuring that it creates value for the recipient. For Buzzfeed this means a better user experience and the luxury not to compete in a plummeting display ad market. Advertisers get a significantly better engagement on their marketing message. This way, Buzzfeed is both a media outlet as well as the advertising agency.
To round this up:
- Buzzfeed created a technology that allows them to build the product that users want
- Buzzfeed offers advertisers native advertising products by allowing them to use the same tech that their editorial stuff is using to create stories thus making the advertiser happy and themselves very profitable
- This in turn allows them to produce the kind of content that is being asked for right now
After years in which we have seen the validity of traditional media-business models erode, companies like Buzzfeed and Vox Media at least provide a viable alternative. One doesn’t have to agree fully with any of those approaches. Looking closely, one can find sufficient reason to be doubtful about the path those new companies are taking.
The core learning, on which so many in the traditional media landscape are focusing when debating Buzzfeed, is certainly not that one has to adopt listicals with funny cat photos or a subversively viral approach to formulating headlines. Those cursory observations are preventing an old industry from learning exactly what it needs to learn from those newcomers.
This is an exciting time to be involved in publishing, journalism and media. Here at Third Wave, we strongly disagree with the notion there is a lack of good content. In fact, the opposite is the case. The difference is that great content is out there, it’s just hard to find and even harder to finance. That too is not due to lack of financial resources. In the Netherlands, De Correspondent have raised 1.7 Million in a crowdfunding campaign to launch a new media entity, in Germany a less exciting project managed to raise over a Million. There are also smaller success stories such as Deca. Those projects prove that there is both money and willingness to pay for good content. Crowdfunding it itself isn’t a business model, nor should it ever be considered one. It might work for certain projects, but it won’t be enough to provide a scalable business model that will ensure the continued existence of the fourth estate.
There is a wonderful, long interview – published on Medium, of course – between Felix Salmon and Jonah Peretti (CEO of Buzzfeed). It’s personal. It provides context to understand why Peretti is able, so far, to navigate first The Huffington Post and now Buzzfeed to being such huge success in the media world.
Be of the net, not just on it.
–Emily Bell, Director of Tow Centre for Digital Journalism at Columbia J School
Buzzfeed certainly is.