Buzzfeed’s Evolving Business Model

Morning Report: Continuing our coverage of media startups, let’s check in on Buzzfeed.

Recently we took a look at the results of “pivoting to video” at quickly-growing media companies. The results have been mixed to be generous.

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But the pursuit of a lasting, profitable model for online content companies won’t take the setback as a license to give up. Indeed, one well-known media company that we’ve written about before, Buzzfeed, recently detailed its views on the digital media market, and how the market relates to its own business.

The missive, penned by Buzzfeed’s founder and CEO Jonah Peretti, contains a good paragraph explaining what has been recently tried by media:

In recent years, digital media has endured a hype cycle promoting various contenders for the “one true business model” for the industry. Some advocated native advertising, others programmatic; some focused on integrating content with commerce, others hyped the “pivot to video” or traditional TV development models; some chased mass scale while others advocated strong subscription niches.

This is a good summation. Regarding the mass scale point, you could argue that Mashable fit into that box. The Information is doing well with the subscription model. Buzzfeed is, actually, the brand I think of first when it comes to native advertising experimentation, and I’ve written at a few places that depended on programmatic ads.

Peretti goes on to detail that Buzzfeed is going to leverage a few of those ideas at once. Which, given its size, is probably smart.

Two things stood out from his published notes that I want to highlight for us this morning. First, that Buzzfeed has grown its revenue from the major tech platforms. Notably, it has done so while managing to increase the pace of its revenue growth in dollar terms (not in terms of percentage growth). As the following chart shows, Buzzfeed added $7 million in the revenue varietal in 2015, $18 million in 2016, and $20 million in 2017. That’s more:

Secondly, that the company is dramatically changing how it approaches selling ads. Summing quickly, Buzzfeed is moving away from selling all its own advertising, and will instead drive an increasing percentage of its ad income from other sources. The letter outlines the numbers:

In 2017, about a quarter of our revenue will come from outside our direct sold advertising business. In 2018 this will grow to about one third of our revenue, and to around half of our revenue in 2019.

So Buzzfeed is managing to at once extract more income from the major tech platforms, while diversifying its ad business. That sounds, frankly, like a healthy mix.

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