BuzzFeed, the news and entertainment website, announced on Thursday that it raised $19.3m in a fourth round of funding – while nearly all of its $15.5m third round, raised last year, is still sitting in the bank.
The site, which does not make public financial statements but is reported to have had revenues of roughly $20m in 2012, had a number of profitable months last year, according to a spokeswoman. But its founder and CEO, Jonah Peretti, says BuzzFeed's principal aim right now is not profitability. "We accelerated our investment and our goal right now is growth and to build a really big company," he told me on Thursday.
James McQuivey, a media analyst at Forrester Research and the author of Digital Disruption, described BuzzFeed's strategy as partially a generational one. "They're in the mindset of these media companies that are trying to appeal to 20-year-olds with the future of media, while still trying to maintain the admiration of people in their 30s and 40s," he said. He said that BuzzFeed is part of a wave: "When you're looking at Mashable and BuzzFeed, you're looking at clones of each other – frivolity of some types of content and seriousness of others, and advertorial that previous generations of media companies would have considered gauche."
That advertorial – advertising content that looks like editorial – is actually the source of BuzzFeed's financial progress, according to Peretti.
Peretti attributed nearly all the company's revenues to its social advertising strategy, which centers around "social advertising" to make ads shareable and working closely with its advertisers in a way that media companies have not been accustomed to. Peretti's long-time and open disdain for an old stalwart of media advertising – the banner ad, blinking loudly above editorial content – is almost palpable.
He's not the only one. Emily Bell, director of Columbia University's Tow Center for Digital Journalism, says BuzzFeed's experiments with advertising strategy are part of a pragmatic movement. "People have to try new things because the idea of selling a decent rate of CPM [cost of a thousand page views], banner and block ads is not a good business to be in. We need new ad models, and the two approaches that are getting the most attention are social advertising and advertiser-funded content. As a journalist you always feel slightly queasy when you can't see the defining line between the editorial and the advertising – but at the same time you have to move away from the old model."
Peretti takes it further. He counts advertising reform as one of BuzzFeed's goals. "We work with brands to help them speak the language of the web," he said, adding: "I think there's an opportunity to create a golden age of advertising, like another Mad Men age of advertising, where people are really creative and take it seriously."
All media advertising is about selling real estate, but BuzzFeed's differs by custom-designing the parcels and sometimes letting the brands move into the house for a short stay. Among BuzzFeed's social advertising gambits were creating a slideshow of "the 20 coolest hybrid animals" for Toyota's Prius, a hybrid vehicle, as well as a "Deck the Web" feature for Old Navy that allowed users to decorate the website and others with Christmas decorations. Another ad campaign, for General Electric, made the BuzzFeed site a kind of time machine where users could pick a decade and see what BuzzFeed's content would look like in that decade. BuzzFeed also works with representatives at Twitter and Facebook to push sponsored tweets so that advertisers get to ride on the coattails of BuzzFeed's social media reach.
Peretti seems to relish the idea of becoming a kind of internet sherpa for corporate brands.
"The biggest source of revenue [for BuzzFeed] is brands becoming publishers," Peretti said. "They're using BuzzFeed's audience, reach, technology as a way to manage their social advertising campaigns. Sometimes it's an image list, or a video, or a quiz. It's making engaging content, testing it and optimizing it for sharing. It's basically moving past the era where advertisers can fake it and actually create something people will engage with."
Peretti notes that BuzzFeed's use of advertising amid content replicates what users of social media, like Facebook, see: sponsored posts amid news updates amid cat pictures.
For old-media veterans, this approach to the warm embrace of advertising still feels like heresy. "I think it's a conflict for prior generations of media professionals," said Forrester's McQuivey. "These [new] media companies don't even see as a conflict. They're not doing it with any concern over ethics and what's the right way to combine the two. They're looking at what the reader wants – does the reader want content in this way. I think the next generation doesn't care one whit and we [the old generation] just have to get over ourselves and accept it."
McQuivey says that despite the nose-holding of many old media companies, when he visits the sites of many old-line newspapers he says they have marched in the same direction. "I do think old media should adopt this," he said.
It has escaped no one's notice in the media world (and almost no one's resentment) that investors are throwing money at BuzzFeed – a total to date of $46m. "What [BuzzFeed] is experiencing at the moment is not the universal experience," said Bell, in a classic piece of understatement. Indeed, many media companies feel like Dickensian orphans looking at the riches flowing into BuzzFeed's coffers.
The site's newly newsy focus, under editor-in-chief Ben Smith, has pulled in attention for BuzzFeed's journalism, which, because of Smith's experience at Politico, is strongest in politics. But it has been branching out: BuzzFeed's latest hires include Kate Aurthur, a well-respected journalist who was the television editor at the New York Times and the west coast editor at the Daily Beast.
BuzzFeed's youth has led to some growing pains, and the controversies associated with being in the center of the social web. Many news outlets and websites reported incorrect initial information about the school shootings at Sandy Hook elementary in Newtown, and BuzzFeed was one of those that misidentified the shooter. "We are feeling our way through very new ecosystem, and trying to understand how breaking news ought to work in the era of social," Smith wrote in a piece on BuzzFeed by way of explanation. After pointing out errors in stories from traditional media, he said: "We're a young news organization, hardly in a position to lecture local law enforcement or the great American outlets with decades or more of experience in hard news."
The site's entertainment aspects – it disdains slideshows but loves lists – are often mocked for its cat-heavy content, but they also draw in readers.
"There's a level of drinking the Kool-Aid, that everybody loves BuzzFeed and you must love them too," Bell said. "I've been impressed with them, despite myself … I wanted them to be a huge disaster, and they're pretty good."
BuzzFeed's investments last year included branching out into a Los Angeles office and video production, as well as hiring Jeff Greenspan, a Facebook veteran charged with coming up with ways that BuzzFeed can work more closely with its advertisers.
Peretti plans to use the site's investment funding for several purposes, including opening offices in new cities – "focusing on cultural capitals" – as well as expanding into new kinds of reporting including business and long-form writing. Another use: growing its access on mobile devices, which already accounts for one-third of the site's traffic.
About that traffic. BuzzFeed puts the number at around 40m unique users last month, according to Google Analytics. Most sites use Comscore, which is the industry standard; Comscore put Buzzfeed's traffic at roughly 12m unique visitors in November.
The new round of funding comes from BuzzFeed's old investors, including New Enterprise Associates, Lerer Ventures, RRE Ventures, Softbank and Hearst, as well as Michael and Kass Lazerow. The Lazarows are the founders of Buddy Media, which was sold to Salesforce.com last year.
The question that whether BuzzFeed's new model is any more lasting than the old. Bell said: "I applaud them for experimentation, but how sustainable it is, as everything else at the moment, you have to put a question mark by it."
