August 11, 2014 6:06 pm

BuzzFeed’s $50m investment bucks the gloom in news

BuzzFeed, the news and entertainment website that has surged to success on the back of social media sharing, is getting a $50m shot in the arm from an Andreessen Horowitz investment that reportedly values the company at $850m.

The injection more than doubles the funding BuzzFeed has raised to date and will be used to beef up its video unit, offer new content sections and invest more in international editions. The company will also create an in-house incubator for new technology and acquisitions and centralise its advertorial efforts.

Soaring valuations for digital companies like BuzzFeed and Vice Media stand in contrast with the gloom around a print sector that has largely been left behind in the recent flurry of media dealmaking. Newspaper and magazine groups from News Corp, Time Inc and Tribune to, most recently, Gannett have been spun off from once diversified parent companies that prefer to focus on higher-margin television, film and digital properties.

“Over the last decade, traditional media has been upended by technology,” said Jonah Peretti, the BuzzFeed founder and chief executive who also co-founded the Huffington Post. “We created BuzzFeed because people still want to be informed, entertained, and inspired but the way they consume media has dramatically shifted.”

Founded in 2006 as a start-up focused on meme-driven lists, GIFs and videos, BuzzFeed has grown into a profitable site drawing 150m readers a month that should rake in revenues of more than $100m this year, according to Andreessen Horowitz.

Much of that success is linked to the rise of Facebook and Twitter and the ubiquity of smartphones, which BuzzFeed has turned into powerful distribution channels for content that is crafted to be shared.

BuzzFeed: in the content graveyards

Lex

“Content is where I expect much of the real money will be made on the Internet,” Bill Gates said in 1996, “just as it was in broadcasting.”

Versions of this pithy claim remain popular. But the distinction between what we consume and how we consume simply does not exist any more. Distribution influences how much content is worth, and vice versa. Ask any newspaper executive.

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That has also left BuzzFeed and the generation of viral websites, such as Upworthy, that have popped up in its wake reliant on the algorithms that Facebook uses – and regularly tweaks – to construct users’ news feeds, analysts caution.

BuzzFeed has expanded into more serious news, including business, technology and politics. Its editorial staff stands at more than 200 people, and it is developing a standalone news app as mobile contributes a growing proportion of traffic.

Its increased emphasis on video and its centralised advertising arm reflect the growing importance of premium ad slots for digital publishers. That inventory carries much higher rates than traditional banner and display ads, which BuzzFeed has pointedly avoided in favour of so-called “native advertising” that appears more like regular content.

For Andreessen Horowitz, which has backed the likes of Facebook, Twitter, Pinterest, Lyft and Airbnb, the bet is that BuzzFeed is among the companies “trying to reshape industries from top to bottom,” said Chris Dixon, an Andreessen Horowitz general partner who will join BuzzFeed’s board.

“We’re presently in the midst of a major technological shift in which, increasingly, news and entertainment are being distributed on social networks and consumed on mobile devices. We believe BuzzFeed will emerge from this period as a pre-eminent media company,” he said.

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