Jonah Peretti, founder and CEO of Buzzfeed; co-founder of the Huffington Post
Courtsy of Ebru Yildiz/NPR
For more than a decade, BuzzFeed has competed against other digital media companies for consumer attention. Now, the rest of the industry is praying for its success.
BuzzFeed announced its intentions to become a publicly traded company Thursday by merging with special purpose acquisition company 890 Fifth Avenue Partners. Along with its acquisition of Complex Networks, BuzzFeed will begin trading with an implied valuation of $1.5 billion.
BuzzFeed will be the industry’s guinea pig — the first of its kind to test public investor appetite. Vice, Vox Media, Group Nine, Bustle and other digital media companies have all discussed going public via SPAC with varying timelines. BuzzFeed’s total unique visitors and time spent among millennials and Generation Z dwarf its competition, according to the investor presentation Buzzfeed released Thursday, making it a logical candidate to be first out of the gate.
The company’s decision to go public will test whether investors believe companies like BuzzFeed are primed to grow in a post-pandemic world, where advertisers are spending more money on digital properties and less on traditional linear television. Still, BuzzFeed will need to convince potential shareholders it can capture those digital dollars rather than watching them flow into Google, Facebook and Amazon.
While BuzzFeed said in its investor deck that “ad spend is shifting from mega platforms,” Peretti argued in a CNBC interview that the company will benefit from the growth of the largest digital platforms because they pay for BuzzFeed’s content.
“We’ve seen our revenue grow right along with the FAANG companies,” Peretti said in an interview on CNBC’s “TechCheck,” referring to Facebook, Apple, Amazon, Netflix and Google. “YouTube, Facebook, Instagram and TikTok are all hungry for content. They increasingly want brand safe content they know they can put advertising against with certainty. We get paid by these big platforms for producing content and share revenue with them.”
BuzzFeed said it generated $166 million selling its own content and $196 million on advertising in 2020, along with a fledgling commerce business.
Unprecedented comparisons
BuzzFeed listed a set of comparable companies in its investor presentation — and the range of businesses unintentionally underlined the haziness of BuzzFeed’s prognosis.
BuzzFeed listed Etsy, Taboola, Zynga, IAC and The New York Times as its five comparable peers — an e-commerce platform, a native advertising platform, a gaming company, an internet holding company and a legacy media journalism company, respectively. Those companies aren’t just dissimilar — they’re all quite different from BuzzFeed itself.
Buzzfeed’s $1.5 billion valuation is also a cause for concern. The company was valued at $1.7 billion in 2016.
“There was definitely a hype period for digital media when a lot of companies were growing really quickly but didn’t have strong, sustainable businesses,” said Peretti, implying Buzzfeed may not have deserved that rich of a valuation in 2016. “We’ve spent the past year managing our costs, building a really strong, sustainable, diversified business.”
Trading publicly will put Peretti’s thesis to the test. It’s possible Buzzfeed’s lack of growth has been more about a volatile advertising-based industry dominated by Facebook and Google — one which may not subside in the years to come.
BuzzFeed’s share performance will likely determine if its smaller peers, such as Vox and Bustle, can succeed as public companies of their own. It will also give BuzzFeed currency to acquire other, smaller sites that can bolster BuzzFeed’s commerce and advertising businesses.
Growing through takeovers is part of Peretti’s plan to boost his company’s valuation, he said.
“I think there’s a lot of excitement to join up with us,” Peretti said. “We are well capitalized, and we have scale. If you’re someone who is running a subscale digital media company, and you know you have to build all these things, you can skip a bunch of steps by joining up with the leading digital media company in the space, BuzzFeed.”
Disclosure: NBCUniversal, the parent company of CNBC, is an investor in Buzzfeed.
WATCH: CNBC’s full interview with Buzzfeed CEO on going public
