NEW YORK (Reuters) — BuzzFeed has come
a long way from cat lists. This month one of its journalists was on
the ground in Kiev reporting on the crisis in Ukraine, and last
December it published an in-depth article on a Chinese dissident
living in Harlem, New York.
The kittens haven't disappeared, but these days there is serious
journalism as well.
When Facebook Inc tweaked its News Feed filters in December to weed
out low-quality stories and other content, many were waiting to see
if it would hurt publishers including BuzzFeed, the leading purveyor
of "sponsored content" on the Web.
But that didn't happen to BuzzFeed, which continues to log
impressive increases in readership. Founder and CEO Jonah Peretti
attributes that to the company's investment in building a news
operation to complement its staple of entertainment and
advertising-sponsored articles.
"There used to be this view that online publishing was about blogs
that were very low-cost," said Peretti, 40, who helped start the
popular The Huffington Post, now a unit of AOL Inc.
"You couldn't do things like investigations or have reporters. You
could just do a smart take or snark on things. If you wanted to
actually say, 'I'm going to sit down and talk to people and spend
more than three hours on a story,' then you go work in old media. I
think that is changing."
Founded in 2006, BuzzFeed is now among the top 10 most-visited news
and information sites in the United States, joining the ranks of
established media outlets like CNN and The New York Times.
Over the past year, BuzzFeed's traffic has soared fourfold, with
more than 160 million unique visitors, according to online
measurement and advertising firm Quantcast.
The social news and entertainment company is famous for producing
advertising-sponsored "listicles" that go viral, such as lists of
golden retrievers (sponsored by a pet food brand) or popular quizzes
like "Which billionaire tycoon are you?" (News Corp's Rupert Murdoch
took the quiz and got himself.)
Less known outside media circles is BuzzFeed's foray into serious
journalism, which began two years ago when it hired Ben Smith, a
former Politico reporter, as its editor-in-chief.
Headquartered in New York, BuzzFeed now has more than 150
journalists, an investigative reporting unit, bureaus in Australia
and the United Kingdom, and foreign correspondents in far-flung
places like Nairobi and the Middle East.
Its expansion comes amid a wave of investor interest in new media
companies that are trying to capitalize on a decade-long wave of job
cuts at newspapers, and new technology that has upended how news and
advertising are produced and distributed.
"As these social technology spaces like Google, Facebook and Twitter
compete with each other, they want to be the place you come and live
in digital land," said Amy Mitchell, director of journalism research
at the Pew Research Center. "A part of what people look for is
news."
BuzzFeed, which has about 400 employees, raised $46 million in
venture capital from the likes of Lerer Ventures, Hearst, RRE and
Japan's SoftBank.
"On the journalistic side, their new level of ambition makes a
difference to me as an advertiser if it grows their audience," said
Andrew Essex, vice chairman at advertising agency Droga5.
SUPPLIER TO SOCIAL MEDIA PIPES
BuzzFeed and other media companies, ranging from upstarts like Vox
Media and Upworthy to established media outlets such as the
Washington Post, depend on social media to fuel readership. BuzzFeed
gets about 75 percent of traffic referrals from social media, and
the majority of that is from Facebook.
Last August, Facebook made a change to News Feed, which is
prominently featured on a user's home page, pushing more stories
through the stream. Many media sites saw their referral traffic
soar. From September 2012 to September 2013, BuzzFeed's traffic
jumped 855 percent, Facebook said in a blog post.
But in December, Facebook made another adjustment to News Feed's
filters to improve the "quality" of the content.
BuzzFeed appears to have benefited — the number of people who
visited the site rose 20 percent from December to mid-February,
according to Quantcast. But other sites have suffered a drop in
traffic since Facebook's tweaks.
An oft-cited rival of BuzzFeed is Upworthy, which aggregates
material across the Web to help its content go viral. It experienced
a dip in traffic during the same period. Upworthy, which grew at an
even faster clip than BuzzFeed last year, experienced a 22 percent
decrease in unique users from December to mid-February, according to
Quantcast.
To be sure, there are many reasons why the number of people visiting
a site can fluctuate from month to month, including seasonal factors
and news items. An Upworthy spokeswoman pointed to the site's sharp
rise in unique users from October to November, and said the number
of people visiting Upworthy is still up significantly since October.
Facebook's dominance in social media is similar to Google's leading
position in Web search. When the Internet giant made several changes
to the formula that determines search query results to ensure more
"quality" information, that hurt some media companies that relied on
high search results, including Demand Media and Rap Genius.
Peretti said he is not worried that Facebook could harm BuzzFeed's
prospects because the company distributes its content through other
social media platforms, such as Twitter and LinkedIn. As long as
there is benefit for the consumer, he said, any traffic fluctuations
should work out in the long run.
BuzzFeed expects revenue to double to $120 million this year,
according to a person familiar with the company. BuzzFeed declined
to give financial figures. Peretti would only say that the company
is profitable.
A MASH-UP
BuzzFeed's investors say they are focused on the company's growth,
including news, and decline to discuss exit strategies such as an
initial public offering or sale to another company.
"BuzzFeed must be in the real news business," said Kenneth Lerer,
chairman of BuzzFeed and an investor in the company through New
York-based Lerer Ventures.
"You have to deliver the whole package. There are not a lot of
companies serving that demo with hard news," he said, referring to
readers between the ages of 18 and 34.
BuzzFeed says it plans to hire more journalists and is keen to
expand its foreign news coverage. Still, some media experts say
balancing a mix of serious stories with sponsored content can be
difficult.
For instance, BuzzFeed published a list of "alleged" secret menu
items at McDonald's Corp, such as the Monster Mac, McCrepe and Pie
McFlurry. The list looked like an ad sponsored by the hamburger
chain, but it was actually a tongue-in-cheek article produced by a
BuzzFeed staff writer. (http://r.reuters.com/dax96v)
"The one question for BuzzFeed as they move further to produce their
own journalism is whether they will be able to successfully straddle
that line of content on their site that is purely for commercial
gain and content that is meant to inform people about issue or
events they care about," said the Pew Research Center's Mitchell.
No one expects sponsored content to go away, especially as
advertisers are expected to earmark more dollars toward the ad form.
Several major news organizations, including The New York Times, The
Guardian, Time Inc and Hearst, are publishing sponsored content. It
offers more lucrative advertising rates at an average
cost-per-thousand-users of around $10, compared with a banner ad
that typically offers only 50 cents to $1 on the ad exchanges.
"We don't question news organizations that create entertainment
content anymore," said Kyle Acquistapace, partner and director of
media at the advertising firm Deutsch LA, about BuzzFeed's news
expansion.
"What causes the question mark in BuzzFeed is if it can credibly
make news when the top thing on its home screen is '28 things that
people with big boobs can simply never do.' Can that door swing both
ways? I think it can. It's a great mash-up."
BuzzFeed is confident that chasing hard news is good for business.
Its in-depth report about the Chinese dissident in Harlem, Dr. Gao
Yaojie, had more than 700,000 views. A 6,000-word story about buying
a house in Detroit for $500 got 1.5 million views. For comparison,
The New York Times' popular "Snow Fall" interactive feature got
about 3.5 million views.
"There are things now that we can try and do that may have been out
of our reach before," said Smith, BuzzFeed's editor-in-chief. "We
can step back and swing for the fences. We can send reporters down
rabbit holes, which I'm really excited about."
(Additional reporting by Sarah McBride
in San Francisco; editing by Tiffany Wu and Douglas Royalty)
