OPA Intelligence Reports

Posted in News on 08/25/2014 By Mark Glaser and Angela Washeck

BuzzFeed raises $50 million

Scrappy digital native outfit BuzzFeed has proven that the Internet loves listicles and quizzes, but can it branch beyond that to become a serious news outlet? That’s the big question as the company recently secured $50 million in funding from venture capital firm Andreessen Horowitz. With the funding, BuzzFeed announced it would aggressively expand, hire more people and even launch a department that will create short and full-length motion pictures. The investment also elevates BuzzFeed above legacy newspaper companies in terms of monetary value; the company is now worth $850 million, $600 million more than the Washington Post in its last sale to Jeff Bezos. Jonah Peretti’s brainchild, which is visited by more than 150 million people monthly, will bring in “triple digit millions in revenues this year,” according to Chris Dixon, a partner at Andreessen Horowitz, in a blog post. Having begun as an Internet experiment for the young, rife with cute animal photos and listicles, BuzzFeed has grown up over the years into a bona fide journalism organization – but now without some bumps. The site was recently caught erasing thousands of old posts in the wake of a plagiarism scandal. Peretti told Slate’s Will Oremus that, “We probably could have communicated better, or handled it better” and that BuzzFeed was started as a side project without journalistic intent.

But now the side project is under a serious microscope with its huge investment and ambitious aims. According to the New York Times’ Mike Isaac: “The future of BuzzFeed may not even be on BuzzFeed.com. One of the company’s nascent ideas, BuzzFeed Distributed, will be a team of 20 people producing content that lives entirely on other popular platforms, like Tumblr, Instagram or Snapchat,” he wrote. This is a similar tactic as that of NowThis News, the bite-sized video news outlet. Bloomberg Businessweek’s Felix Gillette foresees a tough road ahead for a media company that has created its own rules for journalism so far. It costs hardly anything to produce most of what BuzzFeed puts out there, so even with its newfound cash, BuzzFeed’s lofty expansion goals may be stunted by a learning curve or an eventual lack of scale. “The challenge for BuzzFeed will be that as it pushes into traditional genres of media, whether long-form journalism or long-form movies, the cost of production will ratchet up significantly,” Gillette wrote. And with BuzzFeed relying so heavily on viral impact and social media that give them unparalleled impact, the New York Times’ Claire Cain Miller said the tides could turn at any moment. If social algorithms change – as they do – and BuzzFeed isn’t putting serious effort into the quality of its content, it loses stature on the web. “There is another reason for BuzzFeed and other media companies to focus more on the stuff they’re creating than on where people read it. Just as readers are fickle, so are the tech companies that send readers their way. It only takes a small tweak of the algorithm and stories disappear,” Miller wrote. Part of the reason Chris Dixon of Andreessen Horowitz decided to invest in BuzzFeed is its inherent “startup” culture; it goes against everything traditional media has known. So with this venture capital investment comes risk, wrote Marcus Wohlsen for Wired, but the real problem might surface if the BuzzFeed way doesn’t work in the end. “Ironically, hand-wringers who view the rise of BuzzFeed as a harbinger of the end of quality journalism should probably be more worried if it fails,” he wrote.

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