December 21, 2014
BuzzFeed’s valuation tops established media like LA Times
Bloomberg News (*)
A US$50M investment propels start-up beyond traditional big-name publications
BuzzFeed raised US$50 million on a bet its mix of everything from animal lists to serious news is more valuable than the coverage produced by established media like The Washington Post and Los Angeles Times.
The investment from venture-capital firm Andreessen Horowitz propelled BuzzFeed’s valuation beyond those traditional big-name publications to about US$850 million, according to The New York Times. While that’s about half the market capitalization of the Times itself, it’s in line with other web start-ups at about seven times annual revenue, according to Paul Sweeney, an analyst at Bloomberg Intelligence.
Andreessen Horowitz joins BuzzFeed investors Hearst Corp., SoftBank and New Enterprise Associates in wagering that the site can rank among the titans of media. BuzzFeed uses technology to help come up with ideas for articles that will attract readers, and it has connected with advertisers because it creates sponsored stories for their brands — promoting Pepsi, for example, with animated images about staying cool in the summer.
“There’s a lot of potential for BuzzFeed, and it’s well positioned to move into a lot of key areas,” said Peter Krasilovsky, vice president of BIA Kelsey, a media research company based in Chantilly, Virginia. “They’ve put a lot of their money into figuring out which stories are being read. I can understand why you would want to invest in BuzzFeed.”
BuzzFeed said Monday that the funding will let the company expand to Mumbai, India; Mexico City; Berlin and Tokyo and convert its video division into BuzzFeed Motion Pictures, which will focus on everything from animated online images to feature-length films.
“We are very excited to work with everyone at BuzzFeed to help them realize their dreams of a profoundly important new media institution,” Marc Andreessen, co-founder of Andreessen Horowitz, said on Twitter. The company’s opportunity is “effectively unbounded,” he said.
At the end of last year, the company had forecast revenue of as much as US$120 million in 2014, people familiar with the matter said at the time. Ashley McCollum, a BuzzFeed spokeswoman, said she couldn’t confirm the valuation.
The start-up, which has more than 500 employees, is profitable, Chief Executive Officer Jonah Peretti said in September 2013. With the new investment, BuzzFeed has garnered almost US$100 million in funding since the company debuted in 2006.
“The investment from Andreessen Horowitz really validates BuzzFeed, as a company and as an entity,” said Sweeney of Bloomberg Intelligence. “BuzzFeed has really proven itself as a business.”
While Buzzfeed’s valuation may outrank the Washington Post’s US$250 million or the US$493-million market cap of Los Angeles Times owner Tribune Publishing Co., it’s still a relative dwarf in the technology landscape. Facebook agreed to buy WhatsApp, the text-messaging service, for US$19 billion in February, and to spend another US$2 billion on Oculus VR, a virtual-technology company, a month later.
The start-up hasn’t been without controversy and last month fired writer Benny Johnson after finding 41 instances of sentences or phrases copied word for word from other sites. The matter was brought to BuzzFeed’s attention after Twitter users began pointing out examples of what appeared to be plagiarism, it said.
BuzzFeed relies on Twitter, Facebook and other social networks to spread its articles and videos. Its coverage includes everything from weighty political journalism and long-form stories that rival traditional publications to autocorrect mishaps and quirky photo lists, such as 10 Pieces Of Proof That Shar-Peis Are Actually Fuzzy Land Manatees.
“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,” Chris Dixon of Andreessen Horowitz said in a blog post. “We believe BuzzFeed will emerge from this period as a preeminent media company.”
The site’s traffic has lured big-name advertisers like General Electric and Toyota. Traditional news organizations including The New York Times, which had been relying on banner ads, are now mimicking BuzzFeed’s sponsored content, though critics such as HBO’s John Oliver have said the practice blurs the lines between news and advertising.
At the same time, BuzzFeed has gained credibility by hiring top journalists away from their established media organizations. The company brought in Ben Smith, a Politico reporter, as its editor-in-chief in 2011. Since then, the site has hired away journalists such as Mark Schoofs, a Pulitzer Prize-winning reporter at ProPublica, and Lisa Tozzi, a New York Times reporter who covered the September 11 terrorist attacks and Hurricane Katrina, among other stories.
BuzzFeed, founded in 2006 by Huffington Post co-Founder Jonah Peretti, has emerged as a viral website that averages 150 million visitors a month. By contrast, the Times gets 31 million unique visitors a month to its website, with a circulation of 2.5 million Sunday readers across print and digital. The Washington Post, acquired this year by billionaire Jeff Bezos for US$250 million, averages 18.8 million visitors a month.
Andreessen Horowitz joins the rank of a number of BuzzFeed investors, including Hearst Corp., SoftBank Corp., and most recently, an investor group led by venture firm New Enterprise Associates, which invested US$19.3 million in January 2013. Andreessen Horowitz’s funding brings BuzzFeed’s total money raised to almost US$100 million, up from US$46 million last year.