BuzzFeed’s recent valuation of $850 million, following its $50 million in new venture capital from Andreessen Horowitz, has caused a bit of a stir. On Monday the Guardian ran a piece comparing Buzzfeed’s valuation to that of the Washington Post.
The piece confirmed:
“It is only eight years old and best known for collating funny videos of cats and so-called “listicles” of trivia (such as 40 Things That Will Make You Feel Old), but viral internet sensation Buzzfeed was on Monday valued at more than three times as much as the Washington Post, the venerable US newspaper whose exposure of the Watergate scandal brought down President Richard Nixon.”
I understand the comparison between old media giant and new media giant, it shows just how much media consumption has changed, but beyond that the comparison is simply not valid.
Why? I would argue that the Washington Post is a newspaper online, BuzzFeed is a content site built for social sharing, offering younger, more digitally-savvy audiences exactly what they want; snippets of entertainment.
I appreciate that the Washington Post is improving dramatically under the stewardship of Jeff Bezos, the CEO of Amazon. Bezos acquired The Washington Post for $250 million a year ago and has since achieved a remarkable 61% increase over its 24.2 million unique visitors in July 2013* which would be an estimated 39 million unique visitors.
However, it’s still way off BuzzFeed. It should be noted that Mail Online, with 189.5 million visitors, shows traditional media companies can be successful online, but of course BuzzFeed doesn’t have Mail Online’s overheads.
It’s very easy to dismiss BuzzFeed as a site of cat gifs and videos, but that type of disapproval is exactly why the gulf exists between traditional media and growing sites such as BuzzFeed.
BuzzFeed has been developed to capitalise on sharing via social networks, it’s food for the social ecosystem. In the same way, Huffington Post was developed to capitalise on search engines, it was/is food for the search ecosystem.
Buzzfeed’s CEO and founder Jonah Peretti identified a need for social content and developed a site to supply that need. It’s a little more complex than that, but essentially Peretti, who also co-founded Huffington Post, understands media consumption today, where as newspapers on the whole are still trying to provide news to an older generation and only really pay lip-service to digital.
Perretti said: “We created BuzzFeed because people still want to be informed, entertained and inspired, but the way they consume media has dramatically shifted.
“Today we think the time is perfect to grow our company, build our brand and greatly increase the content we are producing so we can be the number one digital media brand.”
BuzzFeed has been clear about its strategy: Publish items that people want to share on social media. It called Facebook the “new ‘front page’ for the Internet”.
So is BuzzFeed worth $850 million? Look at the figures and you begin to understand why it is worth that much and will soon be worth more.
Earlier this year Disney apparently bid $800 million for BuzzFeed, so they felt the valuation was about right, and if we compare the figures to when Huffington Post sold to AOL for $315 million, we can see why BuzzFeed is even more valuable.
When AOL acquired Huffington Post, it was profitable with $30 million in revenue, 25 million monthly unique visitors and 200 employees.
BuzzFeed is expected to top $100 million in revenue this year at a profit, with 150 million monthly unique visitors and 550 employees. This will continue to grow, as will BuzzFeed and its valuation.