Emerald Emerging Markets Case Studies

Buzzfeed Inc: native advertising the way forward?

Bikramjit Rishi, Aditya Mehta, Poulomi Banerjee, Akshay Deepak,
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 Buzzfeed Inc: native advertising the way
forward?
Bikramjit Rishi, Aditya Mehta, Poulomi Banerjee and Akshay Deepak

Introduction Bikramjit Rishi is

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Associate Professor at
It was a warm April, 2016 afternoon at the BuzzFeed headquarters in New York. Department of Marketing,
Awaiting her appointment with CEO Jonah Peretti, Claire marketing head glanced Institute of Management
through the 2015 financial report of BuzzFeed for one last time. BuzzFeed had failed to Technology, Ghaziabad
meet its 2015 revenue target of $250m by more than $80m, and the report in her hand (IMT), India.
suggested slashing the 2016 revenue projections of the company, by half (Anthony, Aditya Mehta,
2016). Shortly after missing its 2015 targets, BuzzFeed had roped in Claire’s company, Poulomi Banerjee and
a premier consulting firm on Wall Street, to provide strategic advice on the way forward. Akshay Deepak all are
For more than two months, she had been working closely with officials from BuzzFeed Students at Department
of Marketing, Institute of
to understand the workings of the company. As she awaited her turn to present the final
Management Technology,
findings and recommendations to Peretti, she made one final mental note of the points
Ghaziabad (IMT), India.
she would be talking on. While most of the issues identified were low hanging fruits
which could be tackled easily through minor tweaks in company policy and operations,
there was one major recommendation on company strategy, on which even after days
of contemplation, she was still undecided.
Claire walked over to a window and looked at the Manhattan skyline glistening in the
afternoon sun, wondering, for the umpteenth time, if that recommendation, could
sustain the runaway success of BuzzFeed. As Claire looked out of the window and
pondered over the slashed revenue projections and the content related issues, the
question on her mind was would native advertising sustain BuzzFeed in the longer run?
BuzzFeed was known for its viral content and native advertising would involve finding
a balance between what is good for the advertiser’s brand and what will become viral.
Buzzfeed ran a risk of losing brands to other modes of advertisement if they felt that
native advertisement, which disguises the product within the content, was not meeting
their expectations.

Origins of the company

Founded in 2006, BuzzFeed described itself as a “cross-platform, global network for news
and entertainment” that “created and distributed content for a global audience and utilized
proprietary technology to continuously test, learn and optimize.” (Buzzfeed Website, 2018).
A team of staff reporters, syndicated cartoon artists and contributors produced content Disclaimer. This case is written
solely for educational
daily which was distributed across nearly 30 online platforms, form Facebook to Pinterest purposes and is not intended
to Snapchat. In less than 10 years, BuzzFeed become the fifth largest news site based on to represent successful or
unsuccessful managerial
desktop and mobile traffic, ahead of the likes of The New York Times and Washington Post decision-making. The authors
(see Exhibit 1). As of 2016, Buzzfeed had captured every aspect of online media, its may have disguised names;
financial and other
content received more than 7 billion monthly global views and BuzzFeed.com received recognizable information to
nearly 200 million unique visitors (see Exhibit 1). protect confidentiality.

DOI 10.1108/EEMCS-06-2017-0137 VOL. 8 NO. 4 2018, pp. 1-18, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 Peretti had said:
If we can entertain and inform people and generate great return for advertisers we can have a
much bigger, longer path. We’re not like something that came before us – we’re qualitatively
different (Halliday, 2016).

BuzzFeed was different from traditional media companies in that it did not focus on driving
traffic to its website – 75 per cent of its content was consumed outside of its own
platform – i.e. Buzzfeed.com (Baysinger, 2016). It wanted to reach the consumers where
they were – instead of trying to use the likes of Facebook, Twitter and Pinterest to send
visitors back to the site, the company was happy with having its content live outside of
BuzzFeed. Hence, unlike traditional companies, native advertising, and not banner ads on
its website, was its revenue source.
The rapid growth of BuzzFeed came with its share of problems. In 2012, BuzzFeed was
accused of plagiarizing content from its competitors (Bump, 2016). It was also the subject
of multiple copyright infringement lawsuits for both using content it had no rights to and
encouraging its proliferation without attributing its sources. In July 2014, BuzzFeed fired
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one of its writers, who was found to have plagiarized others’ work 40 times (Farhi, 2016). In
April 2015, the company faced criticism for deleting posts that were critical of products of
BuzzFeed’s advertisers (Stack, 2016). It was valued at $1.5bn in 2015, having raised
money from numerous investors (Matthews, 2016).
BuzzFeed initially started as a news and viral content sharing media, but it eventually grew
to become a full-fledged social news and entertainment company. It tried to track, launch
and spread viral content across the web. The algorithms running behind its home page
closely monitored around 120 million feeds of partner audience that included Time, Aol
News, etc. Besides, it also had a team of editors which not only monitored the content, but
also created new content. It also analyzed what kind of content drove traffic at any
particular moment. When the algorithm determined a piece of content on one of those sites
to be liked/shared/tweeted or reposted quickly or in short “going viral”, content was
developed by BuzzFeed’s team of creative on the same. As a principle, it focused on the
traffic that came predominantly from sharing platforms such as Twitter, Facebook, Digg
and any other external sources that. BuzzFeed thrived on the premise of proving relevant
and most engaging content to its viewers.

The business model

The revenue of BuzzFeed was driven by the concept of native advertising. Catchy
headlined articles though conveyed the sense that BuzzFeed might be charging
advertisers on basis of clicks but this was not entirely true. Instead, BuzzFeed charged a
fee from its clients for creating custom content targeting the customer base of the client.
This very concept made sure that the advertisements did not appear as mere blatant ads
and these were so embedded to ensure that, to a great extent, the reader actually went
through these without considering them as normal advertisement. The stories most of the
times in themselves contained the logo or some minimal indication of the brand. Its USP
was that it knew and understood what was being read on internet and hence was able to
place right content for the right readers thereby ensuring better success rate for its clients.
Hence most of the posts which looked normal were actual pieces of paid advertising. Over
the past few years, BuzzFeed had been increasingly spending on Facebook & other social
media advertising channels to drive more traffic toward its content.
This was important because BuzzFeed was now contemplating yet another unconventional
move to enhance its reach. Conventionally, it was believed that companies rigorously try to
use social media platforms such as Facebook, Twitter, etc. to drive traffic to their websites,
BuzzFeed, on the other hand was happy to have its content being read and shared outside
its website as well. It was estimated that in January 2016, BuzzFeed received 420 million

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 views through referrals from Facebook, Twitter etc. whereas it generated nearly 18 billion
impressions on those platforms itself (Kafka, 2016). This presented a huge opportunity of
growth for BuzzFeed.

Business performance
As far as performance was concerned, BuzzFeed had been doing really well. Its successful
run and innovative business model had not only attracted audiences, but also big investors.
BuzzFeed successfully received funding of $50m in August 2014 from Andreeson
Horowitz, a venture capital firm which valued BuzzFeed at about $850m. Going further, in
2015 it received equity investment worth $200m from NBCUniversal. The success in raising
capital helped BuzzFeed expand its capacity and reach. It acquired media firms such as
Kingfish Labs and Torando Labs to create its own team of data engineers and scientists
(Isaac, 2016).
However, the year 2015 went tough for BuzzFeed when, as per the reports by Financial
Times, it fell short of achieving its targeted revenue of USD 250 million by US$80m. It forced
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the company to revise and lower its target revenues for the year 2016 as well. The
combined worldwide traffic to BuzzFeed saw a decline of up to 14 per cent (O’Reilly, 2016).
There were a number of speculations about how the company was looking at it, but the fact
remained that BuzzFeed was still a name to be dealt with in the industry.
BuzzFeed’s major rivals included Vice Media, Mashable Inc., Paste Media group, Vox
Media, Woven, Laundry Service (recently acquired by Wasserman Media Group) (see
Exhibit 2).

Online media and entertainment category

The media and entertainment industry comprised of businesses that produce and
distribute motion pictures, television programs and commercials along with streaming
content, music and audio recordings, broadcast, radio, book publishing, and video games.
The digital age summarized this industry as the source of relevant content created in
various forms. The channels for delivery of content in digital space rapidly changed unlike
in the traditional media and entertainment industry where channels were limited. With the
advent of web 2.0 a new category was created which catered to content creation on
the online platform. The increasing variety and diversity of the online platform made this
space a highly competitive one.
As of 2014, the revenue generated from entertainment and media industry globally was
USA$1.74 trillion, which included revenue generated through digital and non-digital
platforms. This revenue generated was expected to increase to US$2.23tn (PWC, 2016) by
the year 2019, projecting a compounded annual growth rate (CAGR) of 5.1 per cent (). It
was also predicted that around 20 per cent of the revenue will be generated through the
digital environment. There was a rapid shift from non-digital medium to digital. Though
digital cannot be viewed as a replacement of the non-digital platforms, the usage of digital
was growing considerably. In 2015, 22 per cent of total newspaper circulation was through
digital means (Mitchel and Jesse, 2016). This showed that consumers were becoming
aware of the digital medium and more focus was being given to the category of online
media and entertainment (see Exhibits 3 and 4).
The online media and entertainment category could be divided into two – digital native
publisher and digital adaptors. Digital native publishers could be defined as those
businesses whose primary from of content generated was targeted toward online channels.
Digital adaptors were those businesses that primarily catered to the non-digital platform
and as a secondary platform entered the online medium. Popular examples of digital
adapters are newspapers with print being the primary medium, however due to advent of
the digital channel had to enter this space as well.

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 According to a study conducted by PEW research center, digital native publishers received
a minimum of 10 million unique visitors on average during the fourth quarter of 2015 (Lu and
Holcomb, 2016). The native publishers could be broadly divided into two segments. First
would be publishers targeting generic content. Some of the key websites in this segment
are Huffington Post and BuzzFeed which had generic content. The second segment
created differentiation by focusing on a particular genre or narrower range of subjects.
Some examples of genre which contributed significantly to this segment were business
(qz.com), the entertainment industry (TMZ.com) or politics (Salon.com).
The primary objective of companies in this industry was attracting eyeballs and trying to
find a unique way to gain more visitors. With around 40 per cent of the world population on
the internet, the opportunity for growth was increasing exponentially (Internet live stats,
2016). Although there are many companies trying to grab the attention of users, there was
plenty of scope to grow and innovate in the way users can be approached. The users were
shifting to multiple devices and using new platform to communicate through the Web. This
opened up opportunity for companies to engage users and gain loyal followers.
As innovation in terms of content was the key to retain users, generating interesting and
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relevant content becomes a challenge and was expensive. There was also a shift in trend
in the type of content preferred by users from text to pictures to videos which resulted in an
opportunity as well as a challenge for the industry.

Native advertising versus display advertising

BuzzFeed’s content could be classified into two types – the first one was the trademark viral
articles and videos that drove its immense traffic and built brand recognition and the
second one was branded or sponsored content. With non-existent display advertisement,
BuzzFeed’s primary source of revenue was the latter, i.e. native advertising – brands would
be advertised subtly in articles created by BuzzFeed’s team of content creators. BuzzFeed
had a massive reach across different social platforms – monthly global content views of
more than seven billion (Newman et al., 2016) and hence, native advertising through
sponsored content too would have a wide reach.
Peretti had mentioned in an interview:
If you make really compelling content and have the brand as a part of the content and also
have something which really matters to the consumer, (then) you can have a lot of success.
We often look at a Venn Diagram of “What do people care about?” and “What is the brand
message?” and finding that overlap is kind of tricky but when you get there, it’s really
powerful (Beet.tv, 2016).
So, brands worked with BuzzFeed the same way they would deal with an advertising
agency – they dealt with a creative at BuzzFeed to create content or ads that would go viral
and at the same time subtly form an impression in the minds of their potential customers.
This made BuzzFeed a people-heavy business. Unlike automated ads on Facebook or
Google, the ads on BuzzFeed involved a lot of creative effort and human interaction.
Hence, with native advertising, scalability was an issue as adding more advertisers would
mean increasing the size of its workforce. Unlike other Web-based companies such as
Instagram, which achieved exponential revenue growth with a small employee base,
BuzzFeed’s revenue growth through native advertising would be less rapid.
Peretti had said:
Silicon Valley is overly obsessed with scalability, and Silicon Valley investors want some
perfectly scalable ad platform, but advertisers want to deal with a really creative person,
whose talent can be leveraged to reach millions of people?. It might not be possible to build
something as big as Google, and you might need more employees, but you can still build
something very significant (Gara, 2016).

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Additionally, native advertising came with its own share of controversies. A 2015 study
found that the more trust viewers had in a media company, the less likely they were to
distinguish between native advertising and that company’s journalistic content.
Readers felt deceived on realizing that the content they had read was actually an
advertisement. The study found that 48 per cent respondents felt deceived on realizing
that the piece of content they had read was sponsored (Carpentier, 2016). Before 2016
US Presidential elections, BuzzFeed had to pull out of an advertising agreement with
Republican National Committee, over a controversial campaign led by the latter’s
presidential candidate Donald Trump (Gara, 2016). While BuzzFeed received positive
reactions for this move, this incident underscored the limitations of native advertising –
while banner or display advertisements for political parties or brands were a fairly
standard practice, running pieces of sponsored content, which many users might
mistake for journalism, in support of political parties, would not be viewed as a standard
or ethical practice. In April 2015, BuzzFeed faced strong criticism for deleting posts
that were critical of some of BuzzFeed’s advertisers (Somiya, 2016). Though the posts
were later reinstated, this highlighted the conflict between sponsored and unsponsored
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content developed by BuzzFeed.

BuzzFeed’s unsponsored content was the major diver of traffic; however, it was the
sponsored content that brought in the revenues. It was the viral nature of BuzzFeed’s
unsponsored content which made native advertising enticing for advertisers. Hence,
without banner ads, the unsponsored content did not contribute directly to BuzzFeed’s
revenue. So, unsponsored posts were just inventories and opportunities to drive people
to a sponsored post. Banner ads or display advertisement was an alternative to realize
the revenue potential of unsponsored content. It would attract more advertisers as it
would be a cheaper means of advertisement than native advertising and at the same
time would add to BuzzFeed’s revenues. Unlike sponsored content, banner ads could
also be easily scalable. However, banner ads had low levels of customer engagement
and they were known for interrupting user experience, especially on smartphones. With
nearly 70 per cent of BuzzFeed’s traffic coming in through smartphones, banner ads
could have a detrimental impact on user experience (Exhibit 1). Finally, having banner
ads would go against BuzzFeed’s long stated position that banner ads were soon going
to be a thing of the past and native advertising was the future. BuzzFeed President Greg
Coleman had said in an interview “I’ve been an adviser to BuzzFeed over the last four
years, and I remember the meeting when Jonah made the bold statement that we’re not
going to take any banner ads. I was shocked and amazed because it meant leaving a
lot of money on the table. But we also believe, in retrospect, that it was a bold and
accurate move on his part” (Sebastian, 2016).

Way forward
As Claire gazed out of the full-length glass windows in the BuzzFeed office, with the
slashed revenue forecasts in her hand, she wondered if BuzzFeed’s revenue model
based on native advertising was the way forward for BuzzFeed. Native advertising was
people-heavy and by its very nature not conducive to rapid growth in revenues, but led
to higher customer engagement and a better user experience. Banner advertisement
was an untapped traditional revenue source which could be easily exploited and
scaled, but which would hamper user experience. Though the industry was slowly
moving toward native advertising because of its inherent advantages over banner Keywords:
advertising, Peretti wondered if his company should stick to what it had been doing with Social media strategy,
great success or take up the revenue generation opportunity that banner ads always Promotion,
presented. Marketing

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 References

Anthony, N. (2016), “BuzzFeed slashes 2016 projections on heels of missed revenue targets”, NY
Business Journal, 13 April 2016, available at: www.bizjournals.com/newyork/news/2016/04/13/
buzzfeed-slashes-2016-projections-on-heels-of.html (accessed 2 December).

Baysinger, T. (2016), “BuzzFeed is now getting 7 billion content views a month”, Adweek, 2 March
2016, available at: www.adweek.com/news/technology/buzzfeed-now-getting-7-billion-content-views-
month-171182 (accessed 2 December).

Beet.tv (2016), “BuzzFeed’s Jonah Peretti: native advertising is not easy”, 14 September 2014,
available at: www.beet.tv/2014/09/buzzfeed-peretti.html (accessed 1 December).

Bump, P. (2016), “BuzzFeed’s ‘happiest facts of all time’ were mostly plagiarized from reddit”, The
Atlantic, 8 March 2015, available at: www.theatlantic.com/business/archive/2013/03/buzzfeeds-
happiest-facts-all-time-were-mostly-plagiarized-reddit/317576/ (accessed 1 December).

Buzzfeed Website (2018), “About”, available at: www.buzzfeed.com/about

Carpentier, M. (2016), “BuzzFeed cancelling RNC ads masks the issue: sponsored content for
politicians”, The Guardian, 6 June, available at: www.theguardian.com/media/2016/jun/06/buzzfeed-
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donald-trump-native-advertising-political-candidates (accessed 1 December).

Farhi, P. (2016), “Buzzfeed fires Benny Johnson for plagiarism”, The Washington Post, 26 July 2014,
available at: www.washingtonpost.com/lifestyle/style/buzzfeed-fires-benny-johnson-for-plagiarism/20
14/07/26/64abe9d2-1484-11e4-98ee-daea85133bc9_story.html?utm_term⫽.b2ac4319a90e
(accessed 1 December).

Gara, T. (2016), “Inside BuzzFeed’s old media business model”, The Wall Street Journal, 4 January
2013, available at: http://blogs.wsj.com/corporate-intelligence/2013/01/04/buzzfeeds-business-
model-scale-is-a-problem-and-thats-a-good-thing/ (accessed 2 December).

Halliday, J. (2016), “Buzzfeed’s Jonah Peretti: ‘We’re not like something that came before’”, The
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Internet live stats (2016), “Internet users in the world”, Internet Live Stats, 1 July, available at: www.
internetlivestats.com/internet-users (accessed 7 December).

Isaac, M. (2016), “Buzzfeed valued at about $850 million”, CNBC, 11 August 2014, available at:
www.cnbc.com/2014/08/11/buzzfeed-valued-at-about-850-million.html (accessed 1 December).

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PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Sebastian, M. (2016), “Q&A: Greg Coleman’s programmatic plans for BuzzFeed”, Advertising Age
India, 6 August 2014, available at: www.adageindia.in/qa-greg-colemans-programmatic-plans-for-
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VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 Exhibit 1. Buzzfeed by the numbers
 More than seven billion monthly global content views
 More than 200 million monthly unique visitors
 18 offices and 1,300 employees around the world
 75 per cent of unique visitors from social platforms
 Publish on more than 30 social platforms across the globe
 More than 70 per cent of BuzzFeed traffic occurs on mobile devices
 Running 5 mobile apps – BuzzFeed, QuizChat, BuzzFeed News, BuzzFeed Video and
Vute or Not
 More than 90 million unique visitors come to BuzzFeed.com each month from outside
the USA
 Content in six different languages including Spanish, Portuguese, Japanese, French
and German
 International editions (11) including USA, UK, Germany, Espanol, France, Spain, India,
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Canada, Mexico, Brazil, Australia and Japan.

Source: Buzzfeed Inc., “About”, available at: www.buzzfeed.com/about

Exhibit 2. Buzzfeed and its competitors

Table EI
Company Name Employee Strength Estimated revenue (million US dollars) Latest Funding Details

BuzzFeed 1,013 170 US$200m from NBC Universal

Vice 694 145 US$200m from Walt Disney Co.
Mashable 239 35 US$15M from Turner Broadcasting Updata Partners
Paste 96 25 Information Not Available
Source: www.owler.com/iaApp/113986/buzzfeed-competitors, as accessed on December 5, 2016

Table EII
Company Name Followers on Facebook Followers on Twitter

BuzzFeed 8,743,349 4,202,292

Vice 6,030,817 7,921,980
Mashable 3,993,502 1,640,958
Paste 184,948 229,535
Source: www.owler.com/iaApp/113986/buzzfeed-competitors, as accessed on December 5, 2016

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

 Exhibit 3. News consumption medium in America

Table EIII
% of US adults who often get news from

Television 57%
Local TV news 46%
Cable TV news 31%
National nightly network TV News 30
Digital 38%
News websites or apps 28%
Social Networking sites 18%
Radio 25%
Print Newspaper 20%
Source: Journalism.org, “State of the News Media 2016”, www.journalism.org/2016/06/15/
state-of-the-news-media-2016/
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Exhibit 4. Key annual economic trends 2015 vs 2014

Table EIV
Newspaper 8% Decreased Ad revenues declined year over year
Cable TV 10% Increased For a total of $4bn for fox news, CNN and MSNBC
combined
Network TV 6% Increased As revenue for evening news programs
14% Increased As revenue for morning news programs
Local TV 7% Decreased On air ad revenue declined to $18.6bn from 2014
election year
4% Increased On air ad revenue grew from last presidential primary
year of 2011
Digital Ad Revenue 20% Increased Grew to $59.6bn
Source: Journalism.org, “State of the News Media 2016”, www.journalism.org/
2016/06/15/state-of-the-news-media-2016/

Corresponding author
Bikramjit Rishi can be contacted at: brishi@imt.edu

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9