The Global Media Weekly for executives and entrepreneurs

BuzzFeed IPO: “ads are good”

The 15-year-old BuzzFeed yesterday confirmed its plans to IPO via a Special Purpose Acquisition Company (SPAC). It claims it will be able to accelerate growth through e-commerce – but will still be heavily dependant on advertising revenue with which it has been struggling in recent years.

CEO Jonah Peretti told investors he expected to generate $654 million in revenue next year (up 25% from in 2021), 48% from traditional advertising. The rest would come from e-commerce and content marketing. As The Information points out, that means almost 77% of BuzzFeed’s revenues in 2022 will effectively come from advertising

By 2024 – when the company forecasts it will beat $1 billion in revenue for the first time – these advertising-based revenue streams are still expected to account for 69% of the business. Peretti says: “Advertising can still be a good business.” It’s a bit of a mood change from his earlier, agonised screams about the difficulty of competing for advertising with Google and Facebook, even after he acquired HuffPost last November.

Harvard’s Nieman Journalism Lab comments on BuzzFeed’s optmistic projections: “Will investors agree that.. ‘ad spend is shifting from mega platforms’ like Google and Facebook?”

SPACs save much of the time taken for a traditional IPO and can also make it easier to attract prospective buyers. The BuzzFeed plans also highlight the way that SPAC companies going public have less oversight, and more freedom to forecast big growth in the future. Regular IPOs tend to forecast more cautiously.

The Information says: “BuzzFeed plans to combine with the SPAC 890 Fifth Avenue Partners to IPO, while simultaneously acquiring digital lifestyle publisher Complex Networks from Verizon and Hearst for about $300 million. The combined company will have an enterprise value of about $1.5 billion (ie $1.2 billion before the acquisition of Complex), a discount on BuzzFeed’s peak valuation of $1.7 billion in 2016.”

Recode makes a telling point: “Peretti has already learned one trick from the successful media and tech companies he’s competing with: How to go public without losing control of your company. BuzzFeed will be a “dual-class” company, which means it will have two sets of shares — one for the general public to buy, and one for insiders, like Peretti, which come with extra voting power. Peretti says that when the deal closes near the end of this year, he’ll retain the majority of voting shares in BuzzFeed, giving him final say over the company’s direction.”