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Buzzfeed’s move to go public tipped to take brands closer to monetising content

Words by Minda Smiley and Seb Joseph

Buzzfeed’s recently announced plans to go public on the stock exchange could put pressure on brands to come up with more compelling ideas for native ads, though some agencies are concerned that the need to appease shareholders could cause the publisher to strike direct ties to their clients.

Although the market had long anticipated BuzzFeed’s inevitable move toward an initial public offering, the immediate implications are less clear. The publisher’s recent expansion of its predictive insight tools were key signals that its ambitions had already evolved but its decision to cave in to advertiser pressure and remove ads earlier this year revealed it has yet to work out its whole native advertising proposition.

A publisher’s move to go public tends not to have a major impact on their product offering or agency and brand relationships. It does however shift the company direction from doing ‘what’s best for the audience’ to ‘what’s best for shareholders’ – and that can have a knock on effect. While the company is churning out news to change its perception as a cat GIF and listicle farm, the fact that all the money it makes comes from producing posts that resemble its own for brands means it will have to come up with a more robust way of monetising viral content.

The next phase of growth for Buzzfeed is an expensive one as it moves into new markets and needs specific content to tap into local cultures. The question is whether the native advertising model will scale globally.

“Content creation and distribution is white hot right now, but for Buzzfeed to realise its potential it will have to disintermediate some of the global agency infrastructures and ambitions in this area, said Mark Eaves, co-founder of Gravity Road.

This could eventually see Buzzfeed forge direct relationships with brands. Mondelez is one business that has revealed its plans to replicate the content king’s business model and reports that the publisher smashed the $100m revenue mark 2014 signal that it won’t be short of offers should it go direct.

Buzzfeed only recently started forcing brands to go through its advertising channels rather than the community channels, which may become a threat to agencies as it expands into a global business. The Drum spoke to agencies from both sides of the Atlantic for their assessment of Buzzfeed’s threat and what it must do to continue making money from ads pretending to be content.

“Brands will increasingly need to go through Buzzfeed's formal advertising channels to reach targeted audiences, rather than the formerly available avenues such as native community content,” said Joseph Debons, principal and executive managing partner at Rational Interaction.

It is an observation shared by John Caruso, partner at MCD Partners, who added that Buzzfeed has matured into a “legitimate platform” for brands, offering “much more than lists and cat gifs”.

“As they delve deeper into custom content and video I suspect agencies can expect more opportunities for integrated pitches, and possibly Buzzfeed even going directly to their clients,” he added.

Going public also spotlights the success of Buzzfeed’s strategy of leveraging social media to drive audience growth. However, the need to appease shareholders could reduce its reliance on this channel for audience reach and explore new operating models. For example, "co-creation" is an area where brands, agencies and media companies have long collaborated, said MEC North America's managing partner and digital content marketing lead GianLaVecchia, and "Buzzfeed’s recent merchandising of its predictive insight tools could pave the way for a new working dynamic between itself and those it partners with in the future".

Buzzfeed is seen by agencies as pioneers in ‘native’ content and is a first mover when it comes to new formats. This extends beyond the popular ‘article’ and into areas such as video production, app development and native walled content for Snapchat and Facebook. As native content loses its sheen and more commonplace, Buzzfeed will need to mine these new areas in order to keep convincing readers its ads aren’t ads.

Pippa Glucklich, co-chief executive of Starcom Mediavest Group, said: “If Buzzfeed does go public, there is a fear from some agencies and brands that there may be pressure from shareholders to reduce this more expensive product ‘experimentation’ and focus on more profitable endeavors.

“If shareholders are wise, they will allow Buzzfeed to continue to develop a strong suite of products and a suitable sales model/s instead of focusing on the bottom line. Facebook shareholders have been reasonably restrained when it came to acquisitions of (then monetised) mobile applications like WhatsApp and Instagram – and in the long run it has benefited both the company’s product and their bottom line.”

While established media companies built around display ads struggle to monetize - BuzzFeed has built a significant business without deploying a single banner. Its meteoritic growth, which saw advertising revenues rocket 82.2 per cent between 2013 and 2014 according to Standard Media Index, serves as a possible window into the media company of tomorrow. Publishers like Buzzfeed and Vox have stumbled on a lucrative concept at a time when many advertisers want their content to make money and not just sell it.

The success belies how the lines between editorial and ads are being blurred amid the advent of content marketing. It has sparked frictions between Buzzfeed and some publishers, who have criticised the integrity of its content though there are some like USA Today and the Huffington Post that have formed their own ties as they post more frequently to social media.

Abba Newbery, director of strategy for News UK Commercial, acknowledged Buzzfeed’s success but said she “wouldn’t go as far as to say that the only sharing model is one that is about sharing listicles on your Facebook page”. “The question is what sort of business does Buzzfeed want to become?” she continued.

“Are they going to be a serious content business? Because inevitably they will have to look more closely at the relationship between commercial content and editorial content. If that’s what their intention is then I don’t think they would need to change. They seem to be very focused on building an international audience,” Newbery added.

Buzzfeed has mastered the art of creating viral content; now it's time to figure out how to monetise it.

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