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Buzzfeed Case Study

The document discusses Buzzfeed Inc and whether native advertising is the way forward for the company. It notes that Buzzfeed relies heavily on native advertising for revenue but faced struggles growing this business model. While native ads were 70% of Buzzfeed's revenue in 2016, the company has since diversified to include other streams like video/display ads, affiliate marketing, and subscriptions. The document examines Porter's five forces for Buzzfeed's market including competitive threats and the bargaining power of customers/suppliers.

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Shivani Soni
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372 views

Buzzfeed Case Study

The document discusses Buzzfeed Inc and whether native advertising is the way forward for the company. It notes that Buzzfeed relies heavily on native advertising for revenue but faced struggles growing this business model. While native ads were 70% of Buzzfeed's revenue in 2016, the company has since diversified to include other streams like video/display ads, affiliate marketing, and subscriptions. The document examines Porter's five forces for Buzzfeed's market including competitive threats and the bargaining power of customers/suppliers.

Uploaded by

Shivani Soni
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Buzzfeed Inc: Native advertising the way

forward?
QUESTIONS
1. Explain the position of BuzzFeed viz-a-viz media and entertainment
industry as referred by the case.

2. Explain the market dynamics of BuzzFeed according to the Porter’s


five forces model.
Content
• Case summary
• Diversified Revenue Model
• Was Native Advertising the only way forward?
• Cons of Native Advertising
• BuzzFeed funding, valuation and revenues
• Porter’s five forces analysis of BuzzFeed
BuzzFeed
• BuzzFeed was founded in 2006 as a viral lab by Jonan Peretti and
John S. Johnson.
• It was valued at $1.5 billion in 2015.
• The revenue was driven by the concept of native advertising.
• BuzzFeed charges fee from its clients for creating custom content.
• In 2015, Buzzfeed fell short of achieving its target of $250 million by
more than $80 million.
• The combined worldwide traffic to BuzzFeed saw a decline of 14%.
• The company was compelled to revise and lower its 2016 revenues by
half.
• Buzzfeed roped in Claire’s company, a premier consulting firm on wall
street, for strategic advice on the way forward.
• Perplexity of sustenance of native advertising in long run for Buzzfeed.
BuzzFeed – Diversified Revenue Model

In 2020 the category of Native Advertising will bring in just 20%


- Jonah Peretti, The Digiday Podcast, March 10, 2020
https://digiday.com/media/buzzfeed-ceo-jonah-peretti-revenue-pie-affiliate-commerce-branded-attribution-news/
BuzzFeed – Native Advertising
2016 2020

70% of the revenue was generated from Plethora of different revenue streams :
natively advertised content 1) Display Advertising – CPC, CPS, a
fixed price for promotion
2) Video Advertising
3) Affiliate Marketing
4) Subscription Revenue
5) Native Advertising
6) Digital & Physical Products
7) Podcast Advertising
Was Native Advertising the only way
forward?
BuzzFeed was struggling as they tried to grow their native
advertising business, eventually succumbing to layoffs &
embarrassing news reports about revenue misses.
Native Advertising has it’s own pros like customisation and
remarkably high engagement like one shown below

https://blog.nativeadvertisinginstitute.com/10-examples-buzzfeed-native-advertising
Cons of Native Advertising w.r.t.
BuzzFeed
Each native ad was custom created and any growth in client base meant the publisher would’ve
to hire more and more creatives to service those clients – leading to a large workforce .

https://techcrunch.com/2019/01/23/buzzfeed-layoffs-2019/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAAlz_ggCuNM2eL2kYl8v0PGGL-itKm-
IXDOiXVNbdDwOO7b0Tx5KgqAq4HF-G1wT3bwrjB2mFE9aCxoOT4gRB_ZcPaVBhXwEhB_lSxMAamCCW4jnZjGN07Jq4GjxsaHUxC1gBoBpqW2pp64f9Oia7I26qJhDdZkX7vQxVFRKAm3V
Latest Funding
& Valuation
1. NBCUniversal
2. General Atlantic
3. Andreessen Horowitz
4. Hearst Ventures
5. RRE Ventures, and many others.
Source: https://www.ft.com/content/beb5cf08-36d7-11e5-b05b-b01debd57852
Investors

The following chart


shows, BuzzFeed added $7 million to
their revenue income in 2015, $18
million in 2016, and $20 million in 2017
from native advertising
Source:https://www.buzzfeed.com
“BuzzFeed buzzkill: Its stunning revenue miss goes viral”

What was the WAY FORWARD?


Source: https://www.ft.com/content/81faa3f0-b935-11e5-b151-8e15c9a029fb
https://www.ft.com/content/26ebf992-00c4-11e6-99cb-83242733f755
“The strategic advice”
“One major recommendation on company strategy”
Porter’s 5 forces model
Developed in 1979
Q. Why ?
• Helps to analyze the competitive environment of an industry.
• Can be applied to any industry
• Underlying factors that shape the profitability of any industry.
• Holistic way of looking at any industry.
THREAT OF NEW ENTRANTS
Content websites like –
Logical Indian
Scoopwhoop
Mens XP
How to tackle threat of new entrants ?
• Psychological switching costs.
- Customised and relatable content
-

Image Source - https://brandequity.economictimes.indiatimes.com/news/business-of-brands/buzzfeed-to-business-we-know-what-millennials-


want/66726334
Competitive data advantage

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 -by Peretti
Competitive data advantage
Bargaining power of customers
We often
Factors thatlook
mayathave
a Venn Diagramon
an impact ofbargaining
“What do people
power care about?” and
of customers-
• “What is the brand
Low switching message?” and finding that overlap is kind of tricky
costs
• but when
High you information
buyer get there, it’s really powerful
• Buyer expectations
Competitive Rivalry
• The level of competition among the Entertainment websites such
as Vox, Mashable, Vice media and paste which competes directly
with Buzzfeed is high.
https://www.similarweb.com/website/buzzfeed.com/
Competitive rivalry
Major point of difference

Cost per click


Native Advertisement advertisement
Bargaining power of suppliers
• Who are the suppliers?

Viewers Buzzfeed

Supplying views/Ideas Supplying content


Bargaining power of suppliers
• Viewer’s preference gives the idea to BuzzFeed as to what kind of content
is to be created.

More
More Viewers More Content
advertisement
THREAT OF SUBSTITUTE
Some Substitute of
BuzzFeed!

Source: https://www.comparably.com/
Substitute of BuzzFeed India!

www.curioushalt.com
Source: digiday.com Source: qz.com
Threat of substitute
• There is little to no switching cost for a consumer so there are more
chances that they will explore over other substitutes available.
• The product performance in this case also plays a major role as, if the
substitute product is on the same or the better level, consumers would
switch over to the substitute easily.

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