BuzzFeed founder Jonah Peretti is committed to adopting more financial discipline than he has done in the past, as he presented plans to consolidate the digital media industry once he took over his business. published by means of a vehicle to be checked in white.
Referring to the period from 2014 to 2016, when digital media groups such as BuzzFeed raised billions of dollars after gaining younger audiences, Peretti told the Financial Times: “There were a lot of missionary-type founders who … has invested in news beyond where the income could support it. ”
However, Peretti said that after investing heavily in BuzzFeed’s news operation in its early days, he was now more focused on “financial rigor,” adding, “I seem to have learned from this mistake. .you need to have more financial discipline in the short term to ensure it grows sustainably. ”
BuzzFeed, known for its shared listings and quizzes, is one of a generation of digital media groups that have experienced an amazing up and down in the last decade. In recent years, investors have scrapped these companies because they have not been able to engage the public with financial benefits, resulting in a period of reduced valuations and layoffs.
Peretti in 2011 hired journalist Ben Smith to build a serious journalism operation, and the group was recently awarded its first Pulitzer Prize. However, BuzzFeed News has implemented several licensing rounds in recent years as Peretti has sought to restrict costs. The company closed its British and Australian divisions of BuzzFeed last year.
Peretti expects BuzzFeed News to make a “modest loss” this year and finally reach profitability, while HuffPost, which he acquired this year, is on track to make a profit this year, he said.
The 47-year-old also predicted a possible drop in ratings for digital media. “The market was very hot but no one had even built sustainable companies, including BuzzFeed,” Peretti said. “Now the strongest companies are emerging from the other side. We are at the beginning of this next stage of appreciation of valuations.”
With BuzzFeed destined to become a public company, Peretti said he will have the money to accomplish his mission to raise the industry to build a digital media behemoth. “We now have a sustainable engine for growth. Especially if we can do M&A fast. It’s a scalable business,” he added.
He declined to name shooting targets, but said other digital media brands were “exciting.” In 2019 he said Vice, Vox Media and Group Nine were doing “an interesting job”.
Peretti has spent the past few years preparing to make BuzzFeed public to fund its planned spree. The chief executive last year drew up an IPO, but ruled out those plans once the pandemic hit. The company has weathered the coronavirus storm better than expected, ending in 2020 with $ 4m in net revenue, compared to a net loss of $ 29m in 2019.
As the market for special-purpose purchasing companies gathered steam, Peretti began to explore that path to becoming public more quickly. BuzzFeed last month agreed to merge with 890 Fifth Avenue, a blanket control company, giving its company a $ 1.2 billion valuation, under $ 1.7 billion BuzzFeed alone had ordered in a collection of private funds in 2016.
However, BuzzFeed has been hit by the slowdown in enthusiasm for Spacs in recent months.
Instead of private investment in public equity financing that has become the norm for the Spac business, BuzzFeed has raised an additional $ 150 million through convertible bonds led by Redwood Capital Management. It is because of a weaker interest from pipe investors who typically finance the Spac business, according to people close to the situation.
As part of the deal, BuzzFeed acquired Complex, the publisher behind the streetwear brand.
Vice Media has also been in discussions to become public through a merger with the special purpose purchasing vehicle 7GC & Co Holdings, they said people are aware of the matter.
Peretti’s task now is to convince investors that BuzzFeed can meet the financial forecasts it has presented, and become a sustainable and profitable company.
He has his work cut out. Investors have downgraded the ratings of digital media companies in recent years, reflecting the skepticism that they can still provide decent financial returns. Disney in 2019 announced all of its $ 400m investment in Vice.
In an investor filing filed with the SEC, BuzzFeed predicted that it should earn from $ 520 million this year to $ 1.1 billion by 2024. The company was first short of its forecasts, missing revenue targets in 2015 and 2017, the FT reported.
The group has announced its rapidly growing business activity, through which it sells BuzzFeed branded products ranging from spatulas to sex toys, and earns a commission for recommending other products sold online. Peretti predicts the business will account for 31 percent of all revenue by 2024, up from just 11 percent in 2019, and compared BuzzFeed to a digital shopping center.
“People are going [to the mall] even if they don’t know what they want to buy. They buy it as a form of entertainment and I think BuzzFeed understands that on the digital side, “he said.” A lot of economical business is about utility. BuzzFeed understands how to make it fun. “