Building out our multi-revenue model
BuzzFeed delivered another record year in 2017, continuing to grow our revenue and total audience. But it wasn’t easy.
The media is in crisis. Google and Facebook are taking the vast majority of ad revenue, and paying content creators far too little for the value they deliver to users. This puts high-quality creators at a financial disadvantage, and favors publishers of cheap media: fake news, propaganda and conspiracy theories, quickly re-written stories with sensationalistic spin, shady off-shore content farms, algorithmically generated content, and pirated videos.
This economic impasse poses a deep threat to society in a time when political and cultural polarization are deeper than ever, fracturing our shared sense of reality. The big tech platforms enable personalized media bubbles that let us live in our own worlds, while traditional media companies are embracing subscription models geared toward affluent subscribers, reinforcing the existing worldview of elites. Our media ecosystem is increasingly fragmented, and as a result the broader public is increasingly walled off from quality journalism and compelling entertainment. The future of democracy and culture depends on publishers and platforms working together to solve these problems.
As the largest independent digital media company, we’re at the nexus of these problems — and while that puts a strain on our business, it also puts us in one of the strongest positions to help. In overcoming the challenges facing our business, we have the opportunity to help reshape the media ecosystem and have a positive, lasting impact on society. I’m writing today to share our plan for continuing to thrive and lead the media industry forward.
Fixing the Relationship Between Media and Tech
First, we have an opportunity to help fix the relationship between media and the big tech platforms. As the big tech platforms struggle with low-quality, objectionable and abusive content, professional content publishers struggle to get paid fairly for their work. There is an easy fix to these related problems: the platforms should reward valuable content. This shift is inevitable because it is in everyone’s interests to fix the digital media ecosystem: the tech platforms get better content, the media industry gets a sustainable digital model, and the public gets quality news and entertainment.
We are beginning to see this shift, but we will have to continue to fight hard to get paid our fair share. Creating quality content is our best weapon in this fight — we’ll double down on strong journalism; lifestyle brands with distinct, meaningful positions; new formats and more of the classic BuzzFeed articles, lists and quizzes that connect with our audience. In the short term, the ecosystem favors reducing content costs and a race to the bottom, but we are focused on the long term. In the long run the best content will win.
Evolving to a Multi-Revenue Model
In 2018 we expect platform revenue to grow significantly. Here’s the direct revenue we’ve generated from Facebook, Amazon, Netflix, and Google over the past four years:
This is an encouraging trend but we won’t just wait for a windfall of platform revenue to come our way. We will continue to build out a multi-revenue model to compliment our advertising business.
In recent years, digital media has endured a hype cycle promoting various contenders for the “one true business model” for the industry. Some advocated native advertising, others programmatic; some focused on integrating content with commerce, others hyped the “pivot to video” or traditional TV development models; some chased mass scale while others advocated strong subscription niches.
The reality is more complex; there isn’t one perfect model for digital media. The best media companies generate revenue from many sources, tapping a combination of advertising, subscriptions, studio development, brand licensing, and merchandising. As digital media matures, the best digital media companies will build diversified businesses with many revenue streams and do it wielding the inherent advantages of digital to be more audience-focused, data-driven, efficient and global than the big conglomerates.
We’re already seeing firsthand that there are more ways to generate revenue from digital media than ever before. In 2017, about a quarter of our revenue will come from outside our direct sold advertising business. In 2018 this will grow to about one third of our revenue, and to around half of our revenue in 2019. Increasingly, we are creating content and brands that generate revenue from many different sources: commerce, advertising, platform revenue, and show development. Tasty is a great example, look at all the ways that business is generating revenue:
Building a Portfolio of Strong Brands
We are pursuing the Tasty model of success across our business, and will accelerate our work building strong digital brands that connect with people’s actual lives with the creation of BuzzFeed Media Brands.
In the past, consumers were loyal to brands — brands created distant, aspirational images and we strived for them. Increasingly, the balance of power has shifted and consumers have more control. Today, brands need to be loyal to consumers. The companies with the strongest brands are the ones providing service to consumers by touching their lives every day. We’ve used our footing in digital and data to rapidly build some of the best-known brands in media, rivaling ones that that have invested hundreds of millions in marketing over decades to build equity. Nine out of 10 millennials know BuzzFeed and BuzzFeed News. The Tasty brand is a relative newcomer in food media, but is the most liked media brand on Facebook and reaches more people globally than any other food network.
The meteoric rise of Tasty gives us signal on a distinct consumer need: in an increasingly polarized environment, the world needs shareable content that exists outside of political discourse, that brings people together around common interests, and improves people’s lives through service. Tasty is a great example of a brand that does all these things, for a diverse population with a shared passion for food. We are expanding this model into other core verticals, investing more in building Nifty for home; Goodful for health and wellness; and launching a new beauty and style brand with a mission of helping everyone express their personal style. Tasty was just the start; there is so much more we can do, building brands the modern way, and helping people connect around shared passions.
Organizing for the Future
We are creating a new organizational structure to better deliver on our strategy combining strong brands with multiple revenue sources. Within that structure, each of our core content engines — BuzzFeed and BuzzFeed News, along with Tasty, Nifty, Goodful and a growing portfolio of lifestyle brands in BuzzFeed Media Brands — will grow revenue in each of our core revenue streams: advertising, commerce, and studio development. This will lead to many new opportunities, some of which are highlighted in the diagram below:
In 2018, we’ll more tightly align our content teams with these business opportunities, and drive growth at every intersection. Everyone at BuzzFeed should be able to see how their work directly contributes in at least one area, and teams like Tech, Product, Marketing, Research, Legal, Communications, Finance, and People will drive collaboration across the grid. Working together, we will build scale, strengthen audience connection, and generate more revenue in each box.
We’ve made strong progress in diversifying our business across 2017. We transformed our ad offering through the BuzzFeed Audience Engine, the introduction of turnkey ad products like BuzzCuts and programmatic. We've closed record deals in international markets from Coca Cola in Mexico City, to Tourism Australia, to Nestle in Brazil. We built a commerce business from scratch, from the Tasty One Top to Social Sabotage to fast-selling merch for series like Unsolved and Ladylike, and are increasingly moving into lucrative licensing partnerships. And we’re developing more original series than ever, from hits like AM to DM and Unfortunatly Ashly to a slew of projects for external partners like series by Quinta for Facebook and Kelsey for NBCU.
We did all of this and more in a single year, while growing revenue and total audience. To be sure, that didn’t translate into as much revenue growth as we would’ve liked. A lot of onlookers want to take that as a sign of the digital media apocalypse, but in truth it’s something a lot simpler (that doesn’t make for as good a headline): we’re growing up. We’ve outgrown the ability to build our business on essentially a single, very distinct revenue stream. We’ve matured into a portfolio of news and entertainment brands that attract very different audiences and can support diverse businesses. We all need to embrace this change, while fiercely protecting and strengthening the experimental, curious, fun and diverse culture that drives our success.
We’re operating in a tough environment for media, but it is within us to be the big winner. Our path forward will clear the way for others as well. We will work to help fix the broken relationship between media and tech, while diversifying our business and growing our portfolio of brands. As we solve these problems, we’ll not only emerge a stronger company, we’ll continue to help lead media into the digital future, connect people, and strengthen democracy and culture.
At tomorrow’s all hands, I’ll share more about this strategy and what it means for you and your teams. And early next year, I’ll set up nine meetings, one for each box, to discuss how we can work together to drive growth and build the future. Can’t wait to see you all to discuss this more.
I’m continually impressed by your analytical minds, creativity, hard-work, and resilience. It is an honor to work alongside you building the future of media.