Last week, BuzzFeed raised $50 million from Andreessen Horowitz, pinning the company at a whooping $850 million valuation. Challenged traditional investor beliefs/thesis so far.
Anyone who has a Facebook account would have come across BuzzFeed and it’s infamous listicles. BuzzFeed started out with lightweight content like listicles, memes and cat photos, which led to many industry observers to dismiss it as just another click bait farm.
You might be thinking, how then, did it command this kind of valuation and draw interest from the likes of Andreessen Horowitz?
Related Article: BuzzFeed Gets $200 Mn From NBCUniversal; Valuation Reaches $1.5 Bn
The company has since grown rapidly, keeping technology at it’s core. It now has an editorial staff of over 200 people covering a wide range of topics – politics, sports, business, entertainment, travel, etc – and plans to invest significantly more in high-quality content in the coming years.
Its 100+ person tech team has created world-class systems for analytics, advertising, and content management. Everything is built for mobile devices from the outset.
It now reaches over 150 million people per month, is consistently profitable, and will generate triple digit millions in revenues this year.
Journalism has Changed
“I am more bullish about the future of the news industry over the next 20 years than almost anyone I know. You are going to see it grow 10X to 100X from where it is today. That is my starting point for any discussion about the future of journalism” — Marc Andreessen
Analysed as a business, the news industry is going through a fundamental restructuring and transformation, for worse and for better.
The main change is that news businesses pre-2005 were mostly monopolies and oligopolies which meant restricted choice and overly high prices. In other words, the key to the old businesses was control of distribution.
Now, with everyone on the Internet, there is no monetary premium for control of distribution. Anyone can create and distribute. Formerly separate industries are now colliding on the Internet. It’s newspaper vs magazine vs TV channels vs online publications. Now they all compete. Both these phenomenons are driving down prices.
At the same time, the market size is dramatically expanding — many more people consume news now vs. 10-20 years ago. Many more still will consume news in the next 10 to 20 years. If you extrapolate from the number of smartphones globally, the total addressable market for news by 2020 will be around 5 billion people worldwide.
Right now everyone is obsessed with slumping prices, but ultimately, the most important dynamic will be the increasing volume. The big opportunity for the news industry in the next five to 10 years is to increase its market size 100x AND drop prices 10x.
News & Media Businesses – Deals & Acquisitions
|Company||Total Funding (Mn)||Valuation (Mn)||Founded In (Year)||Sold In (Year)||Acquisition (Mn)||Acquired By|
|The Next Web||1||–||2008||–||–||–|
|Washington Post||–||–||1947||2013||250||Jeff Bezos|
|First Look Media||50||–||2012||–||–||–|
|Bleacher Report||40.5||–||2007||2012||175||Turner Media|
More and more VC and institutional money is going to enter into this business as more investors finally see this opportunity.
The future looks bright for the news business, particularly those that are adopting and growing with new technologies and innovating.