Why Buzzfeed Doesn’t Make Money

Buzzfeed has never made a profit in 13 years, after being in business that long it is hard to claim you are still a start-up, or as they put it in a statement accompanying the late filing of the UK subsidiary’s annual accounts “still in investment mode”. Which is another way of saying “still losing money”.

The UK subsidiary has quadrupled losses, turnover slumped 35% to £21.6 million, which they say was due to “intercompany revenue” from parent company BuzzFeed Inc. dropping £14.8 million. Whatever those financial shenanigans were they have come to an end. Investors will marvel at how Buzzfeed has burnt through over $500 million of their money which they will never get back.

The pivot to video which was Buzzfeed’s big bet doesn’t appear to be paying any dividends in the UK at least, nor will it until advertisers value the audience. If as, Guido suspects, they have a primarily youthful audience they will not be able to command rates much above Facebook, which means thin margins. Guido has been trying to figure out how to make video or podcasts commercially viable and concluded that until advertisers create audio or video content that needs distribution to his audience, it just won’t be profitable. The Spectator uses their excellent podcast output as a gateway drug to becoming a subscriber, Business Insider and HuffPo are generating significant revenue with sponsored videos. The Economist is very successfully monetising their podcast audience to the tune of millions from corporate advertisers. The Economist demonstrates that if advertisers can be shown you have a valuable audience, they will pay. Buzzfeed’s problem is that their audience is the same “trash audience” that can be bought off Facebook or Google for pennies…

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