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BuzzFeed founder Jonah Peretti pledged to adopt more financial discipline than in the past, as he set out plans to consolidate the digital media industry once he made his company public through a blank check vehicle.
Referring to the period between 2014 and 2016, when digital media groups such as BuzzFeed raised billions of dollars after winning younger audiences, Peretti told the Financial Times: “There were many missionary-type founders who … invested in news beyond where revenue could support them ”.
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 think I learned from this error … more short-term financial discipline is needed to ensure it grows sustainably. ”
BuzzFeed, known for its articles and questionnaires that can be shared, is part of a generation of digital media groups that experienced an impressive experience. get up and fall during the last decade. Investors have sunk into these companies in recent years because they have not been able to match advertising with financial performance, resulting in a period of redundant valuations and redundancies.
Peretti hired journalist Ben Smith in 2011 to carry out a serious journalistic operation and the group recently received its first Pulitzer Prize. However, BuzzFeed News has implemented several rounds of layoffs in recent years, as Peretti sought to reduce costs. The company closed BuzzFeed’s British and Australian divisions last year.
Peretti expects BuzzFeed News to produce a “modest loss” this year and eventually achieve profitability, while HuffPost, which it acquired this year, is going to make a profit this year, he said.
The 47-year-old also predicted a possible rise in digital media ratings. “The market was very hot, but no one had created sustainable companies yet, including BuzzFeed,” Peretti said. “Now the strongest companies are emerging on the other side. We are at the beginning of this next stage of appreciation of the valuations ”.
With BuzzFeed about to become a public company, Peretti said he will have cash to accomplish his mission to develop the industry to build a digital media giant. “We now have a sustainable engine for growth. Especially if we can make quick mergers and acquisitions. It’s a scalable business, “he added.
He declined to name acquisition targets, but said other digital media brands were “exciting.” In 2019 he said Vice, Vox Media and Group Nine were “doing interesting work”.
Peretti has spent the past few years preparing to make BuzzFeed public to fund its planned offerings. Last year, the chief executive plotted a IPO, but dismissed those plans once the pandemic hit. The company weathered the coronavirus storm better than expected, and ended 2020 with $ 4 million in net revenue, compared to a net loss of $ 29 million in 2019.
As the market for special purpose acquisition companies gained momentum, Peretti began to examine this route to make it public more quickly. Last month, BuzzFeed agreed to merge with 890 Fifth Avenue, a blank check company, which gave its company a $ 1.2 trillion valuation, below the $ 1.7 billion BuzzFeed alone had ordered. in a private fundraiser in 2016.
However, BuzzFeed has been affected by the slow enthusiasm for Spacs in recent months.
Instead of private investment in public equity financing that has become the norm for Spac operations, BuzzFeed raised an additional $ 150 million through convertible bonds led by Redwood Capital Management. This was due to weak interest from investors in pipelines that normally fund Spac’s operations, according to people close to the situation.
As part of the deal, BuzzFeed acquired Complex, the publisher of the streetwear brand.
Vice Media has also been in talks to make public a merger with the 7GC & Co Holdings special-purpose acquisition vehicle, people familiar with the matter said.
Peretti’s job now is to convince investors that BuzzFeed can meet the financial forecasts it has set and become a sustainable and profitable company.
He has his job cut out. Investors have downgraded digital media companies ’valuations in recent years, reflecting skepticism that they can always get decent financial returns. Disney in 2019 canceled all of its $ 400 million investment in Vice.
In an investor filing filed with the SEC, BuzzFeed predicted that it would double its revenue from $ 520 million this year to $ 1.1 billion in 2024. The company has previously been lower than forecast. missing revenue targets in 2015 and 2017, according to the FT.
The group has promoted its fast-growing business, through which it sells BuzzFeed brand products ranging from spatulas to sex toys, and earns a commission for recommending other products sold online. Peretti predicts the trade will account for 31% of all revenue by 2024, up from just 11% in 2019, and compared BuzzFeed to a digital mall.
“People are going [to the mall] even if they don’t know what they want to buy. They understand it as a form of entertainment and I think BuzzFeed has discovered it digitally, ”he said. “Many e-commerce services are useful. BuzzFeed has figured out how to make it fun. “
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