BuzzFeed CEO Jonah Peretti stands in front of the Nasdaq marketplace website in Times Square as the company goes public through a merger with a special purpose acquisition company on December 6, 2021 in New York City.
Spencer Platt | beautiful pictures
BuzzFeed fell 39% in its first week of trading to close at $6.07 per share, a bad start for the outlook for mass-market digital media companies.
But even if its valuation is disappointing, Buzzfeed’s launch has given its peers something they didn’t have before: a publicly available market valuation comparison.
“Digital media doesn’t really have computers,” BuzzFeed CEO Jonah Peretti told CNBC in an interview. “For digital media reaching millennial or Gen Z audiences, we’re the only ones going public.”
If BuzzFeed’s stock eventually spikes, peer-to-peer companies like Vox Media, Vice Media, Group Nine, and Bustle Digital Group could try to list their own shares again. All four consider that route earlier this year, with varying degrees of severity. But when companies acquire special purposes, or SPACs, lost their call to invest around April, the industry has put the brakes on plans to issue shares to the public.
Only BuzzFeed was successful, and it didn’t go particularly smoothly. Initial investors committed $288 million in cash to the company’s SPAC withdrew 94% of it, instead of moving forward as a shareholder of BuzzFeed.
“We ended up talking to a lot of mass market investors who said we wouldn’t invest in SPACs anymore, but we still want to see you, so we’ll get to know you.” who you are when you go public,” Peretti said.
The CEO of Bustle Digital Group, Bryan Goldberg, said the critical level for BuzzFeed would be $15 per share. At $15 per share, BuzzFeed’s market cap would be around $2.25 billion. That approaches a transaction four times the revenue. BuzzFeed generated $161 million in revenue in the first half of 2021 and acquired Complex Media earlier this year, bringing in $53 million in the first six months.
Confidence in BuzzFeed’s future prospects could be the grease for the consolidation wheel. BuzzFeed would need outsider confidence in its equity to use it as a viable currency for acquisitions. If BuzzFeed can hold steady at a 4-fold revenue multiple, sellers will feel they’re getting a fair price, Goldberg said.
“Four times the revenue should be the default,” says Goldberg. “But it could take six to eight months to get there.”
Goldberg said the fourth-quarter digital ad revenue numbers will not be good. Supply chain disruptions have limited ad spending, he said. That could put more pressure on BuzzFeed stock. A six-month lockdown for investors can also lead to a rush sale as investors are free to sell, he said.
“I have a particularly well-informed view of what digital ad sales will look like in Q4 and 2022,” Goldberg said. “I think digital advertising will have a fourth quarter of 2021. difficult. But I think 2022 will be clear skies.”
Recalibration can still be helpful
Even if BuzzFeed doesn’t add value, digital media companies can still use it as a solid comparison in an industry that hasn’t. Peer-to-peer companies may not be able to go public, but BuzzFeed’s stability at any price should help the industry understand the true value of companies.
“For the past five years, digital media has suffered from the absence of a publicly traded company,” says Goldberg.
During that time, BuzzFeed, Vox, Vice and Group Nine have held merger talks directly with each other, in various combinations, according to people familiar with the matter. Raised money at a high valuation – $1 billion for Vox Media, $1.7 billion for BuzzFeed, and a giant $5.7 billion for Vice Media – companies that need scale to demonstrate to public investors and potential acquirers they can compete with Google and Facebook for advertising money.
Industry consolidation has been hampered by two factors: The founder’s ego and value agreement.
Without public market comparison, setting valuations would have been a leap of faith. Vice Media was posters for private valuations soar. While Vice valued itself at $3.6 billion in 2019, it tried and failed to list this year as SPAC investors showed little interest in the company. Appreciating yourself in the absence of a viable exit strategy is one meaningless exercise – you can say your house is worth 278 million dollars, but that doesn’t mean someone will pay that amount.
Maybe BuzzFeed can’t be used as an exact proxy for every digital media company, but it’s probably enough to make bold comparisons to make private transactions more viable.
The second problem is more difficult to solve, as the leaders of most major digital media startups want to be the instigators, rather than being caught up in a consortium run by someone else. .
Now that it’s public, BuzzFeed says it will begin rolling out the industry. But the speed of consolidation will depend on the personalities of those in charge, according to people familiar with the matter.
Jonah Peretti, founder and CEO of Buzzfeed; co-founder of the Huffington Post
Courtesy of Ebru Yildiz / NPR
Major digital media players feel they have particular expertise in acquiring and integrating companies, the people who requested anonymity said because the acquisition discussions were private.
Vox Media bought New York Media, owner of New York Magazine, in September 2019. Vice Media announced they bought Refinery29 for $400 million a few days later. A week later, Group Nine announced the acquisition of PopSugar. Bustle Media Group has purchased several media companies, including Gawker, Mic, Nylon, The Outline and Flavorpill, in recent years. Goldberg told CNBC he intends to be a buyer, not a seller.
For its part, BuzzFeed acquired HuffPost in 2020 and bought Complex Networks for $300 million as part of the SPAC merger.
Then there’s a bunch of upstarts who might not be playing with. Companies like Axios and Information There are no overwhelming obligations to investors like their venture-backed peers and are looking for steady subscription revenue. Their founders are not currently interested in acquisition offers based on the strength of their own business model, according to people familiar with the matter. Startups like Punchbowl and Puck, which has few employees, may have little need to sell if they can stay profitable through subscription fees.
“BuzzFeed still has a lot of haters,” said one digital media executive, who requested anonymity to avoid possible retribution.
However, many of the same competitors are now making up BuzzFeed’s success. If BuzzFeed’s stock moves higher and management wins over Wall Street, they’ll have more options.
“I’ve heard it from other company executives: We’re supporting you,” Peretti said.
If stocks don’t rally, Peretti will focus on running a profitable company and proving to Wall Street the value of digital media.
Goldberg, meanwhile, will buy BuzzFeed stock.
“I just bought a ton of BuzzFeed stock for $6.00,” Goldberg said. “If it drops, I’ll actually reverse the truck.”
