Is BuzzFeed Worth $1 Billion?

Three analysts tackle the question

Murmurs were heard across Web when the rumor came out that Disney attempted to buy BuzzFeed earlier this year, but then backed away after the viral purveyor asked for about $1 billion.

A startup asking for the b-word isn’t a foreign concept in today’s market. In April 2012, Facebook forked over $1 billion for Instagram. Just this past February, the Palo Alto, Calif. company opened up the money bags again and forked over $16 billion for texting application What'sApp. Yahoo brought Tumblr on board for $1.1 billion.

Does BuzzFeed belong in the billionaires club? BIA/Kelsey vp of strategic consulting Jed Williams told Adweek that it depends which numbers you use. On pure profits alone, startups simply don't add up to much, he said. Other factors, including time on site, level of engagement and ability to disseminate content can bump that figure way up. And, the New York Times reported that it was BuzzFeed's ability as a "content-dissemination service" that had the Mouse interested.

Back in January 2013, the Wall Street Journal reported that CEO Jonah Peretti said his company was worth a lofty $1 billion after it raised $19 million in venture capital. However, one source pegged the New York based company closer to a more modest $200 million.

"If you look at their revenue for the next 12 months and their projected revenue for the next 12 months, a billion dollars is going to be a different conversation… If you look at what they can do for overall distribution, it becomes a more compelling figure," Williams said.

Andrew Frank, a vp distinguished analyst at Gartner, added that it's hard to give BuzzFeed a dollar figure, but the $1 billion number thrown out there isn't "outrageous."

"It's probably fair to say most valuations of digital media companies that are mostly about audience are all over the map. We’re often shocked at how high they are some times, but sometimes they are worth it," he commented.

Frank added that even in the pre-Web days hip companies like ESPN were able to pull in huge valuations. "In media, there’s always high stakes, high risk and high rewards," he said.

Forrester principal analyst James McQuivey was more adamant that BuzzFeed would never be worth $1 billion simply because the majority of it’s content simply isn’t original.

"That's because the problem with all news sites is roughly the same, whether it's the Washington Post or the Huffington Post: When you deal in news that turns over multiple times a day, there's no value to the archive, all you have is your ability to be in the moment—and it's a very crowded, noisy moment full of the Mediums, Voxes and others who want to add their low-cost voice to the din," he explained. 

McQuivey pointed out that Disney tends to pick companies that produce original work with future value, like Maker Studios. The entertainment conglomerate acquired the online production company for $500 million plus a $450 million earn out at the end of March.

"Buzzfeed doesn't offer that—though the latest 13 top exercises to get celebrity abs has some shelf life, it competes with a thousand other things of similarly lightweight value," he said. "That's not to suggest that the site isn't worth hundreds of millions of dollars, but to get to the billion dollar range it would have to have something that other people do not."