BuzzFeed

Today, I’m excited to announce that Andreessen Horowitz is investing $50 million in BuzzFeed. As part of the investment, I’ll be joining the company’s board.

Many of today’s great media companies were built on top of emerging technologies. Examples include Time Inc. which was built on color printing, CBS which was built on radio, and Viacom which was built on cable TV. We’re presently in the midst of a major technological shift in which, increasingly, news and entertainment are being distributed on social networks and consumed on mobile devices. We believe BuzzFeed will emerge from this period as a preeminent media company.

BuzzFeed started out focusing on lightweight content like memes, lists, funny photos, etc. This led some industry observers to dismiss Buzzfeed as a “toy”. The company has since moved steadily up market, following the typical path of disruptive technologies. 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.

We see BuzzFeed as a prime example of what we call a “full stack startup”. BuzzFeed is a media company in the same sense that Tesla is a car company, Uber is a taxi company, or Netflix is a streaming movie company. We believe we’re in the “deployment” phase of the internet. The foundation has been laid. Tech is now spreading through every industry and every part of the world. The most interesting tech companies aren’t trying to sell software to other companies. They are trying to reshape industries from top to bottom.

BuzzFeed has technology at its core. Its 100+ person tech team has created world-class systems for analytics, advertising, and content management. Engineers are 1st class citizens. Everything is built for mobile devices from the outset. Internet native formats like lists, tweets, pins, animated GIFs, etc. are treated as equals to older formats like photos, videos, and long form essays. BuzzFeed takes the internet and computer science seriously.

As a small, early investor in BuzzFeed, I got to observe firsthand how effectively Jonah and the team executed in recent years. The results speak for themselves: BuzzFeed now reaches over 150M people per month, is consistently profitable, and will generate triple digit millions in revenues this year. I believe the future of BuzzFeed – and the media industry more generally – will only get brighter as the number of people with internet-connected smartphones grows, and the internet solidifies its place as the central communication medium of our time.

 

BuzzFeed’s strategy

BuzzFeed’s CEO, Jonah Peretti, recently sent out an email to employees and investors summarizing the company’s strategy and progress. I really liked his email so I asked Jonah if I could blog it and he gave me permission. This isn’t just the usual cheerleading email – there is a real strategy here (I especially like the strategy choice in section 3), and it’s working.

I’m an investor in BuzzFeed and friends with Jonah so of course I’m biased. But to me what makes BuzzFeed great is their highly unusual combination of capabilities and sensibilities – the capabilities of a first-rate tech startup with the sensibilities of media industry veterans. I think Jonah’s email captures this well.

From: Jonah Peretti 
Subject: The Top 7 Reasons BuzzFeed Is Killing It
To: BuzzFeed Employees 

Hello BuzzFeeders,

As you just heard at the all hands meeting, things are going great at BuzzFeed. We passed 30M unique visitors last month, our revenue is on pace to be more than 3 times what we did in 2011, we have grown from 26 full-timers at the start of last year to 117 today, and we have published entertaining and important stories enjoyed by millions of people.  Our revenue is surging as brands shift their budgets to social ads and our recent growth is driven more by revenue than VC funding – an amazing milestone for any startup. We still have a long way to go but it has been a great year so far.

Whenever a company has this kind of success the press, competitors, and the public start asking: “how do they do it??!?”  Unfortunately, this speculation is often unkind and unfair.  The default assumption is that a company must be cheating somehow or using some trick to grow traffic or revenue.

This skepticism is actually justified because many startups actually do use tricks or shortcuts to succeed.  Some companies figure out ways to juice their numbers so they can quickly sell for millions and then a year later it all comes crashing down.  The dotcom era was as famous for Geocities, Broadcast.com, and Pets.com as it was for Amazon, Yahoo, or eBay.  Based on industry precedent, it is understandable that people are skeptical when a startup starts to really take off.

Nevertheless, BuzzFeed has received a very positive reception from the public, readers, our partners, and the press. But occasionally someone engages in uninformed negative speculation about us, mostly because they are confused about what we are doing.  This confusion is likely to increase in the future. As we grow it is important that we help people understand what we are doing and why it is interesting and different.

In that spirit, I want to share some of my thoughts of about why things are going well, why our success is based on hard work and a unique approach, and how you might explain what we are doing to a drunk, misguided hater at a party.

 

Why BuzzFeed Is Succeeding Right Now?

1) Long Term Focus 

When you compare web publishing today with what Hearst and Conde Nast built in the last century, it is clear that online publishing has a long long way to go.  As sites like Facebook and Twitter mature, the moment is right to build a defining company for a world where content is distributed through sharing and social media instead of transitional print and broadcast channels. Why shouldn’t we be one of the companies that builds this future?

This big opportunity is why we are focused on building an enduring, independent, and self-sustaining company. Nobody has built a truly great publishing company for the social age and we have a good shot to be the ones who do it. But it means that we can’t take short cuts, we need to always invest in the future, and this is why we spend so much time and money building technology and products that don’t have an immediate impact on the company but will help us down the road.

We could juice our traffic and revenue by dropping everything and focusing entirely on the short term.  And that is what companies do when they are trying to flip for a fast payday. But when you are building something enduring, you have to care as much about next year as you do about next week.  That is how you build something big and that’s our goal.

2) Respecting our Readers 

We care about the experience of people who read BuzzFeed and we don’t try to trick them for short term gain.  This approach is surprisingly rare.

How does this matter in practice? First of all, we don’t publish slideshows. Instead we publish scrollable lists so readers don’t have to click a million times and can easily scroll through a post. The primary reason to publish slideshows, as far as I can tell, is to juice page views and banner ad impressions.  Slideshows are super annoying and lists are awesome so we do lists!

For the same reason, we don’t show crappy display ads and we make all our revenue from social advertising that users love and share.  We never launched one of those “frictionless sharing” apps on Facebook that automatically shares the stories you click because those apps are super annoying. We don’t post deceptive, manipulative headlines that trick people into reading a story.  We don’t focus on SEO or gaming search engines or filling our pages with millions of keywords and tags that only a robot will read.  We avoid anything that is bad for our readers and can only be justified by short term business interests.

Instead, we focus on publishing content our readers love so much they think it is worth sharing. It sounds simple but it’s hard to do and it is the metric that aligns our company with our readers. In the long term is good for readers and good for business.

3) We Build The Whole Enchilada  

Most publishers build their site by stapling together products made by other companies. They get their CMS from one company, their analytics package from another, their ad tech from another, their related content widgets are powered by another, sometimes even their writers are contractors who don’t work for the company. This is why so many publisher sites look the same and also why they can be so amazingly complex and hard to navigate.  They are Frankenstein products bolted together by a tech team that integrates other people’s products instead of building their own.

At BuzzFeed we take the exact opposite approach. We manage our own servers, we built our CMS from scratch, we created our own realtime stats system, we have our own data science team, we invented own ad products and our own post formats, and all these products are brought to life by our own editorial team and our own creative services team. We are what you call a “vertically integrated product” which is rare in web publishing. We take responsibility for the technology, the advertising, and the content and that allows us to make a much better product where everything works together.

It is hard to build vertically integrated products because you have to get good at several things instead of just one.  This is why for years Microsoft was seen as the smart company for focusing on just one layer and Apple was seen as dumb for trying to do everything.  But now Apple is more than twice (!) as valuable as Microsoft and the industry is starting to accept that you need to control every layer to make a really excellent product.  Even Microsoft and Google has started to make their own hardware after years of insisting that software is what matters.

BuzzFeed is one of the very few publishers with the resources, talent, and focus to build the whole enchilada.  And nothing is tastier than a homemade enchilada.

4) We Are Doing Something Hard 

Vertical integration means we have to be good at lots of things which is hard.  But doing something hard can actually be an advantage for a business.  It means that there are not that many other people trying to do what we do or capable of doing what we do.  For example, venture capitalists don’t like funding companies that have reporters on staff.  In the early days of BuzzFeed, I had several VCs say they were interested in investing if we could figure out a way to fire all the editors and still run the site. I’m not joking.Tech investors prefer pure platform companies because you can just focus on the tech, have the users produce the content for free, and scale the business globally without having to hire many people.  Startups that promise this vision have an easier time attracting funding which is why there are so many startups trying to be the next Twitter or Facebook or the Instagram or Pinterest for X, Y, or Z.  Meanwhile, companies that employ reporters, editors, and creative people usually struggle to get funding which is why so few publishing companies or agencies are venture backed.

Fortunately, we have been able to convince a few, smart contrarian investors to back our business including NEA, the biggest venture fund in the world.  As one of the few venture backed publishers, we are in a unique position to be one of the leading creators of web content crafted by true professionals. There are lots and lots of things that random, unpaid web users suck at doing.  In particular, the best reporting and the most entertaining media is usually created by people who do it for a living – that means us!

5) We Got Lucky!

A big part of our recent success has also been luck.  People don’t like to admit it but skill is 63% luck.

In our case, we got very lucky with timing.  We were a company focused on making content for people to share just as the social web came of age, at the moment when Facebook and Twitter and other platforms reached scale, and at exactly the moment when it became possible to build a big publishing company through social distribution.

This same lucky shift made our business model work for the first time.  A couple years ago, we were trying unsuccessfully to sell social advertising to a market that only wanted to buy banners but things have changed dramatically since then.  Now many agencies and brands are refusing to buy banners, companies that rely on traditional display units are suffering, and budgets are shifting rapidly to social advertising. One of our board members, who was initially skeptical of our decision to not run banners, recently said that “social advertising will be the biggest media business since cable television.” Times have changed.

Now we are leading the market, which is a huge opportunity, but it was pure luck that a social advertising market even exists for us to lead.  It’s like we happened to start surfing a few minutes before a great wave rolled in.  Or we built a locomotive and a few days later the train tracks got built. We were obsessed with social content and ads before anyone else cared and it was extremely lucky that the world shifted toward us when it did.  The question now is how well we capitalize on our good fortune.

6) We Don’t Treat Half Our Team Like Losers

BuzzFeed is unique in that we are equally obsessed with 1) entertaining content, 2) substantive content, and 3) social advertising.  The teams that focus on each of these areas are equally important which is a key part of our success. We want our cute animals, humor, and animated gifs to be the best of their kind on the web – they aren’t just a cheap way to generate traffic.  We want our reporters to have the best scoops, the smartest analysis, and the most talked about items – they aren’t just a hood ornament to lend the site prestige. And we want our advertising to be innovative, inspiring, and lead the shift to social – and not just be a necessary evil that pays the bills.

Some companies only care about journalism and as a result the people focusing on lighter editorial fare or advertising are second class citizens.  Some companies only care about traffic which creates an environment where good journalists can’t take the time to talk to sources or do substantive work.  Some companies only care about ad revenue and actually force editors to create new sections or content just because brands want to sponsor it.

People don’t do good work when they feel like losers and are second class citizens within their own company.  Fortunately we have avoided that problem.  We love the silly, we love the substantive, and we love making advertising that is actually compelling.  And when we are good at these three things it benefits everyone and the world.

7) Our Awesome Team 

This next one will sound a bit cliche and sappy, but a huge reason we are doing well now is…….you.  We have an amazing team of extremely talented people who really know what they are doing.

We have a group of culture editors who are insanely tapped into the flow of culture on the web, from 4chan to Reddit to Tumbler to Twitter to Pinterest to blogs to pop culture to memes and know how to add their own ideas to the mix and create entertaining posts that people love to share.

In just the past 6 months (!), we have assembled an incredibly talented group of reporters and writers who are regularly breaking news, unearthing scoops, advancing ideas, and engaging business leaders, US Senators, Presidential candidates, the White House, and leading media outlets. Politics was our first vertical and has already become THE defining outlet of the 2012 presidential campaign and the newer verticals are already on their way to owning there respective areas.

Our teams focused on social advertising are totally killing it, with a consultative sales team full of ideas for clients, a creative services team making incredibly entertaining and sharable ads, a social discovery team expanding campaigns to Facebook, Twitter, and across the web, and an ad ops team that traffics our campaigns with skill, grace, and dogged determination – it’s not surprising we are blowing away all our revenue goals. Gong!

And finally the tech, product, and data teams are inventing and building an unparalleled social publishing platform that powers everything we do, including a massive non-relational realtime stats database that tracks billions of data points for our Social Intelligence Report (launched today!), machine learning system for predicting viral hits, elegant publishing tools for editors, and a beautiful front end design that is continually tested, improved, and evolved with the benefit of smart multivariate testing.

You rock and you keep getting better and better with each passing day.  It is really amazing to watch.

But Success Is Fragile…

It’s easy to get excited and arrogant when things are going well but it is important to remember that success is very fragile.  Digg sold for $500K after being worth $200 million just a few years ago. In the same time period, RIM, maker of the Blackberry, lost 95% (!) of its value.  There is continual disruption in our industry and you are likely to fail if you get complacent or stop evolving.

This is why we met today to discuss our “Next Level” plans and why we are always focused on pushing what we do to the next level.  We have done amazing work in the past year and we should all feel proud.  But to thrive in the future, we need to stay humble, enjoy the journey, and continually evolve and improve.

I’m really looking forward to the rest of the year.

Thank you all for doing such inspiring work.

Blogging to learn

People blog for all sorts of reasons. For me, it is mostly about learning. This wasn’t my original intention – it evolved over time. Now I see blogging as part of a continuous learning process:

– Start every morning by skimming through news, blogs, articles, etc. Much of this is tech related. I used to get tech news in the newspaper, then in Google Reader, and now mostly from Twitter. If someone I meet mentions something interesting that was published that I didn’t read, I go back and figure out how I missed it and change who I follow on Twitter so it doesn’t happen again.

– Try to meet with interesting people during the week. The reason being up on tech news is important is so that we can get the most out of the meetings. Often we’ll talk about whatever each of us is working on at the time but it’s also good to have news or blog posts as shared reference points. This makes the meetings more interesting for everyone.

– Try to learn at least one interesting thing each week and then blog about it. Then see how people react in comments, on Twitter etc. I guess some bloggers don’t like comments but for me they are the crucial so that I can get feedback on new hypotheses. Blogging new hypotheses also means a decent portion of your blog posts need to be ignored or ridiculed. Otherwise you are playing it too safe.

Experiment: blog in Kindle book form

There is an amazing amount of useful, free information available on tech blogs for fledgling tech entrepreneurs (this list is a great place to start). I think sometimes we techies forget that this wealth of content is unknown to the non-startup world. I was reminded of this recently when I met a first-time entrepreneur who said when he was first starting out he tried finding books on Amazon, Googling for stuff etc. He described it as an epiphany the first time he stumbled upon Fred Wilson’s blog, which then led him to Brad Feld, Mark Suster, Eric Ries, Venture Hacks, etc.

So this weekend I thought I’d try an experiment. I took about 100 of my blog posts (the ones that I thought were most “evergreen”), bundled them as a PDF and submitted them to the Kindle Store. The Kindle submission process was surprisingly easy. You give your book a name and upload the PDF and then choose pricing.  They force you to charge a minimum of $0.99.  Also, strangely, if you charge less than $2.99, Amazon takes 70% of the revenue, but if you charge between $2.99-$10 they only keep 30%.

I decided to price my book at $2.99 and donate all of the proceeds (~$2 book) to HackNY, a non-profit that “keeps the kids off the Street” (encourages college students to join/start tech startups instead of working on Wall Street). All of the content in the book is available for free on cdixon.org. The only reason to buy the book is to get this blog in a different format and to support a good charity. It is available in the Kindle Store here.

I don’t expect many people to buy the book but maybe some first-time entrepreneurs will stumble on it and from there discover more tech blogs. Think of it as “Kindle SEO” for tech blogs.

Finally, I am having trouble getting the links to work on the Kindle version. I’m not sure if this is an Amazon policy or if I am just doing something wrong (the links work fine in the PDF I uploaded to Amazon). So here is an alternative version on Scribd that has working links.

Apple and the TV industry

The TV industry is a major segment of the consumer electronics industry and Apple is the leading consumer electronics company in the world. Thus far Apple has entered the TV market with a stand-alone device, Apple TV. There has been speculation about whether Apple might enter the TV market by creating an actual TV. The most convincing objections to that idea cite the unfavorable industry structure: the power of the cable operators, the low margins on TVs, the infrequency of people buying new TVs, etc.

I thought it would be interesting to go back and look at the reasoning analysts used to predict the failure of the iPhone before its launch in 2007. Some predicted it would fail because the other handset makers would successfully compete with Apple:

The iPod also conquered the problem of small screens and cheesy navigation. With its newfound popularity, the company was also able to get music publishers to agree to its terms. Unfortunately for Apple, problems like that don’t exist in the handset business. Cell phones aren’t clunky, inadequate devices. Instead, they are pretty good. Really good. Why do you think they call it a Crackberry? Because the lumpy design and confusing interface of the device is causing people to break into cars? No, it’s because people are addicted to it. Samsung has scoured the world’s design schools and hired artists on three continents to keep its phones looking good. Motorola has revived its fortunes with design. KDDI, a Japanese carrier, has a design showcase in the teen shopping area of Tokyo just to be close to trends. And Sharp doesn’t skimp when it comes to putting LCD TVs on its phones. Apple, in other words, won’t be competing against rather doltish, unstylish companies like the old Compaq. The handset companies move pretty quick and put out new models every few weeks. [emphasis added]

Other analysts predicted Apple’s phone was doomed because of the mobile phone industry structure – mobile operators commanded so much power via subsidies, retail distribution etc:

Apple will launch a mobile phone in January, and it will become available during 2007. It will be a lovely bit of kit, a pleasure to behold, and its limited functionality will be easy to access and use. The Apple phone will be exclusive to one of the major networks in each territory and some customers will switch networks just to get it, but not as many as had been hoped. As customers start to realise that the competition offers better functionality at a lower price, by negotiating a better subsidy, sales will stagnate. After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish. The only question remaining is if, when the iPod phone fails, it will take the iPod with it.  [emphasis added]

I am not citing these analysts to mock them. Hindsight is 20/20 and it was quite reasonable at the time to assume that a new phone from Apple would confront the same issues that new phones from other companies confronted. What Apple ended up doing, however, was creating a phone that was so incredibly desirable to consumers that it completely restructured the industry, causing a massive shift of power away from the carriers.

Regarding the TV industry, here is what Steve Jobs said last year at AllThingsD:

Q: Is it time to throw out the interface for TV? Does television need a new human interface.

A: The problem with innovation in the TV industry is the go-to-market strategy. The TV industry has a subsidized model that gives everyone a set top box for free. So no one wants to buy a box. Ask TiVo, ask Roku, ask us… ask Google in a few months. The television industry fundamentally has a subsidized business model that gives everyone a set-top box, and that pretty much undermines innovation in the sector. The only way this is going to change is if you start from scratch, tear up the box, redesign and get it to the consumer in a way that they want to buy it. But right now, there’s no way to do that….The TV is going to lose until there’s a viable go-to-market strategy. That’s the fundamental problem with the industry. It’s not a problem with the technology, it’s a problem with the go-to-market strategy….I’m sure smarter people than us will figure this out, but that’s why we say Apple TV is a hobby.

So Jobs doesn’t believe an “additional box” is a viable strategy for seriously entering the TV industry. This leaves three places to enter: 1) integrating into set top boxes, 2) integrating into other TVs, or 3) Apple creating its own TV. Regarding #1, the last thing the cable operators want is for internet-delivered programming that bypasses their cable channels to become widespread – they see that as the fast track to become a dumb pipe. Re #2: This just seems very unlike Apple – the most vertically integrated company in tech, and famous for wanting to control every aspect of the product and user experience.

Re #3, let’s imagine Apple develops a TV that is as groundbreaking as the iPhone was. The biggest problem “smart TVs” have today is that they need clunky IR transmitters to control set top boxes because the cable operators won’t willingly interoperate. So a new Apple TV would have to drum up such incredible consumer demand that the operators would feel compelled to support it. This does indeed seem harder in the TV than in the mobile industry. At least in the US you had 4 nationwide mobile operators at the time of the iPhone launch. In TV, consumers normally have at most two real choices for traditional cable programming – cable and satellite – and two real choices for two-way internet – cable and DSL/FIOS.

Perhaps Apple won’t enter the market due to its structure. But that didn’t stop them in mobile phones where the structure was similarly difficult. The mistake analysts made about the iPhone was to assume the current industry structure would be sustained after Apple’s entry. I’d be wary of making the same assumption about the TV industry.