BuzzFeed's plan to go public is all about scale
Published Date: 6/25/2021
Source: axios.com
Data: Similarweb; Chart: Michelle McGhee/Axios

BuzzFeed's announcement Thursday that it plans to go public via a special purpose acquisition company (SPAC) marked the end of a long era of uncertainty for the company, which helped pioneer the digital media industry.

  • It's targeting a $1.5 billion valuation upon combining with 890 Fifth Avenue Partners, Inc., a blank-check company.

  • BuzzFeed plans to acquire Complex Networks, a lifestyle and entertainment media company, for $300 million in cash and stock as part of the transaction.

Catch up quick: BuzzFeed had originally planned to go public in 2018, but the move was shelved after Facebook changed its content algorithm and publishers scrambled to adjust.

  • Prior to its SPAC plans, BuzzFeed had conversations with other digital media giants, like Group Nine Media and Vox Media, about possible partnerships or combinations.

Be smart: Once known for selling native ads alongside cat memes and quizzes, BuzzFeed is now home to a number of brands and business lines.

  • Earlier this year, it acquired HuffPost, which sits alongside its own robust news operation, BuzzFeed News, as a sister brand. It also owns Tasty, a digital food brand with a strong commerce business.
  • With the Complex acquisition, Peretti says the company will be better positioned to grow its licensing business. Complex produces a number of different streaming shows, most notably, the YouTube hit "Hot Ones."

By the numbers: In an investor deck, BuzzFeed said that it and Complex combined made $421 million in revenue last year, on a pro-forma basis.

  • It expects to bring in $521 million next year and over $1 billion by 2024.
  • Of that money this year, about half ($261 million) will come from ads, 32% ($165 million) from content (things like licensing fees), and 18% ($95 million) from commerce.

The big picture: BuzzFeed's CEO Jonah Peretti, a veteran internet and technology executive who co-founded BuzzFeed in 2006 and HuffPost in 2005, said he plans to continue to purchase more companies to give BuzzFeed more scale.

What to watch: BuzzFeed's rivals will be eyeing its journey with interest.

  • Bustle Digital Group (BDG) says it also intends to go public via a SPAC this year. Group Nine Media's SPAC went public earlier this year.
  • Like BuzzFeed, both firms intend to acquire even more brands to give them enough scale to better compete against tech giants like Facebook and Google for ad dollars.
  • In an investor deck, BuzzFeed compared itself to other publicly-traded digital firms, like The New York Times, Etsy and IAC, the parent company to DotDash.

Bottom line: BuzzFeed's SPAC IPO sets a precedent for other media giants looking to go public and get bigger in the same fashion.