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How Does BuzzFeed Make Money? The BuzzFeed Business Model In A Nutshell

BuzzFeed is an American digital media company founded by Jonah Peretti, Kenneth Lerer, and John S. Johnson III in 2006. BuzzFeed had a focus on viral content. BuzzFeed’s website relies on advertising to make money. Advertising revenue streams comprise display ads, video advertising, native advertising, affiliate marketing, and subscriptions via the BuzzFeed News service.

Origin Story

BuzzFeed is an American digital media company founded by Jonah Peretti, Kenneth Lerer, and John S. Johnson III in 2006.

Initially, BuzzFeed had a focus on viral content. Named BuzzFeed Laboratories, the company was a side hustle to Peretti’s primary role at the Huffington Post. During this period, BuzzFeed consisted of an algorithm searching the web for viral articles. There were no employees in the form of writers or editors.

Based on information the algorithm had found, instant messaging client BuzzBot sent users links to popular content. The most popular links were then spotlighted on the site after Peretti redesigned it with a more contemporary look. In 2011, BuzzFeed expanded its scope to incorporate long-form journalism and reportage and has won several awards for journalistic merit.

Through a combination of data science and viral content, BuzzFeed grew quickly. Recent figures suggest it has approximately 122 million monthly visitors.

BuzzFeed revenue generation

One visit to the BuzzFeed website and it is clear the company relies on advertising to make money. Let’s take a look at the different types of advertising revenue streams plus a few more below.

Display ads

Display ads encompass banners that occupy various spaces on a website, whether that be the sidebar, footer, or the middle of an article.

BuzzFeed makes money from display advertising in three ways:

  1. Fixed price promotion – any real-estate on BuzzFeed is particularly valuable to a company looking to increase exposure. They may elect to pay a fixed monthly fee to occupy space.
  2. CPC advertising – BuzzFeed earns a fee from the advertiser whenever an ad is clicked on.
  3. CPS (cost-per-sale) advertising – BuzzFeed also earns a fee when a user clicks on an ad and then goes on to make a purchase.

Video advertising and collaboration

With millions of followers on YouTube, Facebook, and other social media sites, the company also collects a substantial sum from video advertising.

BuzzFeed has also worked with Netflix and Universal Television to produce content based on its articles. This arrangement likely involves a contractual fee. Potentially, there are also ongoing royalty payments.

Native advertising

Native advertising can be thought of as an extension of existing BuzzFeed content. Invariably, the author will talk about a product or service in-depth without explicitly promoting it.

Historically, BuzzFeed has partnered with companies such as KFC and American Express and is paid a fixed amount for every piece of native advertising content.

Affiliate marketing

BuzzFeed is also an affiliate for partners including Amazon, Hilton Hotels, and Walmart. When a user makes a purchase in the BuzzFeed shopping section, the company collects an affiliate commission.

BuzzFeed News

Users can also pay $5 per month or $100 annually to get access to BuzzFeed News.

Aside from financially supporting the creation of new content, users receive exclusive gifts, member-only emails, and updates on new projects.

Key takeaways:

  • BuzzFeed is an American digital media company founded in 2006. Using data science and the virality of certain content, the company grew quickly and expanded to incorporate long-form journalism.
  • BuzzFeed makes money through native, video, and display advertising. It has also worked with video producers to create films based on its articles.
  • BuzzFeed acts as an affiliate for eCommerce giants such as Amazon and Walmart. It also offers BuzzFeed News to paying subscribers for a small monthly fee. 

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Related Business Model Types

Platform Business Model

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A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Marketplace Business Model

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Network Effects

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c-business-model
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

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Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

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In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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