NBCUniversal is doubling its bet on online media company BuzzFeed to help the traditional media company better meet a shifting landscape shaken up by the internet.
The television and movie company, which is owned by media conglomerate Comcast Corp., announced last week that it had increased the $200 million stake it took last year in BuzzFeed to $400 million.
NBCU, headquartered in New York but also prominent in Los Angeles, has turned to the digital-first audience of BuzzFeed and Vox Media, in which it also invested $200 million last year, to capture ad dollars lost as younger people turn more to the internet.
“The premise of every digital-first company is that if people aren’t exposed to traditional ads – trailers before a movie, commercials – if they’re more on their phones, you have to reach them where they’re at,” said Eunice Shin, managing director at Manatt Digital Media, a digital business strategy firm.
BuzzFeed, which is also based in New York with a presence in Los Angeles, was one of several companies that contributed to the record $1.2 billion in national ad sales that NBC took in during this year’s Rio Olympics. The amount was the highest ever achieved in U.S. history by any network for a media event, according to industry publication AdWeek. BuzzFeed contributed videos to a Snapchat channel created for the Olympics.
NBCU, which generated almost $29 billion in revenue last year, cited the Olympics in announcing the increased stake.
In the 15 months since NBCU’s first investment, the landscape has further evolved, making the type of engagement that BuzzFeed specializes in even more important, said Shin.
Users increasingly prefer to view and engage with content through a social media site such as Facebook rather than clicking through to a website. The rise of ad-blocking software has increased competition for eyeballs, driving digital video companies such as Hulu toward branded content or subscription models. With its short clips, BuzzFeed, which Quantcast said had more than 188 million unique views for the one-month period ended Nov. 22, is adept at drawing people in and getting them to watch the whole video, said Shin.
The NBCU investment brings a welcome infusion of money for BuzzFeed, which reportedly had to cut its 2016 revenue projection of $500 million in half in April. With the NBCU deal, the company has a valuation of about $1.7 billion, according to Variety.
Other legacy media companies are following a similar blueprint.
In 2014, Walt Disney Co. paid $500 million for YouTube multichannel network Maker Studios Inc., a price that increased as certain benchmarks were hit. Warner Bros. agreed to acquire Machinima Inc., a YouTube network focused on gaming in which it was already an investor, earlier this month.
“The Disney, Warner Bros., and NBC deals just go to show that for larger media entertainment companies, digital-first content companies are still incredibly valuable,” said Shin.
