Whats all the Buzz about?

Prepared for: JN4110, Fundamentals of Business for Media Prepared by: Lucy Aspden 27 November 2013 Assignment 1

Executive Summary
BuzzFeed.com was founded in 2006 by Jonah Peretti who also cofounded the popular site The Hufngton Post. BuzzFeed positions itself as a social sharing site and it is its innovative approach to methods of distribution that sets it aside from other digital content platforms. Fastcompany.com named BuzzFeed their 18th most innovative company in 2013 for reinventing how news (and advertising) is shared. Advertising methods are also BuzzFeeds latest innovative enterprise.

Objectives
This report will look into BuzzFeeds innovative strategy and will seek to explain how the website is innovating the value chain. By looking at BuzzFeeds business model and its attitude towards innovation this report will investigate the moves the company is making towards a paradigm shift. In the changing mobile landscape of the media industry BuzzFeed is developing a model that reinvents how and where value is created and ultimately how prot is made, this report will explore what innovations it is using to do this.

Goals
This report aims to explain the strategy behind BuzzFeeds rapid success by highlighting the key innovative thinking behind its strategy. By looking at the BuzzFeed case-study it is hoped that this report may unveil potential dominant designs for the future of the media industry, whilst shining a light towards what is the next move for companies in this sector.

Name of report !

Contents
Introduction!...............................................................................................3 Business model!.........................................................................................3 Strategy !......................................................................................................4 Value Chain !................................................................................................5 Innovation!..................................................................................................6 Conclusion ! .................................................................................................7 Bibliography !..............................................................................................9 Appendix!..................................................................................................11 Self Assessment Sheet !...........................................................................13

Whats all the Buzz about? !

Introduction
BuzzFeeds creator, Jonah Peretti, said the following in his recent public memo; We have the potential to be a dening company, the same role the traditional media companies played decades ago. These companies were once small and scrappy like us. They faced the skepticism of the incumbents, they pioneered new models, embraced new technologies and succeeded because they served their audience better than what came before (LinkedIn, 2013.) This memo describes the changed media industry, and the products, processes, positioning and paradigms of the whole industry that are hanging in a state of change. BuzzFeed.com has placed itself in the centre of the new social web and is one of the rst online social sharing sites to show denite progression towards the creation of new dominant designs for the industry. BuzzFeed prides itself on its innovative enterprise, however it still understands the inuence of the past on its current position. It is set to rework these traditions in order to create a new combination in the value change of the media industry to suit the the market which continues to become ever more consumer driven.

Business model
Peretti said in his memo to employees, By this time next year we should be one of the biggest sites on the web. In August this year the company saw record prot, weve gone from zero revenue four years ago to a protable company with over 300 employees (Peretti, 2013.) Whilst many other competitors in the media industry are facing loses, BuzzFeed have re-evaluated the value chain and adapted their business model to suit this and the changing industry. BuzzFeed operate a multiway business model. The viral content BuzzFeed provides for its audience is part of an exchange; in return for the high quality, interactive and easily sharable content, BuzzFeed receive what they call social lift from their network of users and it
Name of report ! 3

is this that make them desirable for advertiser and sources their growing prots. Tidd and Bessant (2011) said, in sectors like media the line between consumers and creators is increasingly blurred. BuzzFeeds website explains this linkage, for every 100,000 views generated through paid media to advertiser content, an extra 30,000 views (earn media) were generated from sharing activity (buzzfeed.com, 2013.) It is BuzzFeeds radical approach to online advertising that has boosted their revenue; businessinsider.com (2010) said they have the ability to create custom ad units that blur content with advertising. Schumpeter described this as creative destruction, and we should expect to see a swarm effect when other online content companies follow (1947.)

Strategy
Since its launch BuzzFeed has innovated its product by beginning to generate hard news content alongside its original bored at work content. In developing their market offering they have not only widen the reach of their social web, but have also improved the quality of service and content for their existing readers. BuzzFeed have recognized the possibility to offer both richness and reach at the same time. Thus to create totally new markets and disrupt radically those which exist in any information-related business (Tidd and Bessant, 2011.) By adapting to the needs of their audience they are demonstrating a exible and efcient strategy, which has helped build their brand image. BuzzFeeds strategy demonstrates the evolutionary nature of innovation as explored by George Basalla (1988.) Peretti describes the evolutionary nature of technology in his annual LinkedIn memo by linking BuzzFeeds role as a company to that of the traditional media company. The company is leading from this example and learning from the ways traditional companies developed and applying it to its own model, this is evidence of the incremental innovation that is happening across the media industry.

Whats all the Buzz about? !

BuzzFeed have made incremental changes to existing internet innovations such as social media and the existing technologies of the media industry and have recognized a need for a new combination, innovation is driven by the ability to see connections. (Tidd and Bessant, 2011.) Tidd and Bessant said Innovation is all about nding new ways to do things and to obtain strategic advantage (2011.) BuzzFeed have recognized these advantages. They have utilized the innovative mechanism of novelty in process, by offering news and online content in way others cannot match through the viral qualities of their content and sharing ability of their platform; this is process innovation. Tidd and Bessant (2011) also said that strategic advantage can be gained through adding to the range of competitive factors in the market; BuzzFeed are moving the basis of competition to an increasing importance of the ability to share content; this is product innovation. Innovation provides a huge opportunity for newcomers to rewrite the rules of the game and Bessant and Tidd see this a strategic mechanism; BuzzFeed are rewriting the rules of online advertising by moving away from Googles original banner ads towards creative partnerships with advertisers. By reconguring parts of the process (Tidd and Bessant, 2011) in this way BuzzFeed have demonstrated a new way in which parts of the system can work together. They have highlighted the increasing importance of networks for modern business models and how networks are now the basis for the media industry; this is paradigm innovation. BuzzFeed has placed themselves at the centre of the online network.

Value Chain
BuzzFeeds have innovated the tradition media value chain, they demonstrate a method of systems thinking and have added value by changing variable in the chain. Whereas its chain still possess similar stages to the newspaper model outlined by Lucy Kung (2008) they place bigger value on distribution and the marketing of the content is handled differently. They have changed what is recognized as valuable content, value now lies in both the creativity of the content and the facts that support it. However more importantly, value
Name of report ! 5

lies in the intangible process of distribution and the ability for users to share; bussinessweek.com (2012) describe this advantageous system, BuzzFeeds proprietary content management system, which is designed, managed and constantly tweaked to encourage sharing on social networks. Due to its position in the centre of the social web BuzzFeeds content follows multiple distribution channels and this is due to the value placed on the viral elements. The marketing process in the chain is therefore different to traditional media, BuzzFeed have utilized the power of Word of Mouth marketing. According to New York Magazine (2013), Word of mouth is the most elusive force in the $500 billion advertising industry; therefore by putting more value emphasis on the intangible distribution process BuzzFeed are increasingly desirable for advertisers, which ultimately drives their business model.

Innovation
Innovation drives all business activity at BuzzFeed as has been seen in their reconguring of the value chain and concepts of what its valuable to the online audience. Most notably the company has innovated their business model with the development of sponsored content through advertising partnerships. Powell and Grodal (2005) said, Recent studies suggest, that various forms of inter-organizational partnerships are now core components of corporate strategy. BuzzFeeds advertising strategy embodies this idea. They have worked with 50 of the top 100 brands according to Peretti (2013.) He said, We can light up the social web for an advertiser across Facebook, Twitter and Youtube, with content that is worth clicking and sharing on (2013.) BuzzFeed have radically innovated Googles idea of online behavioral targeting, Peretti told fastcompany.com We think of it as the evolution of advertorial (2013) demonstrating BuzzFeeds incremental strategy. BuzzFeeds innovation sees media buying and creativity as the same business, their sponsored content is advertising that tells a story. As consumers become increasingly less inuenced by traditional advertising BuzzFeed are innovating with a subliminal technique.
Whats all the Buzz about? ! 6

This element of their business model demonstrates both product innovation in the content they are producing, the process innovation of their distribution power and paradigm innovation in the way advertising funds the media industry. In his memo Peretti explains the importance of product innovation in the company to keep them competitive. He discusses a number of areas he hopes to develop in the coming year. There is a huge opportunity to be leading news source for the social, mobile world (Peretti, 2013.) Buzz feed is developing its product innovation to cater for this news market with a news team generating specic content. His report also explains the increasing importance of video and BuzzFeeds plans for further product development into this area with their own video studio and a talented team of video producers who have created 570 videos, with over a hundred videos passing 1 million views each, 350 million total views, and 2 million YouTube subscribers. We are in a great position to help invent new video formats that match new patterns of media consumption (Peretti, 2013.) BuzzFeed have demonstrated an appreciation for lean thinking. They realise the potential of their Super Sharers and have used their strategy to make their business more efcient through them. They put less emphasis of their power to push out media and more on their audiences ability to pull the media they want and share it to their wider network, this is what increases efciency and drives prot margins.

Conclusion
From this investigation is is clear that BuzzFeed recognize innovation as an essential management tool. They are using innovation for the benet of all their stakeholders; their innovative content is benecial to their readers and sharers, their creative advertising methods are proven to successful for advertisers and their sharing platform is driving content towards all social media sites, traditional news companies are also reaping benets from the innovative designs of BuzzFeeds platform and their understand of online audiName of report ! 7

ences. In seven years Jonah Peretti has built an innovative company and with its recent investments in the innovation of online advertising the innovations of BuzzFeed are hovering over the tipping point of Rogers diffusion curve (Tidd and Bessant, 2009.) BuzzFeed has the support of innovators, early adopters and the early majority of consumers and with increased support from advertisers BuzzFeeds innovations will cross the tipping point; they undoubtable have the potential to be the dominant design for the future of online advertising and viral content as the entire media industry looks to change to serve a new, mobile, digital audience. Word Count: 1,554

Whats all the Buzz about? !

Bibliography
Basalla, George,(1988)!The Evolution of Technology, New York: Cambridge University Press. Bercovivi, Jeff, BuzzFeed Is Growing Like Crazy, [online] Available at: http://www.forbes.com/sites/jeffbercovici/2013/09/06/buzzfeed-is-growing-like-crazy/ [Accessed: 05.11.13] Bowen, David E and Youngdahl, William E, (1998) Lean" service: in defence of a production-line approach. International Journal of Service Industry Management; 1998, Vol. 9 Issue 3, 207-225 BuzzFeed, Advertise on BuzzFeed, [online] Available at: http://www.buzzfeed.com/about/advertise [Accessed: 05.11.13] Frommer, Dan, Heres how BuzzFeed Plans to Turn Viral Content Into Cash, [online] Available at: http://www.businessinsider.com/heres-how-buzzfeed-plans-to-turn-viral-content-into-cash2010-7 [Accessed 05.11.13] Gillette, Felix, BuzzFeed, the ad model for the Facebook Era?, [online] Available at: http://www.businessweek.com/articles/2012-03-22/buzzfeed-the-ad-model-for-the-faceboo k-era [Accessed: 05/11/13] Kung, Lucy (2008) part 1: Strategic Content in Strategic Management in the Media: theory and practice, London: Sage, pp18-103 Manjoo, Farhad, Most Innovative Companies 2013; 18; BuzzFeed, [online] Available at: http://www.fastcompany.com/most-innovative-companies/2013/buzzfeed [Accessed: 05/11/ 13] Peretti, Jonah, Memo to the BuzzFeed Team, [online] Available at: http://www.linkedin.com/today/post/article/20130904212907-1799428-memo-to-the-buzzfe ed-team [Accessed: 05/11/13] Powell, Walter W. and Grodal, Stine: Networks of Innovators' in (eds. Jan Fagerberg, David C Mowery and Richard R Nelson:!The Oxford Handbook of Innovation!(2005) Rice, Andrew, Does BuzzFeed Know the Secret? [online] Available at: http://nymag.com/news/features/buzzfeed-2013-4/ [Accessed: 05/11/13]

Name of report !

Schumpeter, Joseph, (1947) The Creative Response in Economic History,!The Journal of Economic History!7 Tidd, Joe and Bessant, John (2011) Managing innovation: Integrating Technological, Market and Organisational Change, [eBook] [online] Available at: http://books.google.co.uk/books?id=CVuYk25bkfsC&dq=tidd+and+bessant+5th+edition+m anaging+innovation&source=gbs_navlinks_s [Accessed: 05.11.13]

Whats all the Buzz about? !

10

Appendix
1BuzzFeed trafc trends over the last to years versus some of its biggest rivals. (2012)

http://www.forbes.com/sites/jeffbercovici/2013/09/06/buzzfeed-is-growing-like-crazy/ 2BuzzFeed archive of downloadable content partnership case-studies. http://www.buzzfeed.com/download/casestudies 3BuzzFeed graph to demonstrate the process of social life through their viral content.

http://www.buzzfeed.com/about/advertise

Name of report !

11

4Jonah Perettis highlights of the year from his LinkedIn Memo. BuzzFeed reached record trafc of 85 million unique visitors in August. We are 3X bigger than we were just one year ago, 8X bigger than we were two years ago, and we have served more web pages so far in 2013 than we have in the entire previous ve year history of the company. We are also rapidly expanding to new platforms beyond our website. Our iPhone app is consistently in the top 5 in the news category and sometimes at #1. We have quickly become one of the leading original video channels on YouTube with over 50 million monthly views and 2 million subscribers. And our BuzzFeed Brews live events with guests like Sen. Rubio, Sen. Gillibrand, and NYC Mayoral Candidate Anthony Weiner have become a leading venue for newsmakers to reach a young, web-savvy audience. http://www.linkedin.com/today/post/article/20130904212907-1799428-memo-to-the-buzzfe ed-team

Whats all the Buzz about? !

12

Self Assessment Sheet

JN4110 Assignment 1 SELF- ASSESSMENT Case Study Reports & Presentation

NameLUCY ASPDEN

08/11/13

Have you completed the This assessment is related to Learning Outcome 1, 2 and 3 for this module and will confollowing? tribute 30% to your nal mark. ! Mailed a copy of the signed Assessed Work Record Form In particular, you were asked to create a critical Case Study Report (approximately 1,500 words) suitable for presentation to media industry colleagues that addressed the following: (available from the Department o"ce) Part 1: Case Study Report (approximately 1,500 words, excluding bibliography) ! Inserted a copy of this as- Part 2: Presentation (5 minutes, 5 slides) sessment sheet, with the assessment portion completed, Part 3: Blog Post (approximately words) with links to sources and presentation slides. into the front of your assignment document. ! Saved your documents as JN4054Assign1YourNames.do c [e.g. JN4054Assign1FPNel.doc] Next: upload to the assignment box in WebCT.

Self Assessment Please review the marking criteria below and then highlight in boldface the mark
that you think best describes the quality of your e#ort.
unsatisfactory < 30 35 39 satisfactory Average 40 45 49 good/v. good Superior 75 80 > 50 55 59 60 65 70 74

Briey say what you think are the strengths of your contribution. I have used a wide range of innovative theory to structure the ndings of my casestudy. By taking direct quotes from the founder of BuzzFeed I have gained an insider perspective of how they innovate, however by then researching their success online I have used critical analysis to aid my own investigation combined with my academic knowledge. The report is set out well with the sections of investigation clearly organised. There are key themes of innovation theory that run throughout the report and draw a rounded image of BuzzFeeds practices. By applying innovation knowledge to a practical case-study I feel my personal understanding of innovation on a wider context has improved.

Which aspects do you think need more attention? I feel my analysis could be more concise, I am concerned about repeating ideas throughout the report, the aim of which was to link sections together, however I feel this could have been done better. The use of graphs and diagrams within the report may have aided the analysis, for example when discussing multiway business models. At times I feel my analysis is driven too heavily by innovative theory rather than the business practices of BuzzFeed and by doing this I have missed key areas that could have been explored.

Name of report !

13