BuzzFeed Stock: The media company is going public but is it a buy or sell?

Buzzfeed stock: The media company wants to be seen as more than a clickbait website. It’s got plans to be taken more seriously: First by winning a Pulitzer Prize in 2021, and now by taking the company into the big leagues. Last week, BuzzFeed agreed to go public via SPAC – and its rival Vice Media might follow in its footsteps.

The digital media SPAC attack

BuzzFeed’s deal to go public is with 890 5th Avenue Partners (NASDAQ:ENFA) and values it at $1.5b, $200m less than its 2017 peak. Vice and BDG (formerly Bustle) are also rumored to be going public via SPAC this year. Why now? According to TechCrunch, it’s the perfect time for digital media companies to make a splash…

• A strong start to the year: Ad sales for companies like Youtube, Amazon, and Facebook soared in Q1 – which bodes well for digital advertising companies like BuzzFeed.
• Aftermath of the SPAC Frenzy: The frenzy left a surplus of SPAC companies hungry for deals.

This isn’t the first time BuzzFeed and Vice were rumored to go public. They had issues scaling up their custom content and their valuations fell as a result.

BuzzFeed stock: A comeback for the ages

BuzzFeed’s path to going public has been anything but straight-forward over the last six years:

• 2015 – Flying high off of a $200m investment from NBCUniversal, BuzzFeed peaked at a valuation of $1.7b.
• 2017 – BuzzFeed fell 20% short of its sales targets, killing hopes of going public.

In 2020, BuzzFeed finally turned a profit for the first time in 6 years. Here’s a look at the numbers from its record year:

• Sales of $421m in 2020, down slightly from $425m in 2019.
• Net income of $17m in 2020, up from a loss of $14m in 2019.

Investors: Digital media “triopoly”

Facebook, Google and Amazon – the so-called digital media “triopoly” – increased their U.S. digital ad market share from 80% in 2019 to nearly 90% today.

In the digital media space, the larger your audience, the more valuable you are to advertisers. But BuzzFeed’s audience is much smaller than the 3 tech giants so it has a different strategy: Buy up competitors.

• In 2020, BuzzFeed purchased HuffPost from Verizon – and sources close to the company say more deals could be coming in the near future.

The Joe’s Take: BuzzFeed hasn’t had a strong track record and the dominance of the digital media “triopoly” makes selling ads even harder. Media businesses are a tough business and most investors are better off staying away.