Buzzfeed: Paving a Future in Food Innovation
The Decline of BuzzFeed
With content ranging from breaking news to interactive quizzes, BuzzFeed is the world’s go-to online platform for viral digital content. At the height of its success in 2016, BuzzFeed was valued at $1.7 billion by investors, with rumours of a 2018 IPO. Despite only having turned a profit once in their history, investors were optimistic that rapid growth could drive the company to profitability. However, contrary to expectations, BuzzFeed came significantly short of revenue targets in 2017 and strayed far from profitability in both 2017 and 2018. With pressure mounting from investors, CEO Jonah Perretti cut 15 per cent of BuzzFeed’s total global workforce in 2019 and cited a need for a strategic shift.
BuzzFeed’s lack of revenue growth can be tied back to the company outgrowing its current target demographic. During its initial years of operations, BuzzFeed’s rapid annual viewership growth created an ever-expanding volume of visitors for advertisers to reach. However, BuzzFeed’s monthly visits have not increased beyond 150 million since June 2016 , with unique visitors from the U.S. oscillating between 70 million and 80 million. Given that the majority of American millennials report visiting the site monthly, BuzzFeed has now reached a stage where growth prospects from their current target market are limited.
The monopolization of the digital media landscape has also contributed to BuzzFeed’s revenue stagnation. With Google and Facebook increasingly dominating digital advertising revenue, publishers like BuzzFeed have struggled to maintain their piece of the pie. These two tech giants–nicknamed ‘the Duopoly’–accounted for 56 per cent of the digital advertising market in 2018 and have vastly outpaced the growth of smaller tech firms and publishers. As advertisers continue to prefer spending their dollars on social media giants, BuzzFeed and other publishers are left with less to go around.
To succeed as a multifaceted digital platform, BuzzFeed can no longer rely solely on generating viral content and growing its viewership in a nearly-saturated market. Moving forward, BuzzFeed must find innovative ways to monetize viewers beyond conventional digital advertising.
A Data-Driven Competitive Advantage
Compared to other industry peers, BuzzFeed has a competitive edge through the comprehensive data generated by its rich user engagement. Given the billions of daily data points it generates through viewership numbers, comments, reactions, and time spent engaging with content, BuzzFeed currently holds a range of valuable insights on consumer behaviour.
For instance, through big data insights, employees at BuzzFeed found that videos with cheese being pulled had particularly high engagement in 2017. This led to the insight that stringy, melted cheese would be a food trend in the upcoming season. Subsequently, BuzzFeed leveraged this insight to create a series of viral videos, which each achieved upwards of five million views. In another example, BuzzFeed identified that users who engaged with posts about fidget spinners would also often engage with content about lip balms. To capitalize on this pattern, the platform created the GlamSpin, a viral lip balm spinner toy which was sold at retailers such as Saks Fifth Avenue and Dylan’s Candy Bar.
The Path Forward With Data Analytics
While leveraging data internally can provide BuzzFeed with a unique advantage in content production, the platform should capitalize on its ability to predict food trends and ingredient virality by offering predictive insights to global restaurant chains. Given these brands’ constant need to develop seasonal menu items, BuzzFeed’s predictive insights surrounding food trends are extremely valuable. Rather than solely monetizing user data, BuzzFeed can offer consulting services through its sub-brand Tasty to help global chains refine product hypotheses and identify trends to capture.
This partnership would play out when a brand like Starbucks is developing a fall menu or when McDonald’s is deciding whether to add healthier menu snack options. For Starbucks, BuzzFeed could identify rising food trends within major customer segments such as upper-middle class teenagers and young working professionals in urban hubs. The platform could also analyze patterns in consumption to help Starbucks find unintuitive product opportunities. For example, they could check if viewers of coffee-related content had particularly high engagement with specific dessert recipes.
In the latter case, BuzzFeed could help McDonald’s refine product hypotheses. If the food brand suspects that pistachios are the next big thing, it can ask BuzzFeed to validate this hypothesis through a range of relevant data. This data includes how pistachio-themed content is performing, a sentiment analysis on comments related to pistachios, scoring data about how recipes with pistachios are rated on Tasty compared to other nuts, and data on what combinations of ingredients with pistachios yield the best engagement. By leveraging its data mining capabilities, not only can BuzzFeed help McDonald’s determine whether pistachios will succeed, it can also offer alternatives and help design the next big menu item. Ultimately, with its ability to predict food trends and identify soon-to-be viral ingredients, BuzzFeed has an unparalleled opportunity to partner with restaurant brands during menu development.
Case Study: Wattpad
As one of the world’s largest fanfiction websites for hobbyist writers and readers, Wattpad originated as a platform to rival traditional publishers. Similar to BuzzFeed, the company possesses AI and data mining assets which can capture content trends and user engagement data. By leveraging these assets, Wattpad has been able to offer key insights about what kind of content will resonate with audiences.
Wattpad’s insights have proven invaluable to partners in film and TV production. In 2018, Wattpad partnered with Netflix to produce “The Kissing Booth”, a film which ended up being one of Netflix’s most watched movies in the U.S. Similarly, within weeks of premiering, the pilot that Wattpad helped adapt for “Cupid’s March” became the second most-watched video on American network CW Seed’s YouTube channel. Using Wattpad’s data, companies like Netflix were able to optimize viewer engagement when producing film content, ultimately generating successful hits.
By mining billions of user data points, Wattpad is able to identify engagement trends and create invaluable decision- making data for their partners. Similarly, by analyzing viewership data and comments for trends in consumer tastes, BuzzFeed could turn their billions of daily data points into decision-making points for restaurant brands.
Zooming In On Tasty
Among BuzzFeed’s various sub-brands, Tasty stands out as the ideal segment for harnessing data and applying predictive analytics. For one, the quality of data insights depends heavily on a highly-engaged viewer base. A study conducted at Elon University revealed that 90.2 per cent of Tasty viewers engage with its content at least once a week, with one of five viewers engaging multiple times a day. This exceptional engagement implies that Tasty has the necessary recurring viewership to generate up-to-date data insights. Additionally, as the go-to platform for food enthusiasts, Tasty stands out as a market leader with approximately 2.4x more views per video than its competitors.
An Industry In Need of Innovation
Offering predictive analytics to restaurant brands also makes sense from the food industry’s perspective. In 2018, BCG reported that restaurant brands which leverage data achieve 10 to 20 per cent greater EBITDA relative to their peers. In an industry with razor-thin profit margins, restaurants need new ways to use data in the menu development process and increase their profitability. In the past, menu development has been fixated on the ability of corporate chefs or individual franchise owners to innovate using their own experience. For instance, McDonald’s iconic Snack Wrap was invented by head chef Dan Coudreaut after testing 85 ideas for an item that could appeal to drive-through customers.
In contrast to that approach, restaurant brands are increasingly recognizing the importance of using data to develop products. After a failed “millennial-friendly menu” that led to 100+ store closures in 2017, Applebee’s has taken a data-driven approach to redesign their menu. By identifying key consumer trends and subsequently re- embracing comfort food, they were able to substantially increase same-store sales in 2018. Ultimately, BuzzFeed’s predictive analytics can more accurately capture shifting consumer tastes to avoid costly missteps and help brands succeed in menu development.
From a financial perspective, the food research and development industry is also a lucrative one for BuzzFeed to enter. In 2018, BuzzFeed’s revenues increased by a mere $10 million, amounting to annual growth of only 2.9 per cent. Given that food research and development spending by companies in America surpassed $4.6 billion in 2016, $4 billion is a conservative projection of total future annual spending. Under this conservative scenario, capturing as little as one per cent of total expenditures would result in revenues of $40 million for BuzzFeed, without even taking into account any performance-based royalties.
The new menu development service should be housed under BuzzFeed’s emerging Partner Innovations segment, which is focused on entering the product development market. Although menu consulting does not involve the creation of a tangible product on BuzzFeed’s behalf, it still capitalizes on data analytics in a comparable way to prior developments like the GlamSpin. Specifically, within menu development, BuzzFeed should establish two main types of services: product testing and product formulation. On one hand, product testing will be for brands looking to refine developed menu hypotheses. On the other hand, product formulation will more broadly target restaurants looking to define new menu possibilities from rising trends. Consistent with the pricing model used in Partner Innovations, the service will charge customers a fee with the potential for performance-based royalties. This fee will differ on a case-to-case basis depending on the size of the restaurant brand and the depth of insights demanded.
When working with each client, BuzzFeed should first gain an understanding of the chain’s operational capabilities. By understanding their limitations within stores, BuzzFeed can ensure recommendations are within the scope of feasibility. Next, BuzzFeed should collaborate with the client to align key success criteria and understand the core customer segments to target. Once the criteria are clear, BuzzFeed’s engineers can leverage the platform’s machine learning and data tools to analyze relevant content and generate insights.
Risks and Mitigations
One risk facing BuzzFeed is the inherent uncertainty surrounding what kind of data insights would be most valuable to different restaurant brands. To mitigate this risk, before launching the service officially, BuzzFeed should conduct a pilot with a select group of brands in its network. A pilot allows for the opportunity to understand broad data needs for restaurant brands of varying sizes, product specialities, and customer bases. Another risk is that Tasty’s competitors–such as Bon Appetit–could also enter the menu development market, leading to oversaturation. However, this risk is mitigated by the fact that Tasty achieves approximately 2.4x more views per video compared to competitors in the space. Hence, Tasty has a unique competitive advantage as an industry frontrunner with the highest total audience.
A 21st Century Digital Media Platform
In light of stagnating revenues and declining growth, BuzzFeed needs new strategies to leverage existing assets and monetize its audience. Looking forward, BuzzFeed should consider offering menu consulting services to global restaurant brands. By leveraging its billions of user data points, BuzzFeed can predict rising food trends and potential ingredient virality through its machine learning capabilities. Not only does this service align with the food industry’s desire to become more data-driven, but it also presents an opportunity for BuzzFeed to capitalize on its existing assets in an innovative new way. In the future, this service can also pave the way for increased collaboration opportunities between food industry giants beyond menu consulting, such as public product partnerships. Ultimately, by expanding upon their existing portfolio of product development services, BuzzFeed can transform itself into a resilient 21st century media company