You'll Never Guess What Happened To BuzzFeed's IPO Chances After It Missed Revenue By 20%

Buzzfeed’s plans for a rumored 2018 IPO, first reported back in March by Axios, just suffered a serious setback. In what amounts to a serious blow to the digital media pioneer’s credibility with investors, not to mention the potential impact on its lofty venture-capital-fueled valuation, the Wall Street Journal is reporting that Buzzfeed is on track to miss its 2017 revenue projections by between 15% and 20%.

Buzzfeed had expected revenue of $350 million, but will probably miss that target by between $50 million and $70 million, per WSJ.

If accurate, that would be at least the second major revenue miss for the site in the past two years, after reports surfaced in the spring of 2016 that Buzzfeed had missed its 2015 revenue projections by nearly 50%.

Indeed, investors reportedly told WSJ that prospects for an IPO next year now look remote.

Of course, widely missing your projections isn’t the sort of behavior that will help entice investment bankers to take a chance and underwrite what would be the first IPO for a major digital-media startup, a space that has suffered more than its fair share of disappointments.

Earlier today, WSJ reported that Mashable would sell itself to Ziff Davis publishing for a paltry $50 million, just one-fifth of the lofty $250 million valuation it had reported as recently as the spring of last year.

Some BuzzFeed investors have become worried about rising costs as Buzzfeed expands into areas like news and entertainment. Those frustrations were aired at a board meeting in recent weeks, in which directors confronted management about its profligate spending on expansion.

In what could be construed as a silver lining, one person close to BuzzFeed told WSJ the performance reflects a more general malaise this year in ad-supported media businesses and isn’t particular to the company. This means that, even if Buzzfeed doesn’t IPO next year, at least its main rivals - Vox and Vice Media - are facing similar headwinds.

To wit, Vice Media, the biggest of the players in the emerging-media space, is also expected to miss its revenue target of more than $800 million this year, though it is unclear to what degree, people close to the company said. Vice was valued at $5.7 billion when private-equity firm TPG invested $450 million in June. The company’s investors are pushing it to rein in costs and achieve profitability next year, according to one of the people.

As WSJ points out, digital media companies are finding that lines of business that succeeded early on - like creating custom content for brands - are becoming harder to scale up. Meanwhile, with each passing year, digital behemoths like Facebook and Google are tightening their grip on the advertising market.

The so-called “duopoly” is expected to account for a combined 63% of US digital ad spending in 2017, according to eMarketer, leaving a smaller pile of ad dollars for everyone else to fight for.

BuzzFeed for years had shied away from selling traditional display ads, or banner ads, finding that they didn’t grab users’ attention and sold for low prices. Instead it opted for its “native ads” like quizzes and videos sponsored by companies.

But in its quest for growth, in August the company changed its approach and began introducing display ads that can be bought in an automated, or “programmatic,” fashion, much like on many other websites.

BuzzFeed’s investors include Comcast Corp.’s NBCUniversal, which has invested $400 million, Andreessen Horowitz, Lerer Hippeau Ventures, New Enterprise Associates, RRE Ventures and Hearst Ventures.

NBCU’s latest infusion was about a year ago and valued Buzzfeed about $1.7 billion - less than half of Vice’s valuation.

Further complicating the IPO process, Buzzfeed’s Alexa ranking has slipped since the beginning of the year: It’s now only the 56th most popular US website - it had ranked below 50 as recently as this spring.

Of course, for anybody who reads Buzzfeed, the revenue miss is hardly a surprise.