It’s hard to talk about disruptive innovation without talking about Harvard Business School, where Clayton Christensen incubated his influential theory, and the Japanese auto industry, which provided much of the crucial fodder for it.
So take note: Buzzfeed, the web publisher best known for its infectious lists and quizzes, is the subject of a new Harvard Business School case study. And Buzzfeed’s founder and CEO, Jonah Peretti, says he’s doing to the media industry just what Toyota and Honda did to Ford and GM in the 1970s and 1980s.
“When people first started noticing us,” Peretti tells Felix Oberholzer-Gee, the HBS professor who wrote the case study,
their response was similar to the way Japanese cars were perceived when they were first introduced to the U.S. People made fun of them, and they laughed, “Look at these crappy cars.” But a lot of young people said, “Awesome, I can own a car for the first time, and it gets me around.” And then the cars got to be better and better, and now people generally consider Japanese cars to be higher quality than American cars.
Peretti isn’t the first to draw the parallel. In fact, Christensen himself made it in a 2012 essay for Harvard’s Nieman Foundation for Journalism, lumping together Buzzfeed with the Huffington Post, which Peretti also co-founded.
But there’s a big difference between the two when it comes to business model. Whereas HuffPost relied almost exclusively on banner ads, at least until recently, Buzzfeed committed itself early to “native” advertising. Peretti explains the decision as a matter of efficiency:
At Huffpo I was perplexed that all our tech and product work only made us money indirectly. We would build amazing tools for editors, they would use them to generate traffic, but then we would just run banners against that traffic. It seemed like there must be a better way.
Oberholzer-Gee says he became interested in studying Buzzfeed’s model after discovering that it was charging average ad rates of $9 per thousand views, about twice what most publishers command, even for custom-produced branded content. He credits the company’s sophisticated content management system, which ferrets out the few posts showing viral potential from the many that aren’t so they can be promoted and optimized.
Buzzfeed’s technology ensures that sponsored posts receive social lift — ie. organic shares by actual human beings — which in turn provides a brand lift. “The reason it’s so successful is the moment we start to share things, the sharing itself is some sort of endorsement that’s hard to replicate with other forms of advertising,” says Oberholzer-Gee.
The case study raises several questions about Buzzfeed’s future prospects, including whether a company with so many imitators can hope to maintain its advantage over the long term. Peretti and his investors seem to think so, having recently rebuffed a $500 million acquisition offer from Disney.
Ben Smith, Buzzfeed’s editor in chief, tells Oberholzer-Gee that knocking off the formula isn’t as simple as it looks. “[I]t’s actually harder to make the definitive cat list than to do most journalism,” he says.
Oberholzer-Gee agrees: ”If you only have the technology piece or you only have the editorial piece, I think it will be really hard for you to replicate the success they’ve had.”
By Jeff Bercovici for Forbes. This article was published through NewsCred’s Licensed Publisher Network.
Originally published on Jul 10, 2014 9:35 PM