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Buzzfeed and The Cost Of Native Advertising

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Buzzfeed and The Cost Of Native Advertising

When looking at the native advertising game, it’s clear that Buzzfeed has stepped up as a major player in the space. From consistently engaging campaigns to impressive visitor numbers, Buzzfeed’s success seems to be a justification for their premium-rate pricing, as explored in a recently released progress report.

But can their success last? Is their enviably-high pricing a bubble that’s waiting to burst? Benjy Boxer takes a look at what Buzzfeed’s breakdown means for the future of the company, and for native advertising publishers in general.

Why is Buzzfeed such a powerful example? Based on revenue alone, Buzzfeed is poised for a major market takeover. Boxer explains that:

Buzzfeed is expecting to sell 600 – 700 native advertising campaigns in 2013, and to complement that number, AllthingsD learned that Buzzfeed’s 2013 revenue projection was increased from $40mm to $60mm… As a point of reference, the Huffington Post, which Peretti co-founded, earned $31mm in revenue the year before it was sold to Aol in 2011 and was projected to hit $60mm of sales in 2011.  By that measure, Buzzfeed is now larger than the Huffington Post was in 2011.

That’s a decent number of native advertising campaigns in the docket, considering Buzzfeed is charging ~$92,300 per campaign. But is that high price tag actually worth it for brands? If you look at it from a strict, impressions-only based perspective, maybe not; Boxer determines that, “Buzzfeed would need to quadruple its total impressions just to reach the Facebook CPM on their native ads.”

However, Boxer notes that native advertising increases the purchase intent by 18% over display ads. Furthermore, Buzzfeed’s native advertising initiatives are effectively targeting an incredibly valuable audience, affluent 18-34-year-olds. They’re leveraging their social outreach prowess on Facebook better than most publishers, and are continually driving engaged readers to their editorial and sponsored content.

Quality content is at the heart of this story. Marketers shell out premium payments for native ads both because of Buzzfeed’s high value audience, and because Buzzfeed can now be trusted to create content that works. However as the pricing system around native advertising evolves, one thing remains unalterable: investing in thoughtful, tailored content is worth it because the impact will be significantly deeper and longer lasting.

Is a high price tag always going to be a part of that? We’ll see. But we do feel confident that as native advertising matures, these campaigns will continue to be seen as a real, and worthy investment.

Read more from Benjy Boxer in Forbes here.

Image via: http://bit.ly/1bGUJ8e