BuzzFeed Sells First We Feast… Now What?

By: Jacob Cohen Donnelly

BuzzFeed announced on Thursday that it sold First We Feast, the producer of chicken-wing show Hot Ones, to a management buyout led by Soros Fund Management for $82.5 million in cash.

This comes after BuzzFeed had reportedly been trying for months to close the deal. We wrote about it in June, asking the question: Is First We Feast Worth $70 Million? Now we know it’s actually worth 18% more than that.

It’s a fair deal. In 2023, First We Feast generated $22 million in revenue and revenue to date as of September 2024 was $22 million. So, it’s a growing business that one source estimates will hit $30 million this year. First We Feast didn’t immediately respond to a request for comment.

Back in June, we estimated that the business was likely generating $7 million to $8 million in EBITDA assuming a mid-20% margin. While $82.5 million might be on the high side, there are a couple of key points. First and foremost, Hot Ones talent Sean Evans is part of this deal. So, if he’s not going anywhere, the asset has far more value.

Second, with that kind of growth, it might make sense to slightly overpay because it’ll now have total focus from management. Focus matters: First We Feast as a part of the overall BuzzFeed portfolio was never going to get the same kind of love and appreciation that it should get as a stand-alone entity.

So, good news for First We Feast and very good news for BuzzFeed because their debt is now under control, which we’ll come back to.

It needs to be said: the BuzzFeed / Complex deal destroyed a lot of shareholder value. BuzzFeed paid $198 million in cash and $100 million in equity for Complex, the owner ofFirst We Feast, back when it first executed its SPAC. Three years later, it got back $196.8 million in cash ($108.6 million when it sold Complex earlier this year + $5.7 million in fees and then this First We Feast Deal).

I recognize that many public companies look at issuing shares as a sort of funny money, but the reality is, investors got diluted to make this deal possible. Unless cash flow grows faster than the issued shares, investors lose.

So, good to get the cash back, but in hindsight, a bad move for everyone involved.

Which brings us back to the debt point. BuzzFeed’s balance sheet is fine. There were a number of articles written over the last couple of weeks that sounded incredibly apocalyptic about BuzzFeed. But the company itself wasn’t worried. As a person close to BuzzFeed told me on Thursday, “We have a great relationship with the lenders and we have been communicating with them every step of the process, so we feel great with them.”

Part of that communication was reaching an agreement to give note holders 95% of all proceeds from asset sales like this one. Thanks to the Complex sale and this one, it’s in an even stronger financial position. It has $30 million of debt on the balance sheet and that same source said, “we now have more cash that we’re operating with than debt.” So, debt’s not an issue.

But what’s the strategy?

This is the crux of the situation and what I am unclear about. In the deal statement, BuzzFeed wrote: “The divestiture of First We Feast completes the Company’s strategic shift away from lower-margin content products, allowing for a greater focus on high-margin, tech-enabled revenue lines: programmatic advertising and affiliate commerce.”

What does that mean? According to the source:

As we were doing that shift away from Complex, we started focusing predominately on our website. Obviously BuzzFeed and HuffPost, which we can control the distribution, we control the ads, it’s powered by our technology, so it’s super easy to scale and use all of our tech that we have to increase revenue. 

So, things like our programmatic advertising as well as our affiliate commerce which is all of the shopping posts that you see and everything that comes from affiliate. Those are really high margin businesses for us because not only are they low spend, high revenue, but also using our technology, we can scale those things very quickly. 

We started that shift earlier this year and now that we are passing off First We Feast—and First We Feast has a lot of branded video content, costs a lot to produce, and you make revenue off of it, but it’s not the same giant margin as the advertising and commerce on our sites are. This is sort of pushing us in that direction. 

They also went on to say, “At the end of the day, we have incredible time spent, we have an incredibly large audience and they are engaged and coming direct to the site more and more, which is a great trend to be seeing.”

I went to SimilarWeb to get some confirmation on this. HuffPost is crushing it from a direct traffic perspective with 59%. That’s 8.5% higher than The New York Times, which is a pretty good barometer for “brand loyalty.” Only 23% of its traffic is coming from search, so if Google were to become a dead business for publishers, HuffPost would be alright.

BuzzFeed itself is less strong. About 35% of its traffic comes direct, according to SimilarWeb, while 41% comes from organic search. It’s still a third, which is good, but that leaves a lot of dependence on platforms and other sources for readership. With many publishers realizing they need to figure out how to own that relationship, BuzzFeed has a lot of work to do.

So, what comes next?

If I were at the BuzzFeed leadership table, here is what I would encourage them to do. The very first thing is to learn as much about their audience as possible. In January, we did an “Ask the Experts” and Industry Dive’s founder, Sean Griffey, said:

They need a much stronger first-party data strategy. They have a number of newsletters and email courses but try to find them on the site. It’s near impossible. While they still have a wealth of traffic, they need to convert these people to subscribers and build rich profiles of their interests. Only at that point can they start to build targeted content and advertising products that will withstand the next media evolution.

This is still true. If they can figure out exactly what their audience cares about, they can start to build new products around that. Being so focused on programmatic and affiliate commerce rather than deepening the relationship with the reader will likely come back to bite BuzzFeed. Time on page and number of users are both nice metrics, but we are very far away from that era. The ability to target users based on interest matters. And hey, maybe they have that capability. If you are reading this, BuzzFeed, hit me up if you do.

From there, I’d focus more of my energy on HuffPost. It should try to become the left’s version of The Daily Wire, which Axios reports will generate $200 million in revenue this year. That’ll require it to lean into personalities again, but it has a built-in audience. If Daily Wire’s vision is to “fight the left,” maybe HuffPost should “fight the right.” I find that strategy exhausting, but this is the media climate we live in.

Whatever the case, it needs to build something truly differentiated. None of what I’ve seen gives me much confidence that it is doing that. BuzzFeed is very excited about AI; CEO Jonah Peretti said in the statement that, “In the coming years, we will continue to invest in our most scalable and tech-enabled services, launching new AI-powered interactive experiences, and delivering for our loyal audience and business partners.”

If the outcome of all of this is BuzzFeed using AI to create content, then I remain convinced that BuzzFeed won’t survive. HuffPost will, because it has a place politically, but I don’t see the moat or reason to survive for BuzzFeed.

Whatever the case, here’s how I see things. First, First We Feast is going to thrive. I’m sure of that. Second, BuzzFeed has a balance sheet that is at least not detrimental to its survival. And third, the strategy still feels outdated. It may work, but it feels like BuzzFeed has been jumping from idea to idea over the last five years. Why would this be any different?