Why BuzzFeed’s attempt to reinvent online advertising is a lot harder than it looks

If there’s a poster child for the phenomenon of “native” advertising — also known by other names, including sponsored content — it is BuzzFeed, the digital-only publisher created by Huffington Post (s aol) alumnus Jonah Peretti. Unlike some content companies that are just experimenting with these new forms of advertising, BuzzFeed has staked its future on the format, refusing to carry traditional ads. But as a recent profile of Peretti and his company in New York magazine makes clear, reinventing advertising is no walk in the park — and while BuzzFeed may have a head start, it is still far from that goal.

As the NY magazine piece points out, word of mouth is the holy grail for advertisers: customers talking about your product (or something related to your product) without you paying them to do so is the ultimate recommendation. Madison Avenue legend David Ogilvy said it was “like manna from heaven, but nobody knows how to do it on purpose.” In a nutshell, that’s what Jonah Peretti has been trying to do ever since he himself went viral in 2001, after a stunt he came up with involving a Nike shoe and some bad press for the company’s foreign manufacturing.

This is fundamentally the same reason advertisers are interested in social networks like Facebook (s fb) and Twitter: because they are hoping to figure out how to both create “social” advertising messages and target them in such a way that they don’t really seem like advertising, thereby encouraging users to share them. The only problem is that no one really knows how to do that (Note: We’re going to be talking about sponsored content and other monetization methods with BuzzFeed president Jon Steinberg, among others, at paidContent Live on April 17).

How does virality work? No one really knows

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Everyone can recognize a viral campaign when they see them after the fact, but no one quite knows how to produce them in any kind of scientific way. Microsoft (s msft) researcher — and Peretti friend — Duncan Watts has studied this area more than just about anyone, and he and the BuzzFeed founder (who co-authored a paper in 2007 on the topic for Harvard Business Review) both have algorithms that try to describe the process. But Watts admits it is far more chaotic and difficult to predict than those algorithms suggest.

“We have this very Newtonian view of causality,” Watts, a square-jawed Australian, shouted over the din. “Like, billiard balls hitting each other, that’s the most complicated thing that we can wrap our heads around.” But his research suggests that the commonly understood, Gladwellian model of virality, with its linear progression through influencers and tipping points, doesn’t really reflect the way viral messages spread.

Even Peretti, who has gained a reputation for being able to engineer virality, seems to concede that it is harder than most people think. The New York magazine piece says the BuzzFeed founder became visibly irritated when told that some advertising industry critics don’t see the site’s sponsored content as being that valuable — with one ad agency executive arguing that showing readers “a bunch of cats” isn’t really helpful when it comes to doing actual marketing. “Could you make a list of cute animals that gets 5 million views? It’s actually really hard,” Peretti shot back.

Some advertisers are resistant to the idea


So one reason why BuzzFeed’s attempt to reinvent advertising is going to be a lot harder than it looks would be simple resistance from the ad industry itself: for all of Peretti’s talk about how sponsored content can bring back the creativity and storytelling aspect of advertising, many agencies and other players don’t seem convinced that putting their brand name on a piece about dogs who look unimpressed is going to help them move more product. The BuzzFeed founder may see this as short-sighted, but it is still a hurdle.

Another barrier is related to this one: namely, the fact that some of BuzzFeed’s sponsored content winds up doing the exact opposite of going viral. According to the NY magazine story, some of the content that Virgin America and other brands spent hours creating in collaboration with BuzzFeed — tinkering with it until they were convinced they had engineered it to be as viral as possible — more or less fell flat and disappeared without a trace. One post had just 350 shares on Facebook, which is the equivalent of a damp squib in social-networking land.

“Other campaigns running on the site… showed smaller results: Geico, 140,000 views; GE, 65,000 views; Pepsi Next, 44,000 views. These numbers don’t quite match the hype around native advertising, which might be why ad agencies sound much less enthusiastic about the medium’s transformative potential than publishers do.”

It’s also expensive — and potentially risky

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A third hurdle to BuzzFeed’s ambitions is implied by both of the others, and that is the cost of producing the kind of content that the site wants to lure advertisers into sponsoring. All of the meetings that the NY magazine piece describes, in which a dozen or more editors work on posts and then decide which ones to market heavily (a process that somewhat ironically includes the use of ads on Facebook and elsewhere) makes for an expensive process.

And one final hurdle is the one highlighted by blogger Andrew Sullivan in a series of posts about the evils of sponsored content and of BuzzFeed’s approach in particular: namely, that the site will be unable to maintain the trust of its readers if it blurs the line between editorial and advertising too much. The NY magazine story describes several posts that could easily be mistaken for ads — even though they aren’t — and other posts that began as non-sponsored content and then were more or less recreated as advertising for specific brands.

BuzzFeed has $20 million in new financing, and New York magazine estimates that based on what it charges for a piece of sponsored content, the site could make as much as $40 million in advertising revenue this year. But building a profitable business based on the creativity of human beings in an area as unpredictable as online content — while retaining some credibility — is not an easy task. Just ask the traditional media industry.

Post and thumbnail images courtesy of Shutterstock / Everett Collection as well as Flickr users Nils Geylen and 401K, and Shutterstock / Eldorado3D