50 percent of Buzzfeed’s traffic now comes from mobile devices

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Session name: Where the Money is Going

Speakers: Kenneth Lerer Om Malik

Kenneth Lerer 00:07

Is it here?

Om Malik 00:07

Yeah. Nothing like talking about money first thing in the morning, right?

Kenneth Lerer 00:12

It’s a little early.

Om Malik 00:13

I like to talk about lack of money which is something very common in the media business these days [chuckles]. Well, welcome–

Kenneth Lerer 00:20

Thank you.

Om Malik 00:20

–thank you for making time for us. It seems like you have a new job.

Kenneth Lerer 00:25

What’s that?

Om Malik 00:26

After leaving Huffington Post.

Kenneth Lerer 00:28

Well it was actually my son’s idea. Before we sold the Huffington Post– and Benjamin is my son, he’s the CEO and founder of Thrillist and JackThreads. And I forget which company it was, but some company raised the money, and I said to Benjamin – because I was doing investments on my own – I said to Benjamin, “Gee, I should have invested in company X, but I don’t know the guys.” And he said, “Oh, they’re my best buddies.” And I said, “Well stupid, tell me.” And I said, “You know what we should do, we should start a fund”, since he has great contacts at that level in the industry. So we started a fund, we raised $8. 5 million – basically it was just family and friends – while I had the Huffington Post.

Kenneth Lerer 01:22

And then when we decided to sell the Huffington Post, Eric Hippeau and I talked, and he decided to join us and we did a second fund. And now we’ve done a third fund and as these things go, maybe we’ll do another one. We’ll see.

Om Malik 01:37

Right. But what’s the thinking behind starting this one. If you read the papers, it seems like the world is ending for the media industry, but you seem to be starting a fund focused on a lot of these media companies.

Kenneth Lerer 01:54

Well, I do think the world is ending for traditional media companies, but it’s just beginning for digital media companies if you will. So when we started the Huffington Post, it was obvious that traditional print was going through enormous disruption. And it seemed to me it was a great time – it seemed to us – it was a great time to try to disrupt traditional print. And that was really the thinking behind the Huffington Post. We weren’t the first ones to think of it. There were a lot of blogs out there. There was a lot going on, but it just seemed it was the right time to step into it.

Kenneth Lerer 02:35

In investing, another obvious is if you’re too early you lose all your money, if you’re too late you don’t make any money. So timing, in investing to me is as critical as any one component.

Om Malik 02:47

And so you think it’s good time for people to think about investing in new media entities, new information companies, new content companies?

Kenneth Lerer 02:56

I think it’s the best time in the last eight years, to invest in digital content companies.

Om Malik 03:05

We have seen a bunch of new investments which have taken place. Buzzfeed has obviously raised a ton of money, you are the chairman there, and what’s the thinking from an investor’s standpoint? Why do things like Buzzfeed make a lot of sense and are interesting to guys like you?

Kenneth Lerer 03:26

Well, the pendulum always swings from distribution to content at some point in the life of a new media. So it happened in radio, it happened in cable, it happened in broadcast, it’s now happening on the web. The web is built out. Mobile is virtually built out, the infrastructure. So what better time to invest in content? Because you’re going to have to fill those pipes, if you will, with content. So the pendulum has swung now from distribution to content – there’s an expression, Content’s king. Content is king at a certain time, and I think content is king now.

Kenneth Lerer 04:12

Now, you can’t a successful content company online without the corresponding great technology, so… I remember when I was at the Huffington Post, a lot of editors from traditional media would come in and they’d say, I have a great idea, I want to do a site for moms or I want to do a site for sports or I want to do a site for cooking. And the first question you would say is: Who is your technology partner? And they’d say, “I don’t have one”. And you’d say, Thank you very much, see you later. So, it has to be partnered with great technology. But the pendulum, I think, has swung back to content. Not all investors agree with us by any means. It’s very hard to raise money for content companies today. We may be one of a handful that are very interested in that. But I’m a big believer.

Om Malik 05:05

But there is the whole ecosystem around content, right, that hasn’t really changed. You see the media the industry itself change, but let’s say advertising business hasn’t changed. The ideology in ad markets hasn’t changed, people still want the same CPM driven advertising. They’re still thinking about models that are from the past. How do you kind of start build content models of the future, without Madison Avenue actually thinking differently?

Kenneth Lerer 05:38

Yeah, advertising always lags, doesn’t it? And it’s lagging now, but eventually it catches up. So that’s a question of timing, so if you do it too early, you’re not giving yourself enough time for advertising to catch up. So, you have to raise enough money, hold your breath, and eventually it will happen if you have the right content.

Kenneth Lerer 06:01

Buzzfeed’s doing exceptionally well now with advertising. They don’t take display ads, they only take social advertising. And it’s doing exceptionally well because of that. So, you just have to be patient. There’s no silver bullet there.

Om Malik 06:18

What about today’s world, right. One of the things which is great about House of Cards when it came out and Netflix it kind of exposed us to this idea of just stacking the whole TV show and watch it in one go, right. It was just not don’t wait or a season, and then when you look at things like Hulu and Netflix, they’re teaching the world about the idea of non-linear consumption of content. How does it impact people that want to start companies? How should they be thinking about that? Buzzfeed is another example, there is nothing linear about their front page. Not like the New York Times’ front page is very linear, there is a certain definition to it.

Kenneth Lerer 07:06

So let me try – Jonah might be better at saying this in a few senses then me – but let me give it a shot. The idea of Buzzfeed’s content is a social feed. So, on your social feed you get a horrible story, like the tragedy in Boston. You’ll get who won the game last night, you’ll get a weather story, you’ll get a stupid picture, and then you’ll get news about the gun control debate. On Buzzfeed, you’ll get – just like your social feed – you’ll get all those stories with no apparent design. However, the readers of Buzzfeed are use to reading material online, like that, in that order. I think that’s why it works so well. And we’ve thought about that a lot before we did it.

Kenneth Lerer 08:03

When we started the Huffington Post, we kind of had the idea of just putting magnets on a refrigerator in no special order, and everybody told me how ugly it was forever, but it seemed to work. So people online I think are more and more comfortable with consuming content that way. The young web user has never had any other experience. So, for you and me – well for me because I’m and old guy, for you, you’re not as old as me yet–

Om Malik 08:39

Thank you.

Kenneth Lerer 08:40

It’s all right.


Kenneth Lerer 08:41

We’ve been learned to read in a certain order or we’ve been learned to watch TV a certain way. But the new consumer doesn’t have those habits, so when they see a Buzzfeed, to them it’s just normal. Right? Same way when a new user goes to Thrillist and JackThreads and they see content and commerce side by side, that’s okay. They don’t have any rules– they don’t think these things are breaking the rules, they think those are the rules.

Kenneth Lerer 09:15

I remember when my kids were growing up, they started watching MTV and Nickelodeon, they were probably 5, 8 years old at that time. Well they didn’t know of ABC, NBC, and CBS. They didn’t understand how broadcast scheduled, they just saw MTV and Nickelodeon, that’s all they knew. So the new consumer doesn’t have any habits and will accept anything as long as it makes common sense and it’s good content. So I don’t think you have to be stuck for guys like me and you.

Om Malik 09:51

So… Well maybe–

Kenneth Lerer 09:54

Guys like me.

Om Malik 09:55

Just to be very clear.


Om Malik 09:57

You know I have like 1. 3 million Twitter followers, I know social feed a little bit.

Kenneth Lerer 10:02

Guys like me.

Om Malik 10:03

All right. You don’t even Tweet.

Kenneth Lerer 10:05

All right, leave me alone.


Om Malik 10:06

All right. How the Mets doing?

Kenneth Lerer 10:10

The Mets lost two in a row last night.

Om Malik 10:11

I’m sorry, I’ll be nice to you today.

Kenneth Lerer 10:15

You asked me what I was interested in, and I said, “My family, gun control, and the Mets”, and then he promised me he wouldn’t ask me any questions about those three.

Om Malik 10:22

Well I just had to bring up the Mets. I am a Yankee fan, so… Not that we’re doing terribly well, but that’s okay. Talking about the new companies and the new players – in the match we have a lot of new talent there, they’ll work out someday – what do you think about the companies or types of companies you’re interested in as an investor? What attracts you the most?

Kenneth Lerer 10:50

Well I’m not being facetious. The first thing that attracts me is the handshake. Right?

Om Malik 10:54


Kenneth Lerer 10:55

Somebody comes in, you have to look him or her in the eye, shake their hand, and make a pretty quick judgment as to do you want to be partners with this person. Doesn’t matter what the business is. And that’s hard to tell in an hour and a half or in three or four meetings. Because we do seed investing so there’s not a whole lot of financial analysis, we can make believe there is, but I never seen a set of financials on a company we’ve invested into seed that has anything to do with what it looks like a year later, good or bad. So, you have to kind of take the measure of the person and say, Am I going to have fun working with this person over the next four or five years, and what do I see when I look in their eyes. That’s the first thing.

Kenneth Lerer 11:54

The second thing is, copycats – which we see a lot of are not particularly interesting. And I would say we’ve invested in about 170 companies in the last three years, and we see – I don’t see them all obviously – but we see on paper probably 100 companies a month. And probably 75% are iterations of existing companies. That’s not that interesting. Once in awhile you find one that’s great because of the person, so there are certain things that are obvious now to me and everybody here, everything’s going to the phone. Buzzfeed has 65% of its traffic now on the phone.

Om Malik 12:50


Kenneth Lerer 12:51

Thrillist– JackThreads, the commerce company, sells 65% of what they sell on the phone. John Borthwick, who’s coming later, can tell you all about his businesses. Now launching an app content company is much harder than launching a web company for sure. Much, much harder, I’ve learned that. But phone, video 10 years ago was ripe to disrupt the print media. I think now is ripe time to disrupt the broadcast and the cable industry, because everything is going video. Obviously social brands are less important, social is more important.

Om Malik 13:39


Kenneth Lerer 13:39

That’s going to continue. So you look for macro – I do anyway. I look for macro obvious trends, which anybody, which isn’t hard to think about and then see where the companies and fit in and take advantage of those trends.

Om Malik 13:55

So if there is an entrepreneur out there who wants to come and talk to you, what are the key kind of companies they should be building right– obviously you said they need to have original ideas and it has to have social and mobile elements to it, but apart from that are you interested in video related companies, or long form content, or content publishing systems, what is it that interest you the most these days?

Kenneth Lerer 14:29

I think, just for me – maybe not for everyone in our fund – I think the thing that interest me today is a certain kind of commerce and a certain kind of content. And probably no one else today who you have here will agree with me. But those are the two things that interest me. I see content changing dramatically, I see young web users coming up, like I said before, and having no perceived notion of what should be in front of them. I see everything going mobile, I see most things going video. So Buzzfeed’s a perfect example. RebelMouse, Paul Berry is going to be here later, is a perfect example. We started RebelMouse with Paul. Both of these are heavily social, and a new kind of content. That’s my background so that’s what I know. I try not to invest in stuff I don’t know about.

Om Malik 15:29

Do you have any thoughts on the emergence on a lot of these long form start-ups which have started popping up?

Kenneth Lerer 15:39

Like what?

Om Malik 15:40

Well there is a company called Narratively and then there is Bi-liner and companies like that which are pushing the envelope on either e-books or e-singles, and stuff like that.

Kenneth Lerer 15:53

Well I love the idea, I love singles. Long form journalism has got to find its place online, it hasn’t yet, it will. I’m sure. I don’t think– I think that all of this is great for journalism; I guess a lot of people don’t agree with me. There are more outlets. There are more places to write, there are more places to consume. It’s easier for me to read long form content online, easier today than it was three or four years ago. I know a lot of people aren’t comfortable there, but they’ll get there. I don’t think I’d invest in a long form journalism company today if they walked in the door.

Om Malik 16:36

Okay. Last question before we end the conversation, investing is only one part of the equation, right?

Kenneth Lerer 16:45


Om Malik 16:45

So the other part of the equation is exit, whether it’s through IPO or through sale, and when given that the media ecosystem is falling apart pretty rapidly, companies don’t have appetite to buy, as a professional investor how do aptly see the outcome for your company?

Kenneth Lerer 17:06

So I’ll use the cable analogy. The big media companies weren’t interested in buying their own networks, they tried to buy some early on, it didn’t work. At the end of the day they paid much more and bought them all. The same thing is going to happen now.

Om Malik 17:23


Kenneth Lerer 17:23

So, the exits for a lot of the companies that we’re investing in are today’s media companies, and instead of paying X they’re going to pay 6X. The LinkedIn of the world, the Facebooks of the world, the Googles of the world, the Yahoo! s of the world, the AOL and the big cable networks, they’re all going to be forced to buy content. Inevitable.

Om Malik 17:46

Good, then you can buy me lunch.

Kenneth Lerer 17:48

I’ll buy you dinner.

Om Malik 17:48

Or maybe keep–

Kenneth Lerer 17:50

I’ll take you to a Met game.

Om Malik 17:52

No, I don’t think that’s going to happen, but you can keep them afloat if that happens, right?

Kenneth Lerer 17:55

No, I can’t.

Om Malik 17:57

No, okay. All right, but seriously, thank you so much for making time for us today.

Kenneth Lerer 18:01

All right, I enjoyed it.

Om Malik 18:02

I know you have a big day ahead of you, so thank you again.

Kenneth Lerer 18:06

All right.

Om Malik 18:06

Look forward to having you back at our show again.

Kenneth Lerer 18:08

Thank you.