A rising class of Internet video companies is challenging the supremacy of broadcast TV—and they’ve come with a list of 10 Totally Awesome Reasons Why They’re Doing It Wrong.
Since 1948, TV networks have hosted an annual schmooze-fest called the Upfronts, where executives in suits sell a year’s worth of advertising all at once. It’s a martini-soaked, star-laden affair that feels stuck in the Mad Men era. But the Upfronts endure, even though Web advertising—where algorithms, not alcohol, drive the buying and selling—is now a $40 billion business. Data-driven digital ads are the exact opposite of the handshake deals that fuel the Upfronts.
But a funny thing happened on the way to the future: Digital media companies saw the value in all the schmoozing and created their own version of the Upfronts, called the NewFronts. What started with a handful of tech companies in 2012 has expanded to a two-week digital video festival that’s as flashy and boozy as any broadcast event. Last week at the Lincoln Center in Manhattan, Yahoo served champagne and miniature lobster tacos to attendees wearing purple glow sticks as renowned disc jockey Steve Aoki spun beats.
This year, 33 companies are participating in the NewFronts. That includes YouTube networks such as Maker Studios and digital media startups such as BuzzFeed, as well as newspapers (The New York Times), magazines (Condé Nast and Fortune publisher Time Inc.), and classic media conglomerates (Time Warner and News Corp.). The businesses have little in common. But they are all competing for the same ad budgets.
As they create ever more videos to attract those dollars, the media companies are learning the same lesson that newspapers and magazines learned about text in the late 1990s: You can’t just port analog content to the Web. The Internet is its own weird beast, and the predominantly youthful audience that is devouring online videos is suspicious of clinically professional content. Web audiences can smell someone trying too hard from a mile away; they recoil from the clownish makeup and stiff hair helmets of TV talk-show hosts. There’s nothing wrong with classic television content per se. It just doesn’t feel quite right in the context of the Internet, where animated images of cats ricochet around Twitter, six-second Vine videos have a narrative arc, and your Aunt Sue douses herself with a bucket of ice water on Facebook.
That’s why the media companies with the most exciting video outfits aren’t Condé Nast, or the Times, or even CNN or MTV. They are upstarts making content that looks nothing like the footage you’d see on television. Vice Media’s irreverent shock tactics, such as embedding reporters with the Islamic State or Peruvian drug lords, have earned the Brooklyn outfit an audience of millions. BuzzFeed’s goofy stunts, where adults try public school lunches on camera or a man spends a day hobbling around on stilettos, have earned the New York company a billion views per month. Tastemade, an up-and-coming startup in Los Angeles, has amassed a small but growing monthly audience of 25 million foodies who eagerly stream bite-sized clips of hipsters visiting restaurants; investors are calling it the next Food Network. Together, BuzzFeed, Vice, and Tastemade represent a new breed of entertainment that aims to walk a very fine line: Authentic enough to appeal to discerning online audiences but just professional enough to entice advertisers.
The trick for this trio and their peers will be convincing brands who are accustomed to spending their TV budgets on highly produced shows like American Idol to get comfortable with the freewheeling world of giggling, swashbuckling, amateur Web content. Soon enough, they’ll have to: The way we watch video content is changing rapidly, and Web video won’t live solely on laptops and in Roku boxes much longer. The next wave of television sets have the Internet already built in. It won’t be online video versus television—it’ll just be entertainment.
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Thirty-six million people have watched “6 Fruits You’re Eating Wrong,” a recent video created by the team at BuzzFeed. In the one minute and 46 second clip, generic rock music blares as BuzzFeed employees slice up a kiwi, a mango, a pomegranate, an orange and a watermelon in quick succession. A buzzer honks when the fruit is cut incorrectly, and cheeky commentary, like “Crazy, right?!” pops up as proper cutting techniques are shown. The video, which has been published on Facebook, Yahoo, AOL, and YouTube, has more than three times the viewership of the finales of Breaking Bad, Modern Family, or American Idol.
Started in 2006 as a lab for experimental web content, BuzzFeed has attracted an audience of 200 million monthly unique visitors, making it the sixth-largest site in the U.S.—bigger than eBay, Yahoo, and Wikipedia, according to Quantcast. It’s known for its viral hits—jokey lists about cute animals—and increasingly, its investments into journalism. But now, like its digital peers, BuzzFeed has aggressively expanded into video. Already the company’s 3,000 videos have been watched four billion times. In 2014, BuzzFeed crossed $100 million in revenue on its special brand of house-made native ads, though, as we will see, only a small portion of that came from its burgeoning video business. And either way, $100 million is small potatoes compared to, say, American Idol, which sold $575 million worth of ads last season by some estimates.
But 36 million views qualifies “6 Fruits You’re Eating Wrong,” as a hit, and so, on a Tuesday afternoon last fall, the brains behind BuzzFeed Motion Pictures, the company’s Los Angeles-based video unit, gathered to riff on more things its viewers might be doing wrong. To enter the attic area where such meetings are held, BuzzFeed’s young producers, who often star in the videos themselves, must crawl or roll under a wooden horizontal beam that inexplicably cuts through the room. The cavernous Hollywood building was “designed by a madman,” according to Ze Frank, president of BuzzFeed’s video unit.
Senior video producer Andrew Gauthier leads the riffing. He notes that, in addition to “Eating Wrong,” a video called “10 Ways Men Are Dressing Wrong” has racked up 1.7 million views on Facebook. “The word ‘wrong’ is really good,” he says.
“It makes you need to click on it to see if you’re doing something wrong!” Ella Mielniczenko, a video producer, chimes in.
Ideas for new “wrong” videos get thrown around: Snacks you’re eating wrong. Maybe you’re running wrong, or putting your pants on wrong, or eating sushi wrong. Words you’re using wrong. Ways you’re sleeping wrong. Gauthier reminds the group focus on “super visual things,” to optimize for video. “What if people are having sex wrong?” someone asks, and the room erupts in groans.
This is not rocket science, or even neuroscience, which Frank studied at Brown University. But is it some form of science, involving data crunching and hypothesis testing. This meeting is just one cog in BuzzFeed’s data-driven content machine.
The secret to BuzzFeed’s success—the thing that Frank, Gaulthier, CEO Jonah Peretti, and his staff of more than 900 believe makes BuzzFeed different from other media companies—is its data-driven approach. The company employs 12 data scientists and 11 researchers to crunch the numbers on the approximately 500 posts it publishes each day. Every list, listicle, article, essay, photo, video, upvote, comment, Thumbs Up, Tweet, Like, Heart, Pin, Share, Reblog, Retweet, LOL, WTF, OMG, and Ew represents a data point to be scrutinized. From there, BuzzFeed tests hypotheses to determine what made the content successful, in hopes that each successive piece of content will be even more perfectly engineered for irresistibility. “You can’t just do what [you think people] want, because people like to be surprised and exposed to new things,” says Peretti.
Unlike a Hollywood studio, which might produce five films a year, BuzzFeed is churning out an average of 50 videos a week, and taking advantage of the opportunities to test everything from characters and actors to theories about human behavior. “It’s fast-paced, its iterative, the production is the same day as the distribution, and they’re interacting with audiences and getting data in real time,” says Frank. When Frank asks his team what they’re working on, they rarely tell him the individual piece they’re shooting, but rather the problem they’re trying to solve. One big problem of late has been “post-literate videos,” which reduce the dependence on language. “You can see the success by its international growth, Frank says. “It’s a really difficult problem and these folks are doing six to 10 videos and studying the result.” Thus, “Totally Useless But Awesome Hacks You Need To Know.” Click!
In August last year, BuzzFeed raised $50 million in new venture funding from Andreessen Horowitz. In December, it sold between $30 million and $40 million worth of secondary shares to General Atlantic and executed a 10-to-1 stock split, a move that startups typically do in preparation for an IPO, according to sources familiar with the situation. (BuzzFeed declined to comment on the December funding.)
A big chunk of that capital has allowed BuzzFeed Motion Pictures to build a new 20,000 square-foot studio with 20 different sets. Frank is quickly adding heads to his 200-person team, including real actors, so BuzzFeed doesn’t have to rely on staffers to star in the videos. The new studios were previously used as a storage space by the Academy.
Tucked in the office’s far back corner, Jonathan Perelman, BuzzFeed’s general manager of video and vice president of agency strategy, is building out a shadow operation to Frank’s fruit-cutting, brainstorming, data-crunching producers. Perelman’s team, called the Branded Video Division, is using insights like “the word ‘wrong’ is really good” to co-create commercials for brands. Except, unlike regular TV commercials, the sales pitch is subtle. (Authenticity lesson #1: The hard sell never, ever works online.) In “Dear Kitten,” an older cat dispenses advice to a kitten. Halfway through the three-minute video, the cat praises Friskies wet cat food over the dry “dehydrated brown niblet.” That video was seen more than 20 million times and spawned a “Dear Kitten” series, which crossed 59 million views.
With 100 advertisers, sponsored videos make up a small portion of BuzzFeed’s income (the rest comes from sponsored advertorials on BuzzFeed.com). At BuzzFeed’s NewFronts event, Peretti noted that the success of BuzzFeed’s video division has showed the company “a pathway to a new business model,” where it can make money posting content on other social media platforms, not just BuzzFeed.com. If successful, video will eclipse BuzzFeed.com in revenue, according to Perelman. “I’m working hard to make that happen,” he says.
To do that, he faces the daunting challenge of winning over TV ad budgets. A single 30-second spot on last season of American Idol, which reached 10.8 million viewers in its finale, netted $355,000, according to Advertising Age. For the initial “Dear Kitten” video, which garnered twice as many views, Friskies paid BuzzFeed between $100,000 and $125,000, according to people familiar with the company’s pricing. Perelman hopes TV and video budgets blend together to become a new category of spending. “I can’t say we are taking from television,” he says. “That’s a very big bucket that’s very full.”
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Last summer, across the country, Vice Media’s employees were settling into its recently expanded Brooklyn headquarters, a block of frankensteined-together warehouses so maze-like that CEO Shane Smith was still learning where all the restrooms are. Fresh off a $250 million fundraise that valued Vice at $2.5 billion, the company already made plans to move a few blocks away. The new office is twice as large and has the capacity to add 525 new employees.
TV monitors around the headquarters highlight the top-viewed content in Vice’s network, which for several weeks in August was dominated by a five-part, 45-minute YouTube documentary series called The Islamic State. In it, an embedded reporter follows ISIS as the jihadist group opens fire at the Syrian army, parades stolen weapons through the streets, and discusses the challenges of balancing warfare with family. Snipers are narrowly avoided. Children issue adrenaline-fueled threats of car bombing and killing. Heads are mounted on fence posts. Abu Mosa, the Islamic State press officer, fiddles with his gun while delivering a message to America: “Don’t be cowards and attack us with drones. Instead send your soldiers, the ones we humiliated in Iraq.” It’s terrifying and titillating. It’s also unlike any other coverage of the Syrian conflict, making it a perfectly Vice-ian piece of content.
All told, the series racked up 9 million views, contributing to the company’s monthly audience of 200 million (an internal figure that includes Vice.com, “Vice” the HBO show, Vice the print magazine, Vice’s channels on YouTube, and international TV syndication). The series was cited in White House press briefings. ISIS even beat surefire hits like “I Got My Pussy Stoned with Weed Lube,” a Vice.com article that evokes the sort of unapologetic drug tales with which Vice made its name as an alternative magazine in the 1990s.
Vice’s young, edgy workers—“12-year-old kids with facial tattoos,” Smith calls them—operate in stark contrast to the Internet-y data nerds cutting up mangoes at BuzzFeed. The ISIS series was not born in a brainstorming session or on a data spreadsheet. Editorial decisions are mostly made on gut instinct, says Smith, because Vice does not do “content by consensus.” “We know what works, what doesn’t work, and a world-wide exclusive on an embed on ISIS is going to work,” he says. “We’re going to go with our gut on that.” Stories about weed tend to be popular, too, he adds with a chuckle.
It’s edgy. But frequent cursing and braggadocio aside, Smith himself is an amiable guy. He’s the sort of person that can charm a corporation into spending “tens of millions of dollars” on a multi-year advertising deal, which he did, in 2009, with Intel. Similarly, he has convinced the world that Vice is in possession of a difficult-to-reach key demographic—millennials. He is gleeful on this point.
“We have mobile, we have online. [TV networks] don’t have any of that. They’ve lost a whole generation,” he says. In 2013, when Charlie Rose asked if Vice would become the Time Warner of the street, Smith didn’t blink. “We already are the Time Warner of the street.” His proof is self-reported—Vice claims 76% of its audience is under the age of 34, same goes for BuzzFeed—but the numbers are almost beside the point, because Vice and BuzzFeed have convinced the world they’re millennial whisperers. Digital advertisers believe: Vice’s 2014 revenue was estimated to be $500 million. (BuzzFeed, you’ll recall, brought in more than $100 million.)
Still, American TV brought in $74.5 billion. Smith says Vice’s biggest clients have told him, “Boy if you had TV, we have huge budgets for that.”
The company is doing just that. Since taking on investment from A&E, reports have speculated that Vice will rebrand one of A&E’s unloved cable stations as its own 24-hour cable network in 2016. Last week at its NewFront party, Vice previewed ten new TV shows with no details as to where they’d appear.
Until then, Vice will license its documentary video content—much of it long-form—to TV networks around the world, such as Antenna TV in Greece and China Travel. The company struck a $100 million joint venture with Rogers Communications, operator of Canada’s number-one cable channel, to create programming for the channel. This year the company announced a four-year deal to provide daily newscasts for HBO’s new digital TV service, HBO Now. Licensing its content to TV networks around the world makes up a large chunk of Vice’s margins, Smith says, and it’s on track to overtake Vice’s digital revenue.
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Oren Katzeff, an executive with Tastemade, doesn’t know which budgets advertisers are using to spend money with his company. He just knows they are spending—and generously. Without hiring a single ad sales person, the food-focused network of YouTube channels has already lured big ad buys from the likes of American Express, Kraft, Chase, and Hyundai. The fledgling startup’s ads follow the TV model of sponsorship. For example, American Express paid more than $1 million to sponsor two series created around how-to videos, recipes, and “life hacks” and Grey Goose sponsored a series about cocktails called Local Flight. Like with BuzzFeed, the brand mention is subtle. “We don’t hit you over the head with it,” says Katzeff, who heads up programming at the startup. “Online audiences are so quick to call things out that they don’t agree with.”
Brands are eager to align themselves with the 440-channel network because the content is professional—Tastemade has a three-kitchen studio in Santa Monica—but carries an Internet-y sense of authenticity.
Take Katie Quinn, one of Tastemade’s up-and-coming stars. Blonde with black-frame glasses, Quinn sprinkles her conversations with Bart Simpson-style slang like “No way, Jose!,” “Dope!” and “Word!” She’s a little bit goofy and very enthusiastic. In Internet parlance, she’s adorkable.
Over pizza at John’s of Bleecker Street in New York’s West Village neighborhood, I assist her in shooting what she calls an “appisode,” or a short-form video guide to a restaurant. She showed up alone—no crew, no expensive cameras, no layers of makeup and hairspray. Using the Tastemade app on Quinn’s iPhone, we capture shots of ourselves interacting with the food for B-roll. At one point, she records herself taking a bite from the pizza’s perspective, phone in one hand, slice in the other. We choose a background song, font and caption, and then, like magic, Tastemade weaves it into a perfectly entertaining short film with a beginning, middle, and end.
To Quinn, a former producer with NBC, the app is a breakthrough. “This is going to put us all out of business,” she thought when she first saw it. “They’re letting people who don’t have any experience with video stuff put together a cohesive piece of content with a narrative arc,” she says. It’s the difference between someone on posting 20 blurry snapshots of their friends at a picnic on Facebook, versus that same person on Instagram, sharing a single image of a sunset, perfectly framed, cropped, focused, aligned, filtered, brightened, captioned, and geo-tagged. Instagram didn’t make that person a better photographer, it just gave them the tools to make their boring photos look professional. (Tastemade isn’t yet monetizing the so-called “appisodes,” but it has mined them for talent, elevating people like Quinn to its network of professionally produced videos.)
User-generated content around food, in particular, is hard to get right. Just ask Martha Stewart, whose gag-inducing photos of slimy truffles and goopy salad dressing have drawn ridicule on social media. This is particularly important to advertisers, who don’t want their products next to anything so unappetizing.
Tastemade’s videos, which reach 25 million monthly visitors (a figure that does not include mobile views), aim to walk the fine line of looking polished, but not so polished it doesn’t feel real. “It’s bridging the gap between YouTube and TV, but taking the best of both,” Quinn says.
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At the Emmy Awards last fall, things took a self-loathing turn when comedian Seth Meyers, the event’s host, pointed out an awkward reality: Netflix’s 31 nominations threatened cable TV the same way cable TV had, decades ago, threatened the stodgy broadcast networks. “It’s not very nice when someone younger comes along, is it cable?” Meyers taunted. “Cable is looking at Netflix the way Justin Beiber looks at One Direction—through a cloud of marijuana smoke.” BuzzFeed included a gif, or animated image, of the joke in one of the 27 articles it published on the Emmys. Meanwhile Vice took home an Emmy, its first, for outstanding informational series or special.
But Meyers’ observation is also a warning to BuzzFeed, Vice, Tastemade and their peers. Their prized young audiences are fickle. By the time ad budgets finally catch up to eyeballs online, the kids may have moved on. The definition of authentic is constantly shifting. Earlier this year, BuzzFeed scored a sit-down interview with President Obama. A week prior, vice president Joe Biden visited Vice’s office. The presidential treatment bestows credibility on both media organizations; it also requires a necessary level of follow-the-rules professionalism, which doesn’t exactly scream “authentic.” For Biden’s visit, Vice reportedly hid a pair of rhinestone-studded Elvis underwear that hung above its copy machine.
To stay authentic, the would-be media empires are on betting their ability to perpetually adapt—BuzzFeed with its data-driven learning and experimentation, Vice with its swaggering gut instincts, and Tastemade, with its army of adorkable foodies—to keep them relevant long enough to garner serious ad dollars, before another leaner, smarter, faster upstart dethrones them. “We don’t have to know how its all going to be worked out in the future, we just have to have a team that continually learns,” says BuzzFeed’s Peretti.
“Will someone come eat our lunch?” Smith asks. “Yes. Will we have 10 years before they do? Yes.” Smith likes to remind doubters that his company has always been quick to jump on new technology. Vice started as a magazine in 1994, the minute desktop publishing software became available to “schlubs like [him].” He did the same thing again in 2007 with online video, since it meant he could make TV without owning a network. The next big thing might be holograms, he muses. For now, Vice’s 12-year-old kids with facial tattoos have figured out a way to shoot video and record audio in 3-D, creating news reports for virtual reality headsets. “We’re already working on it,” he says. “It’s fucking awesome.”