BuzzFeed’s big secret: Video is taking over

August 11, 2014, 10:19 PM UTC

Buried in the news that BuzzFeed raised $50 million in new funding on Monday is the fact that the 550-person company has reorganized itself. BuzzFeed now consists of separate business units for its Web content, its video content, its branded content, and its distributed content.

The most formidable of the group is BuzzFeed Motion Pictures, the new name (and with it, an expanded mission) of the company’s video operations. BuzzFeed is known for its highly shareable lists and native advertising experiments, but the company’s two-year-old, Los Angeles-based video operation has been quietly growing like a weed. In an interview with Fortune, BuzzFeed CEO Jonah Peretti said he believes the video business could become as big or bigger than “Video is a huge, mega-trend, and the fact that it’s being viewed on mobile at such a high rate and being shared at a high rate aligns all these things together,” he said. “Digital, video, mobile and social can all be the exact same thing: someone sharing a video they love that they viewed on their mobile device.”

In the last two years, the company has produced between 1,800 and 1,900 short videos with a total of 1.7 billion YouTube views. About 27% of its videos have garnered more than 1 million views each. The video business has slightly more than 100 employees and recently unveiled a new 20,000 square-foot studio space in Los Angeles.

Now, with the establishment of BuzzFeed Motion Pictures, the company will expand beyond its bite-sized, one- to three-minute videos to make serialized content and longer-form features, including documentaries. The company says it will collaborate with traditional Hollywood studios, though it declined to discuss how specifics of any business partnerships.

BuzzFeed Motion Pictures is run by Ze Frank, an early viral video star who joined BuzzFeed in 2012. One month ago, Jonathan Perelman, the general manager of video and vice president of agency strategy at BuzzFeed, moved to Los Angeles to ramp up the unit’s business operations, which includes a creative team making sponsored videos for brands.

We spoke with Peretti, Frank, and Perelman about BuzzFeed’s big bet. Below are excerpts from interviews with each, edited and condensed for clarity.

Jonah Peretti, CEO, BuzzFeed

BuzzFeed CEO Jonah Peretti talks with Fortune senior writer Jessi Hempel at Fortune Brainstorm Tech in Aspen, Colorado.

How do you think we’ll be consuming video content in future?

We keep getting surprised. We never expected people would watch video on their phones, but now we’re seeing like half of our views are mobile. There are rumors that Apple (AAPL) is making a bigger format iPhone and people are buying more Android phones that are bigger and have longer battery lives, so people can spend more time watching mobile content.

Having video content that is 20 minutes long in your Facebook (FB) News Feed that people are sharing and watching on their phones doesn’t seem that far-fetched. But that’s like three to six months in the future. We don’t have to know how it’s all going to be worked out in the future, we just have to have a team that continually learns, and have a method for trying, creating, and learning from that, and getting data and feedback. It’s not just having a company that invests in creating content, but [having one that] measures it. We have the art side and the science side. If we do that, any new platform that emerges is something that will be a big benefit for our way of working. Essentially our core skill is to do great storytelling on any platform.

Ze—his [value] isn’t that he’s great at video. He’s great at playing with it and learning how to delight and amuse many people on different platforms.

How did you recruit him?

We both had viral hits around the same time, within a couple of months of each other. He had done these videos of himself and reached a million people, so we both essentially had the same experience: Some little fun thing we were doing while procrastinating that ended up reaching millions of people.

At that time, it was happening to a lot of other people, or at least many other people. There was  the Numa Numa dance. And most of them just went back to their regular life and were like, “This was a weird thing that happened to me and it’s a great story.” Or they tried to do the same thing over again it, like Numa Numa 2 and Numa Numa 3, and each time it was less and less novel and did less and less well.

Ze and I got more intellectually interested in how does this work, and tracking how people shared things and engaged with them. The medium [Ze] used the most was video.

His show really defined most of the conventions you see on YouTube now. The influence he had when you see all these 15-year-olds with millions of screaming fans doing certain styles of cuts, putting their face close to the screen, and having fans do stuff like making an Earth sandwich.

The teen YouTube stars that were featured in New York magazine.

Yeah, he’s like the grandfather of that. 

What’s your budget for videos?

There was a Nightline episode where they were making fun of the fact that the whole production budget for a video was like $100. The model is, you have fixed costs which are the team and space and all that. If you have the right people and environment, the cost of each additional video goes down. The way we budget is a function more than a number. Put in X into one side and if X+N comes out in the other side, then just keep repeating it. 

Ze Frank, president, BuzzFeed Motion Pictures

How will Buzzfeed Motion Pictures content be different from the video content we’ve seen so far?

The business we’ve built over the last two years is focused on short form, specifically the notion of experimenting and iterating. That continues to grow and we’re incredibly excited about the short form business because it’s opened up this bank of knowledge for us. It opened up a way for us to identify really interesting aspects of culture that seem to be important to media, like focusing on identities and the way that people seem to relate to a lot of the niche aspects of identity which we think are underserved.

The second piece is, when we start talking about serializing content and creating mid-range series for release on the Web broadly, it’s a great place to interface with the more traditional skill sets of Hollywood.

The third piece is [the working group] Future of Fiction, where we're bringing in [producer] Michael Shamberg and [actor and comedian] Jordan Peele, and that's an all-out collaboration with Hollywood as it is today. We’re trying to see whether, through that, we can inspire each other on how I.P. is generated, how we can make some incremental gains in reducing friction in the process. And to expose the traditional market to data-driven learning.

What’s the actual business arrangement with traditional Hollywood?

I can’t speak to specifics, but it’s a pretty broad swath of potential types of arrangements. The goal is to build content and properties and to think of them in a trans-media way, where the place they live isn’t defined from the start. 

The majority of your viewership comes from YouTube, correct?

We are still in a position where YouTube is the majority, but that ratio has been declining over time. We’re at around 150 million-plus views a month on YouTube, but all-in across Yahoo, AOL, Facebook, and all those things, we’re at 250 million. A critical part of this growth has been understanding the relationship between content development and platform. What changes when you syndicate broadly and there’s different models and ways of thinking about content in different platforms? "Buzzfeed, off Buzzfeed" [The company’s new distribution unit —Ed.] is going to take that to another level.

Would you prefer to own the distribution rather than outsource it?

There are definitely advantages to owning distribution pipes, but I don’t tend to think of the advantages in the same way that I think traditional folks think about it. The idea is not a monopolistic intention. Those days are gone. But owned distribution means you can get a lot more data. Ideally it’s a blend where we’re looking at lots of audiences, but you also have a segment that’s owned.

What have you done that works best and what doesn’t work at all?

The biggest gamble that we took in setting up this studio was on the operational and managerial side. We architected teams within the short-form group that were generalists and faced with the expectation that they’d produce one to two videos a week, if not more. The second thing was we took away the idea of pitch up and approval down, and tried to get people to think along experimental lines where the media is always focused on a problem they are trying to solve.

Those are two high-minded principles and that’s one of the most surprising things to me is the degree to which that worked. It has created a very autonomous, but earnest, team that has lots of different visions. It’s a form of letting go, organizationally, but what it’s taught me that I don’t think the complexities of the modern media landscape can really be understood by individuals. It has to mimic the complexity of the network itself. We need lots of different viewpoints thinking about this stuff at the top level. 

That sounds like pure chaos.

It’s surprisingly not. What I find fascinating is if I go out and walk around and see what people are doing, rarely do people tell me the individual video they’re working on, but the bigger problem. They say, “I’m doing post-literate pieces, where I’m reducing the reliance on what language the video is in, and can see the success by its international growth.” It’s a really difficult problem and these folks are doing six to 10 videos and studying the result.

What are some other problems?

How the delivery mechanism changes some of the ways you might think about the presentation of the content. Things like autoplay inside Facebook. That’s not trivial. That’s a pretty massive adjustment. There’s moment of no-sound presentation of what you’ve made and you have to take that seriously. That has implications of how you set things up and the ordering of the content. Another one is that mobile generally has an interesting relationship to sound. There are a lot of people thinking about how you can do things that are non-sound reliant, but where adding the sound adds some value.

People will notice something in the audience reaction or a spike the data and then they follow it up and try to make sense of what’s happening. Travel videos around travel in your 20’s are resonating huge in Gen-Y, so there’s now a format class called “Gen-Y Aspirationalism, Subclass: Wanderlust,” and so people are focusing on trying to figure out why that is.

Jonah mentioned you both shared a philosophical approach to why things go viral. 

I came out where in 2007 in the middle of producing this year-long video blog, and I was shopped around. The way that I worked, and increasingly, the people that are coming to Hollywood to work, is fast-paced, it’s iterative, the production is the same day as the distribution, and they’re interacting with audiences and getting data in real time. It was obvious that I had to sacrifice that way of working in order to do anything in this town. In a way, what I’ve built is the studio I wish existed at that time. 

Jonathan Perelman, GM of video, VP of agency strategy, BuzzFeed

Can we expect will video overtake rest of the BuzzFeed’s business in terms of revenue?

I’m working hard to make that happen. We are still much earlier in the process than what [the website] BuzzFeed has. I’m really inspired by the growth we’re seeing on the branded video front. I hope we can be just as big.

Can you share some of those growth numbers?

I’ve seen a 100% increase over the last year of brands doing multiple videos with us. Ever since the NewFronts this spring, we’ve seen over 50% growth in interest and pitches coming in. We released 55% more branded videos in the months following April than in the months from January to April. The revenue has growth 400% in the past eight months. 

What chunk of the videos that BuzzFeed makes are branded?

Probably around 5%. We’re investing more in this now with the new funding. We have 14 producers and that will more than double in the next few months.

How does your team work with the rest of the BuzzFeed video team?

We’ll get an inbound lead from a brand, and it’s our job to come back to them with ideas as to how to tell the story in a unique, interesting way. Once they agree, it’s a process where my team and the creative video folks work with the brand and agency to refine the idea. The best work happens with that collaboration. It’s not simply a BuzzFeed thing where we have all the answers, or the brand saying “This is how you have to do it.” We understand our audience and shareable, creative video and the brand understands the brand and brand message, and when you combine those two together is really great shareable content.

Have any of them used your content for a TV spot?

We are working on several now with the thought process of that. We’re producing mainly 90-second to three-minute spots. To turn into a 30-second spot is tough but it’s a request from some clients.