BuzzFeed buys into banner ads after years dumping on them

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Media analysts are puzzled by BuzzFeed’s decision to add programmatic banner advertisements to its homepage, sub-pages, and mobile applications at a time when the ads have lost favor among media companies and advertisers.

BuzzFeed has long touted its unique native ads, created in-house, as a more effective way to reach youthful customers. Many have seen the ads as a key differentiator for the 10-year old site, which is expected to go public sometime next year.

The change in strategy is designed to bring in additional revenue, but what isn’t clear is what that means for a site that has viewed traditional banner advertising as anathema to the brand. Its vice president of agency strategy once declared, “You are more likely to summit Mount Everest than click on a banner ad.”

“Over the years, most companies have moved away from banner ads because they have limitations in getting the message across and they take up too much space,” says Morningstar equity analyst Ali Mogharabi in an interview with CJR. Last year, for instance, The New York Times moved away from traditional banner advertising for its own proprietary format. According to eMarketer, “Video is the only subcategory of display ad spending that is growing, as rich media, banner ads and sponsorship all shrink.”

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BuzzFeed publisher Dao Nguyen in a statement says the company long rejected overtures to show advertisements from Facebook Audience Network and Google’s DoubleClick Ad Exchange, which it now plans to welcome, for being “highly-intrusive” and often irrelevant to its viewers. The site did previously show banners alongside its native articles, but they were never sold programmatically. Nguyen says programmatic technology has evolved, and the ads should load quicker and be more relevant to users.

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BuzzFeed also may not have much of a choice: Google and Facebook now control two-thirds of the digital ad market; the news site will find growth more difficult if it can’t snag a piece of that pie.

Still, banner ads seem like an odd fit for the BuzzFeed ethos. Look no farther than the company’s flagship website, which features content that pokes fun at banner advertisements. And its own advertising materials still tout the superiority of its in-house ad solutions: “Click-through rates for story units have proven to be 10x the industry standard for banner ads.”

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Ads featuring video, audio, and elements like games or interactive graphics are some of the biggest trends in online advertising right now. The Interactive Advertising Bureau reported desktop video was the only other category besides mobile advertising that recorded increases in revenue in 2016. Standard banner advertisements don’t allow for features like video. As a result, Mogharabi says, many of BuzzFeed’s new advertising customers for programmatic ads will likely be small and medium-sized businesses. “They just want to get that mass exposure,” he says. “They’re not thinking about target advertising. They also have tight budgets and would probably go for the banner ads which are much lower cost.”

Another analyst notes that banner ads have improved on mobile sites and in their overall quality. “They know what you’ve been looking at, clicking on, searching and shopping for,” says Robin Diedrich, senior equity analyst at Edward Jones. “However, they’re still fairly intrusive.”

The move is part of a larger, strategic push for BuzzFeed to generate more revenue from its various platforms and “massive scale,” Nguyen wrote in a statement to CJR. In June, the company’s flagship website saw 75 million unique visitors and 231 million video starts according to comScore. That was down slightly from the same period last year, when BuzzFeed had 78 million unique visitors.

One risk of BuzzFeed’s adoption of programmatic banner ads is the lack of control over where they are placed and what content appears nearby. “You can have your brand placed next to some undesirable content,” she says, noting advertisers have commented on this issues. “If this content is not being scrubbed and supervised beforehand, that’s where I think some advertisers been a little leery.”

Prior to this announcement, the company was already using some advertising on Facebook to help distribute its branded content, as well as in its Instant Articles.

“I think there’s room for both, is the bottom line, and banner ads have become smarter. It seems like it’s still a very viable and growing piece of the puzzle that most advertisers are going to want to use,” says Diedrich, the Edward Jones analyst.

When asked whether the move was designed to bump up BuzzFeed’s numbers in advance of an IPO, BuzzFeed CEO Jonah Peretti did not answer directly, only replying, “The goal is to serve our diverse audience and build a great business to support our continued growth.”

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Karen K. Ho is a CJR Delacorte Fellow. Follow her on Twitter @karenkho.