Case For BuzzFeed
This New York City-based company was founded in 2006 by Jonah Peretti and John S. Johnson III with a focus of tracking viral content while happily polluting the internet with cat videos and silly memes. Over time, it branched into multiple media endeavors including video production, podcasts, and news. Acquisitions of brands such as HuffPost and Complex Networks helped grow the company.BuzzFeed’s news coverage was initially on the fluffy side, but it gradually took on a more serious nature and by 2021 it achieved a peak achievement in U.S. journalism by winning the Pulitzer Prize for its coverage of Chinese human rights abuses against the Uyghur Muslim population in the Xinjiang province.
BuzzFeed has also generated more than its share of controversies over the years, with repeated charges of plagiarism, left-wing bias in its coverage, and advertiser interference in the editorial decisions. The company made headlines with the 2017 publication of the so-called “Steele dossier” that made unsubstantiated claims about Donald Trump’s behavior prior to his presidential election.
In its most recent earnings report, the fourth quarter data published on March 22, BuzzFeed recorded revenue of $145.7 million, up from $123 million one year earlier, and net income of $41.5 million, up from the previous year’s $32.2 million. The company ended the fourth quarter with 1-cent basic earnings per share.
Peretti announced the quarterly earnings by stating, “We became the first publicly traded digital media company, delivered double-digit growth in revenues and profits, and completed the acquisitions of HuffPost and Complex Networks—both of which are already making important contributions to the company’s financial performance … We are working together with the tech platforms to create sustainable models for good content to thrive. We’ve made real progress in this area, but we see significant room to strengthen the attribution models around premium content in a way that benefits both platforms and content creators.”
Case For Lee Enterprises
This company’s roots are somewhat deeper in time than BuzzFeed’s. In 1890, A.W. Lee, a former bookkeeper for the Chicago Times, decided to become a newspaper publisher and acquired The Courier, a daily newspaper in Ottumwa, Iowa.The Courier had a daily circulation of 575 when Lee purchased it, and 10 years later it grew to 3,709. Today, the company is the nation’s fourth-largest newspaper company with 350 weekly and specialty publications serving 77 markets in 26 states. It also provides advertising and marketing services, as well as publishing services for third parties including universities and television stations.
Warren Buffett acquired a stake in Lee Enterprises in 2012, and in January 2020 the company purchased the BH Media Group’s publications and The Buffalo News from Buffett’s Berkshire Hathaway for $140 million.
In its most recent corporate development, Lee Enterprises rejected the unsolicited offer by hedge fund Alden Global Capital, LLC to purchase the company for $24 per share in cash, or roughly $141 million. Chairwoman Mary Junck complained, “The Alden proposal grossly undervalues Lee and fails to recognize the strength of our business today, as the fastest-growing digital subscription platform in local media, and our compelling future prospects.”
In its most recent quarterly earnings report, the fiscal year, first-quarter data published Feb. 3, Lee Enterprises recorded $202 million in operating revenue, down from $211.8 million one year earlier, and net loss of $541 million versus the $501 million net loss from the previous fiscal year, first quarter. The company ended the quarter with $2.21 basic earnings per share—12 months earlier, it was $2.79.
Kevin Mowbray, president and CEO, shared the data by noting, “For the first quarter, we posted 69 percent growth in revenue from our Amplified Digital Agency, 26 percent growth in digital-only subscription revenue, and continued growth at TownNews, our SaaS content platform. Total Digital Revenue increased 17 percent to $55 million in the quarter. Excluding political advertising, which generated uniquely high revenue during the prior-year quarter, Total Digital Revenue increased 25 percent in the quarter … Total print and digital subscribers increased 7 percent in the first quarter compared to the same quarter last year due to rapid digital-only growth. Lee now has 450,000 digital-only subscribers, up 57 percent in the quarter, which represents more than half of our 900,000 digital-only subscribers target that builds our pathway to a vibrant digital-centric business.”
Verdict
Admittedly, this Stock Wars duel offers players from two very different corners of the media world—a Midwestern newspaper enterprise that adapted itself into the digital world and a New York City cutting-edge online resource that reinvented itself from being a silly distraction to a prominent (if somewhat erratic) news outlet.Lee Enterprises seems to be doing something right, as Alden Group has continued (with no success) to convince the company’s shareholders to accept its takeover bid—going so far as to lobby shareholders to vote no on the company’s director slate and suing the company over the election of directors.
BuzzFeed doesn’t seem to be doing anything right lately—and any company that has multiple stories of internal revolts percolating into the news has a human resources infection that needs to be cauterized. The company’s shares are also trading too low for comfort.
The verdict on this Stock Wars is fairly easy: Lee Enterprises is a stable company that will be a reliable presence in a portfolio. As for BuzzFeed, whether it can steer itself into smoother waters remains to be seen.
