What happened
Shares of digital media company BuzzFeed (BZFD 4.52%) are having their best day of trading ever. As of 1 p.m. ET, BuzzFeed stock was up 124% and still climbing after a report surfaced regarding a partnership between the company and Meta Platforms.
So what
According to The Wall Street Journal, Meta is partnering with BuzzFeed to create content in a deal that is reportedly worth millions. And according to BuzzFeed's founder and CEO Jonah Peretti, the company will be working with ChatGPT's creator OpenAI to make its content more relevant to its audiences.
For context, roughly half of BuzzFeed's revenue comes from ads placed on its digital content. And this revenue source only grew 11% year over year during the first three quarters of 2022 because advertisers have generally pulled back their spending.
However, BuzzFeed's content revenue is up 58% year over year during this same time period. Content revenue is branded content BuzzFeed creates on behalf of its customers, which is what its deal with Meta would presumably be.
It will be interesting to see exactly how BuzzFeed incorporates the use of artificial intelligence into its content-creation strategy. For additional context, the company laid off 12% of its workers back in December.
Now what
BuzzFeed's stock is likely jumping so much because of how low expectations were for this company before today. According to Yahoo Finance, the stock was trading at less than half of its book value, which suggested the market was placing low chances on BuzzFeed's long-term viability as a business.
I'm not sure how much growth BuzzFeed has ahead thanks to its new deal with Meta, or whether it can become more efficient with fewer workers and greater reliance on AI. But it does appear expectations were too low for this company, and today's news was a wake-up call in that regard.
Now it will be up to BuzzFeed to prove to the market it can grow sustainably and profitably. Financial results for the fourth quarter of 2022 are expected to be reported next month.
