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Turning Japanese: BuzzFeed to launch site in Japan

BuzzFeed
Andrew Harrer | Bloomberg | Getty Images

BuzzFeed is launching a joint venture with Yahoo Japan, the country's top internet portal, to create a Japanese-language version of the viral news and entertainment site.

The partnership structure marks a departure for BuzzFeed, which wholly owns its operations in other countries including the UK, Germany, Brazil and India. The companies did not disclose how much they are investing in the venture, but BuzzFeed will hold a 51 percent stake and Yahoo Japan will own the remaining 49 percent.

BuzzFeed's international push in the past two years has come as its content, which is widely distributed over social media including Facebook, reaches an increasingly global audience. Some 45 percent of its website's 200-million monthly unique visitors now come from outside the US, said Greg Coleman, BuzzFeed president.

BuzzFeed's side of the venture will be financed from its existing funds, including the $50 million it raised last year from Andreesen Horowitz, the Silicon Valley venture firm, which was partly earmarked for international expansion. Comcast's NBCUniversal is expected soon to conclude a $200 million investment in BuzzFeed at a valuation of $1.5 billion, according to a person familiar with the situation.

Teaming up with Yahoo Japan — itself a joint venture between Yahoo and SoftBank — will allow BuzzFeed to tap the group's large audience of 88 percent of Japanese internet users and its relationships with advertisers.

"We will have the opportunity to get the massive traffic from Yahoo Japan to help accelerate the growth of our site and we also will be getting access to the largest [digital media] sales team in Japan," Mr Coleman said.

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BuzzFeed derives its revenue from creating sponsored content for brands that look like its popular gif-illustrated stories and lists. The company passed $100 million in sales in 2014, and recent financial documents obtained by Gawker, the US gossip website, show BuzzFeed first reached profitability in 2013 and booked $2.7 million in net profit in the first six months of last year.

Digital ad spending in Japan is projected to grow 10 percent to $9.7 billion this year, out of a total $37 billion advertising market, according to eMarketer, the researcher. But Japan is in the "very early stages of native advertising", Mr Coleman said. "In many ways we'll be the first to market. That's terrific but it also means you have to break the ice with a lot of marketers."

In previous international expansions BuzzFeed has followed a consistent formula, starting with a small editorial staff that creates the fluffy viral content for which it is well known, then moving into harder news coverage and native advertising sales. In Japan, it will start by hiring editors and a chief executive to run the joint venture before courting marketers, but the focus will be on news from the start, Mr Coleman said.

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BuzzFeed has been investing heaving in its editorial side, with high-profile hires including Janine Gibson, the former deputy editor of the Guardian. Its editorial budget ballooned to $10.5 million in the first half of 2014, compared with $11.7 million in all of 2013, according to the Gawker documents.

The Japanese venture will also import BuzzFeed's strategy of social sharing to give its content a reach far beyond its own website. Its existing relationships with Facebook and Twitter, both of which have large followings in Japan, will be a benefit but the Japanese operation will also need to make inroads with local operators.

"This is why the traffic we'll get from Yahoo Japan will be so important to prime the pump," Mr Coleman said.

BuzzFeed and Yahoo Japan began talks a year ago, around the time Mr Coleman joined the US company. The executive has a history with the Japanese group in his previous roles as president of Criteo, a digital advertising company that also partners with Yahoo Japan, and as Yahoo's executive vice-president of global sales.

BuzzFeed will control the joint venture's board with representation from Yahoo Japan. Holding majority ownership will make it easier for BuzzFeed to consolidate Japanese earnings in the event the US company decides to go public, Mr Coleman said.