Buzzfeed (NASDAQ:BZFD) shares jumped overnight on news of a content partnership with Meta Platforms (NASDAQ:META). BZFD stock was trading at $1.35 per share pre-market on Jan. 26, while META stock was up slightly at $143.11.
Buzzfeed will get nearly $10 million under the deal, which comes as Meta’s Facebook and Instagram services continue to lose ground to Bytedance’s TikTok.
Strengths and Weaknesses
The deal illustrates the strengths and weaknesses of the two companies. Buzzfeed, which went public in December 2021 through a special purpose acquisition company (SPAC), has been a horrible investment, down 90% from its initial public offering. During the same period, Meta is down nearly 54%.
But Buzzfeed, founded in 2006 as a viral media company, continues to draw a crowd. Similarweb calls it the 23rd-most-active news site on the web. Its Buzzfeed News unit, launched in 2011, has gotten scoops but has been a cash drain. The company lost more than $95 million during the first three quarters of 2022.
Meanwhile, Meta is one of the five “Cloud Czars,” whose scaled data centers dominate the Internet’s infrastructure. But revenue peaked near the end of 2021. Net income fell by more than half between that quarter and the September quarter as it continued to invest in its metaverse platform. Meta announced 11,000 layoffs in November.
Meta remains considerably popular in the Global South. But most of its servers are in North America, where its traffic and reputation are declining. The hope is that Buzzfeed can juice numbers in both markets.
What Happens Next for BZFD Stock?
Buzzfeed’s market capitalization is just over $130 million. If the agreement shows promise, Meta could easily buy it with its $371 billion market cap. The risk to Meta is minimal, while the risk to Buzzfeed, and its promise, are existential.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.