In case you missed it, the controversy began on Friday, when the New York Post reported that merchant bank Goldman Sachs was annoyed that Bloomberg reporters were tracking employees’ log-on activities. The matter soon gained steam when BuzzFeed reported that Bloomberg brass had long known about the practice, and with the news that the Fed and Treasury were investigating the situation.

The company stonewalled at first but on Sunday, Bloomberg News editor-in-chief, Matthew Winkler, addressed the situation in detail:

“Our reporters should not have access to any data considered proprietary. I am sorry they did. The error is inexcusable,” wrote Winkler in a blog post. The rest of the post, however, amounted to a pushback; Winkler explained that the practice was nothing new, and that reporters only tracked “mundane” information.

As bad as voicemail hacking?

So what to make of all this? Did Bloomberg engage in sinister “snooping” (one NYU journalism prof has already compared the incident to the infamous phone hacking conducted by News Corp in Britain)? Or is just this a tempest in a teapot egged on by Bloomberg’s competitors in the news media?

The answer is somewhere in between. On one hand, Bloomberg reporters didn’t do anything approaching the UK scandal — monitoring bankers’ log-in activities is nothing like breaking into a dead girl’s voicemail. Moreover, the Bloomberg “tracking” appears to have done little more than confirm if someone still worked at a certain company. As a source told BuzzFeed’s Peter Lauria, “LinkedIn Pro is more useful and has better information for finding sources and helping to break news.”

All this suggests that some of the the fuss is not about what Bloomberg reporters actually did, but instead is tied to secretive nature of the company itself. This is reflected in a Quartz report that characterizes Bloomberg as “a black box” and portrays a data-obsessed, almost cult-like corporate culture.

News and power of the platform

On the other hand, the Bloomberg episode does raise ethical concerns over how proprietary platforms — including not just Bloomberg but also LinkedIn or Facebook — should handle customer data for news purposes.

The issue isn’t just academic. More and more, platforms are relying on news (think of “LinkedIn Today”) to keep users on their sites. And, as Bloomberg journalists know, customers’ activities on those platforms can be a source of news — and better yet, a source of exclusive news.

The question is where this all this should stop. Would you like reporters to know when you suspend newspaper to go on vacation? Probably not. Would you like your cell phone carrier to use the location of your calls as a source of news? Definitely not. The Bloomberg episode, therefore, appears to be less of a snooping scandal than it is a cautionary tale about what can happen when the line between a company’s news and data gathering operations get blurred.

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While BuzzFeed has relied on reader content for years, the new vertical will increase the visibility of such contributions. It will also increase the chances of a viral pay-off from the site’s high-tech publishing tools. The new “Community” section includes a formal submission process that permits users to submit one post per day until their (what else) “Cat Power” increases, which will allow more frequent submissions.

“Community has always been a huge part of our site — some of our best posts have come from community submissions — and now we want to reinvent community for the social web,” editorial director Scott Lamb said in an email statement.

BuzzFeed’s decision to expand the scope of user-generated offerings comes at a time when media outlets are increasingly looking to commenters as a source of talent and future hires. My colleague Mathew Ingram explained the phenomenon well earlier this week in “Want a job at Gawker Media? You can get a head  start by being a regular commenter.”

The new section is consistent with BuzzFeed’s improbable quest to become more serious and more inane at the same time. In recent weeks, the site has been at forefront of major news stories like the Boston bombings while also churning out its regular fare like “14 cats who think they’re sushi.”

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However, a few themes came out of our presentations from Paul Berry, founder and CEO of RebelMouse, Jeff Fluhr, co-founder and CEO of Spreecast, Matt Galligan, co-founder and CEO of Circa, Aria Haghighi, co-Founder and CTO of Prismatic, and Josh Miller, co-founder of Branch. Here were the ones we found most compelling:

• The future of news will come from other people. This isn’t to say that the majority of the world will eventually get all of their news from Twitter and Facebook, but it is fair to say that we’ll increasingly rely on recommendations and smarter social cues from friends and respected strangers as we sort through the vast amount of information available online. This could mean something like Prismatic, which as my colleague Mathew Ingram has written, is working to combine data from social media with individual interests to create a smarter social reader for news.
• We’ll be reading all the news that fits — on mobile. For traditional sites, having a strategy that works for mobile is not longer an option, but we’ll increasingly see mobile-specific approaches from startups like Instagram, which was able to scale successfully by creating a simple, fast photo experience for mobile users in a hurry, or Circa, the startup that’s re-thinking how to structure news stories based on the attention spans and needs of mobile readers.  ”We distill these important details into specific pages,” Galligan said. “You hop through and jump from point to point.”
• It’s all about the individual person and the brand they build. Obviously individuals have always had a hand in shaping the news since the days of newspaper editors picking the stories that end up on the front page. But since the early days of blogging we’ve seen the rise of the personal brand grow in importance, and our panel earlier on Wednesday with some of the pre-eminent bloggers like Maria Popova and Andrew Sullivan only solidified the idea that smart, passionate writers can build their own readership online. Berry talked about how RebelMouse is allowing any individual, whether a famous blogger or not, to highlight personal achievements and content in one place, and with the rise of Twitter we’ll likely see this continue. “RebelMouse allows you in a very efficient way to say, let’s make this my splash,” he said.
• People want to talk about the news but they’re looking for smart conversations. We’re moving on from the days of television round-tables and flame wars in comment threads — or at least many people are looking to move on. Several interesting tools have launched recently that allow for more dynamic conversations online about the news, and we’re seeing those conversations happen both in text and multimedia. Spreecast joins the likes of Google+ Hangouts in lettings users host video discussions with additional social components, and Branch is looking to re-invent online discussions by making them invite-only and embeddable across the web.
• Traditional advertising can’t support the future, but no one’s clear what the alternative looks like. Some of our most heated discussions all day came from the discussion over how to make money from content in a way that allows writers and artists to benefit, consumers to enjoy reasonable prices, and businesses to stay afloat. From Popova discussing affiliate links to Buzzfeed discussing sponsored content, it’s clear we’re far from reaching a consensus. But from Prismatic’s efforts to work with brands to make money off their content on the service to Spreecast’s premium services, it’s clear that startups are at least considering smarter ways to approach the problem than traditional banner ads.

Check out the rest of our PaidContent Live 2013 coverage here.

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Felix Salmon, a popular and acerbic Reuters journalist, attempted to pour some cold water on the hype at paidContent Live Wednesday, where he spoke with a panel of native advertising apostles that included BuzzFeed President Jon Steinberg and Forbes COO Lewis D’Vorkin.

“So one percent of the time I’ll immerse myself in this beautiful listicle of cats?” asked Salmon, in reference to BuzzFeed’s promise to create ads that look and feel like the content surrouding them. Steinberg, who retorted that a very small percentage of BuzzFeed’s branded content contains cats, emphasized that native ads are superior because readers not only like them, but share them too. D’Vorkin offered a longer view.

“This is has been going on for 10-15 years … Marketers want to be seamlessly intergrated into a native product,” he said, adding that corporations spent lots of money to attract readers to their own websites before realizing it was more effective to integrate with famous media brands.

“Media partners give us credibility we can’t get on our own,” said Kyle Monson, the third member of the panel and chief creative at Knock Twice ad agency. He added, however, that native ads “can be shady sometimes” and said agencies should try to protect their publishing partners.

“Chef Boyardee put native ads on the Food Network. It’s a horribly bad deal … it’s way too downmarket for them.”

And what about the fear that native ads are deceptive? Nonsense, Steinberg said, noting that no reader will be confused since the ads are clearly marked and even a different color.

He also claimed the banner and programmatic ad industry has cooked up false tales of reader confusion on the fear that they are losing ground to native advertising.

Salmon had the last word in the native advertising debate.

“We’ve run out of time, so you get to talk English right now,” he joked, ending the panel.

(Update: I’ve removed an earlier sentence that said Steinberg exaggerated the problems of display advertising; you can make up your own mind based on the video below)

Check out the rest of our paidContent live 2013 coverage here, and a video embed of the session follows below:

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Betaworks has developed a model for these rapid launches and development cycles (100 to 150 days), and the company relies heavily on data to see if they stick in the marketplace. On Wednesday Betaworks launched Poncho, a super simple weather app; a couple weeks ago there was Giphy, a search engine for GIFs, which Borthwick said was so popular that 2 million users crashed the system when it first launched. Before that there was tapestry, a collection of mobile tappable stories.

But when Betaworks isn’t churning out its own content, it’s slicing, dicing, merging and mixing the content of others. One of the things that Betaworks is most famous for is its acquisition of the former social reading site Digg for a reported $500,000. Betaworks then merged it with some of the tools of its sluggish News.me creation.

Borthwick said that when the company bought Digg it had $250,000 a month worth of legacy costs, with $10,000 in monthly operating profits. Digg was jacked up and it had to pull out the needle, said Borthwick. After switching over to Amazon, building a new stack and relaunching with Betawork’s algorithms, Digg now costs closer to $20,000 a month to operate. “That’s the math of the cloud,” said Borthwick.

The overhaul seems to be working. The new Digg, and its users, are highly mobile-centric. Fifty percent of the traffic during the week and 55 percent on weekends comes from mobile traffic, said Borthwick. It was closer to 5 to 6 percent mobile before the relaunch. Digg now has a couple of million “active, rabid” users, said Borthwick. The Betaworks team pays particular attention to the amount of engaged users on Digg, which is high.

Attention is being fractured into a bipolar fashion, leading to condensed, fractional content on one hand and uber long-form content on the other. It’s Twitter vs House of Cards and Homeland, explained Borthwick. To build media companies and products in this era, you have to keep an eye on both, said Borthwick. To address that long form content market, Betaworks has created some tools over the past year around long-form story telling.

Not all of the innovation will come from newly launched media projects. Borthwick said he admires the work that Forbes and Bloomberg have done, as well as new media sites like The Huffington Post, Buzzfeed and Upworthy.

CHeck out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

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Lerer co-founded the Huffington Post and now serves as managing director at Lerer Ventures. “It’s the best time in the last eight years to invest in digital content companies,” he said. With the technology for the web as well as mobile having been more or less built out, it’s now time to fill those pipes, he argued. “Content is king at a certain time. And I think content is king now.”

However, Lerer also cautioned that digital media investments are risky, with timing being everything. “If you’re too early, you lose all your money. If you’re too late, you don’t make any money,” he explained. And when you give cutting-edge companies seed money, it’s hard to predict how their business plans are going to pan out. “You have to kind of take the measure of the person,” he admitted.

So what are the big trends Lerer is seeing in media, aside from a huge shift to mobile? Video will play a huge role going forward, but there’s also a more fundamental shift in how consumers look at media properties. In short, they ignore everything media execs hold dearly. Instead of expecting a curated front page, they’re much more comfortable with a social feed, Lerer said. “When they see a Buzzfeed – to them, it’s just normal,” he added.

In the end, the companies that aren’t married to those old rules will prevail, Lerer argued: “I think the world is ending for traditional media companies, but it’s just beginning for digital media companies.”

Correction (04/19): A prior version of this story quoted Kenneth Lerer saying that 65 percent of Buzzfeed’s traffic is coming from mobile devices. We were subsequently contacted by a Buzzfeed spokesperson, who clarified that Lerer misspoke and that the site gets 50 percent of its traffic from mobile devices.

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As the NY magazine piece points out, word of mouth is the holy grail for advertisers: customers talking about your product (or something related to your product) without you paying them to do so is the ultimate recommendation. Madison Avenue legend David Ogilvy said it was “like manna from heaven, but nobody knows how to do it on purpose.” In a nutshell, that’s what Jonah Peretti has been trying to do ever since he himself went viral in 2001, after a stunt he came up with involving a Nike shoe and some bad press for the company’s foreign manufacturing.

This is fundamentally the same reason advertisers are interested in social networks like Facebook and Twitter: because they are hoping to figure out how to both create “social” advertising messages and target them in such a way that they don’t really seem like advertising, thereby encouraging users to share them. The only problem is that no one really knows how to do that (Note: We’re going to be talking about sponsored content and other monetization methods with BuzzFeed president Jon Steinberg, among others, at paidContent Live on April 17).

How does virality work? No one really knows

Everyone can recognize a viral campaign when they see them after the fact, but no one quite knows how to produce them in any kind of scientific way. Microsoft researcher — and Peretti friend — Duncan Watts has studied this area more than just about anyone, and he and the BuzzFeed founder (who co-authored a paper in 2007 on the topic for Harvard Business Review) both have algorithms that try to describe the process. But Watts admits it is far more chaotic and difficult to predict than those algorithms suggest.

“We have this very Newtonian view of causality,” Watts, a square-jawed Australian, shouted over the din. “Like, billiard balls hitting each other, that’s the most complicated thing that we can wrap our heads around.” But his research suggests that the commonly understood, Gladwellian model of virality, with its linear progression through influencers and tipping points, doesn’t really reflect the way viral messages spread.

Even Peretti, who has gained a reputation for being able to engineer virality, seems to concede that it is harder than most people think. The New York magazine piece says the BuzzFeed founder became visibly irritated when told that some advertising industry critics don’t see the site’s sponsored content as being that valuable — with one ad agency executive arguing that showing readers “a bunch of cats” isn’t really helpful when it comes to doing actual marketing. “Could you make a list of cute animals that gets 5 million views? It’s actually really hard,” Peretti shot back.

Some advertisers are resistant to the idea

So one reason why BuzzFeed’s attempt to reinvent advertising is going to be a lot harder than it looks would be simple resistance from the ad industry itself: for all of Peretti’s talk about how sponsored content can bring back the creativity and storytelling aspect of advertising, many agencies and other players don’t seem convinced that putting their brand name on a piece about dogs who look unimpressed is going to help them move more product. The BuzzFeed founder may see this as short-sighted, but it is still a hurdle.

Another barrier is related to this one: namely, the fact that some of BuzzFeed’s sponsored content winds up doing the exact opposite of going viral. According to the NY magazine story, some of the content that Virgin America and other brands spent hours creating in collaboration with BuzzFeed — tinkering with it until they were convinced they had engineered it to be as viral as possible — more or less fell flat and disappeared without a trace. One post had just 350 shares on Facebook, which is the equivalent of a damp squib in social-networking land.

“Other campaigns running on the site… showed smaller results: Geico, 140,000 views; GE, 65,000 views; Pepsi Next, 44,000 views. These numbers don’t quite match the hype around native advertising, which might be why ad agencies sound much less enthusiastic about the medium’s transformative potential than publishers do.”

It’s also expensive — and potentially risky

A third hurdle to BuzzFeed’s ambitions is implied by both of the others, and that is the cost of producing the kind of content that the site wants to lure advertisers into sponsoring. All of the meetings that the NY magazine piece describes, in which a dozen or more editors work on posts and then decide which ones to market heavily (a process that somewhat ironically includes the use of ads on Facebook and elsewhere) makes for an expensive process.

And one final hurdle is the one highlighted by blogger Andrew Sullivan in a series of posts about the evils of sponsored content and of BuzzFeed’s approach in particular: namely, that the site will be unable to maintain the trust of its readers if it blurs the line between editorial and advertising too much. The NY magazine story describes several posts that could easily be mistaken for ads — even though they aren’t — and other posts that began as non-sponsored content and then were more or less recreated as advertising for specific brands.

BuzzFeed has $20 million in new financing, and New York magazine estimates that based on what it charges for a piece of sponsored content, the site could make as much as $40 million in advertising revenue this year. But building a profitable business based on the creativity of human beings in an area as unpredictable as online content — while retaining some credibility — is not an easy task. Just ask the traditional media industry.

Post and thumbnail images courtesy of Shutterstock / Everett Collection as well as Flickr users Nils Geylen and 401K, and Shutterstock / Eldorado3D

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Since it hired Smith to broaden its editorial efforts, BuzzFeed has launched a British edition of the site — as well as new verticals aimed at sports and women — and introduced a business hub (which sparked some imaginative headlines) as well as made a move into longer-form content, such as a feature on the history and evolution of video games. As McBride notes, the site has also done serious investigative pieces about topics such as the failure of the new G.I. bill and the impact of Mitt Romney’s Mormonism on the election.

Serious and entertaining can co-exist

When McBride asks Smith about the dichotomy between the site’s serious journalism and its “viral” entertainment content, the BuzzFeed editor says he thinks drawing that kind of artificial distinction misses the point, since it doesn’t really explain posts like the one about the most inspirational photos of 2011 — which is one of the most-read pieces in the site’s history. Was that post serious journalism or entertaining ephemera? One could argue it was both (and it should be noted that BuzzFeed has been criticized for how it aggregated those photos).

In many ways, a realistic appraisal of BuzzFeed’s chances to become a home for “serious” journalism can only come when we stop thinking of BuzzFeed as a single media animal — the one that is hiring an “animals editor” and asks job applicants for another position to create an instruction manual for making a peanut-butter-and-jelly sandwich — and think of it as a media entity like any other. If the Huffington Post can win a Pulitzer Prize for investigative journalism, why couldn’t its offspring carve out a process for doing that as well?

We like to think of newspapers like the New York Times or the Washington Post as monolithic bastions of “serious” journalism, but the reality is that newspapers have always been a blend of the ephemeral and the important. In most cases, it’s the entertainment column or the fashion feature on a drug-addled celebrity that pays the bills, and allows newspapers to send reporters to Afganistan or undercover to investigate a health scandal. But we ignore those aspects of what they do because we have come to see them as primarily engaged in “serious” journalism.

Read some Sartre, pat a cute dog

BuzzFeed co-founder Jonah Peretti (who was also instrumental in the creation of the Huffington Post) has said that he thinks of what the site does as similar to someone reading a serious novel at a cafe, and then stopping to notice a cute dog — in other words, appealing to the full range of human emotions. And McBride makes a good comparison when she notes that BuzzFeed is a lot like ESPN, a blend of pure entertainment and hard-hitting journalism:

“BuzzFeed’s journalism model is a bit like ESPN’s, an organization I’m familiar with. They both produce a large volume of highly entertaining information, sprinkled with some regular journalism and some high-end stuff. BuzzReads reminds me of ESPN’s 30 for 30 film documentary series, not least because both are produced mostly by outsiders.”

The Poynter writer also points out some of the ways that BuzzFeed needs to improve, including better editing and getting the attention of those in positions of power so that it can actually effect change. If that’s the goal, BuzzFeed may be closer than McBride thinks: a post at National Journal notes that the Republican National Committee is launching a site redesign — and they are doing their best to imitate BuzzFeed. “BuzzFeed’s eating everyone’s lunch,” a spokesman said. “They’re making people want to read and be cognizant of politics in a different way.”

(Note: BuzzFeed president Jon Steinberg will be joining us to talk about the site’s business model at paidContent Live on April 17)

Post and thumbnail images courtesy of Shutterstock / wellphoto

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Never one for understatement, BuzzFeed is promoting the launch with a London event and an animated flyer that shows Queen Elizabeth II riding a tweaked-out corgi dog against a Doctor Who style background:

This is BuzzFeed’s first international expansion and comes after it received nearly $20 million in new funding early this year. According to editorial director, Scott Lamb, the UK site will start by offering “great pop culture content” that represents BuzzFeed’s roots. He explained the strategic goal this way:

“Social is global. We already had a solid audience in the UK, a place that embraces Twitter and Facebook in a huge way, so it made sense for it to be BuzzFeed’s first foray into international waters.” A report from the Next Web says the UK content will come from a four-person team based in London. Meanwhile, a BuzzFeed spokesperson told us that the largest proportion of BuzzFeed’s overall traffic was coming from the UK early Monday morning.

BuzzFeed’s expansion comes at a time when UK and US press outlets are increasingly entering each other’s markets; Britain’s the Daily Mail and the Guardian, for instance, are making a concerted effort for American readers.

BuzzFeed also appears to have brought its trademark native advertising across the pond in the form of “stories” like “15 Kinds of People You Will See at Ultra,” a photo-feature produced by an energy drink maker. BuzzFeed founder Jonah Peretti has long argued that this form of advertising, which can be distributed across social media, is more effective than traditional internet display advertising.

As it dips its toe into Britain, BuzzFeed is also expanding aggressively at home with more long-form content and plans for a business vertical.

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The plan comes as the fame of Grumpy Cat, a Snowshoe Siamese with a perpetually dour expression, continues to grow. Last week, the cat stole the show at the tech and music festival, SXSW, where people lined up for hours to take pictures with her. Grumpy Cat was also hired by BuzzFeed but had a bad first day on the job.

The trademark applications, which also cover hoodies and comedy videos, were filed in January on behalf of Ohio-based Grumpy Cat Incorporated. Los Angeles lawyer Kia Kamran, confirmed by email that the company is controlled by Tabatha and Bryan Bundesen, the siblings who own the cat and helped build her fame.

Kamran, who also represents Mike Tyson, says he hasn’t filed any Grumpy Cat lawsuits yet, but probably will soon in response to the “current wave of infringers that are popping up.” He adds that, while he’s sensitive to the cultural dimensions of internet memes, he’s had to take action on behalf of other clients, Nyan Cat and Keyboard Cat.

Standing up for the feline will be a challenge, however, since Grumpy Cat is a cat not a person. Unlike human celebrities, animals can’t invoke “personality rights” which let them control their image. The Bundesens, if their application is successful, will nonetheless be able to control the commercial use of the phrase “grumpy cat” and photographs they own of the cat.

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