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- BuzzFeed has scaled back its operation as advertisers and partners have slashed spending, citing the coronavirus’ impact.
- Digital media had been consolidating before the pandemic, and the economic downturn could accelerate that trend.
- Observers see the crisis as a crucial test of whether BuzzFeed and its CEO Jonah Peretti can prove it’s essential to readers and advertisers.
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Earlier this week, BuzzFeed CEO Jonah Peretti held an all-hands meeting with his staff of around 1,100. He was transparent: Revenue was down double digits year over year in wake of the coronavirus pandemic. The digital media company might face 2020 losses of up to $20 million.
Still, Peretti remained optimistic. He said Buzzfeed was well positioned to weather the storm and pointed to a strong recent uptick in readership, to a lifetime high of 77 million unique visitors for March.
It wasn’t supposed to be this way for BuzzFeed. The company had spent years building a massive following, fueled by a war chest of venture capital, advertising innovations such as native placements, and perfecting sharable content for billions on Facebook. It started this year nearly profitable.
Since March, BuzzFeed, like many other media companies, has had to face a new reality. Peretti has had to make difficult decisions as coronavirus rips through the advertising industry, slashing marketing budgets and publisher revenue along with it. BuzzFeed recently announced pay cuts for staff, an approach also implemented by its peers including Vice Media, Vox Media, and Group Nine Media.
This challenging period could prove to be the ultimate test for Peretti as both an entrepreneur and a leader.
Will BuzzFeed, which has turned down giant acquisition offers, raised hundreds of millions, and once mulled a public offering, be able to pull off success, let alone survive?
“This is the moment to test his mettle as a wartime CEO,” said Andrew Essex, who got to know BuzzFeed and Peretti in its early days while running ad agency Droga5 from 2009 to 2015.
Peretti must “prove that Buzzfeed is essential to an audience.”
Buzzfeed had it all and transformed the media industry
BuzzFeed was founded in 2006 and scaled quickly to hundreds of millions of readers. It was one of the first digital publishers to take advantage of Facebook’s massive userbase to distribute its entertaining quizzes, animal photos and emotionally-driven content. Advertisers flocked to BuzzFeed to reach young readers. Disney was reportedly interested in acquiring BuzzFeed but balked at Peretti’s asking price of about $1 billion.
In 2015, Buzzfeed raised $200 million from NBCUniversal at a $1.5 billion valuation. The eye-popping numbers made Jason Anderson, who was raising money for Vice Media at the time while at Royal Bank of Canada, sit up and take notice.
“When you raise hundreds of millions for a media company, that matters a lot. These guys looked like an MGM or a Lionsgate,” Anderson said of BuzzFeed back then.
“It changed the dynamics of a lot of businesses. Vice and others drafted on them. Buzzfeed led to a market change in attitude and changed the perspective overall that these [digital media companies] could be multi-billion dollar businesses.”
A costly bet on news
BuzzFeed offered the possibility to onlookers that it could crack the elusive code of building a sustainable news outlet online.
Peretti hired a talented reporter from Politico, Ben Smith, to start and run an ambitious newsroom operation, BuzzFeed News, that could give the company journalistic prestige alongside bread-and-butter entertainment coverage. Buzzfeed News was eventually separated out from the rest of the newsroom and turned into its own division.
Under Smith, BuzzFeed News ballooned to 300 employees, packed with big-name hires like Pulitzer winner Mark Schoofs and Wired’s Mat Honan.
But a reckoning was coming for digital media companies. Facebook, which had sent a firehose of traffic to publishers’ stories, tinkered with its algorithm and in effect shrunk audiences of sites like BuzzFeed. Advertisers began funneling most of their digital spending toward Facebook and Google, where they could reach far more people.
In 2018, just two years after its last big fundraise, BuzzFeed lost $50 million and laid off 250 people. Peretti floated the idea of a merger with other digital publishers like Group Nine Media and Refinery29 as a way to gain more leverage against the competing tech giants.
In early 2019, BuzzFeed laid off 15% of its staff, including its first big cuts in the news division. It started to take steps to staunch the losses there, hiring The New York Times’ Samantha Henig as strategy head.
Peretti took heat for his decisions internally for both the layoffs and how he’d run the company. Critics disagreed with the rampant growth he’d pursued that led the company to that point (a pressure many entrepreneurs feel after raising capital). They also disagreed with his reliance on Facebook for traffic that turned out to be short-lived, and his opposition to editorial staffers’ decision to unionize, which culminated in a staff walkout.
Peretti’s wartime leadership under the pandemic gets praise
Today, some insiders who were previously critical of Peretti give him more credit. They say he has done a good job diversifying the business beyond advertising to other streams such as e-commerce. In 2019, commerce represented 21% of company revenue, up from 9% in 2017.
They also praised him for moving early to shut down BuzzFeed’s offices as the coronavirus pandemic approached. Peretti made the call on March 9, weeks ahead of most others. Instead of layoffs, Peretti announced pay cuts of 5% to 25%, based on employee seniority and rank. He also gave up his own salary during the crisis. BuzzFeed has been sending out a weekly health survey to employees.
“The work-from-home thing, BuzzFeed was on top of it,” one staffer said.
But coronavirus continues to pummel the company’s finances. Amazon and Walmart pulled deals that let publishers like BuzzFeed get a cut of sales they drove to those retailers. BuzzFeed had to scale back its overseas operation. And Twitter pulled its funding for BuzzFeed’s live news show “AM2DM” as well as another initiative that was in the works, citing the coronavirus.
Peretti angered some staffers with his handling of the “AM2DM” situation. Initially, many who had worked on the show were not offered severance because they were contractors rather than full-time employees. After internal backlash on Slack, Peretti said he would pay the staffers out of a future-projects development fee paid by Twitter.
Despite employees being overall positive of Peretti’s leadership during the pandemic, many fear they won’t have the company’s protection if the situation continues to get worse.
Rachel Sanders, a BuzzFeed editor and chair of the BuzzFeed News Union, said the pandemic has shown that people can’t necessarily rely on their employers to protect them when things go bad.
“I feel pretty confident that BuzzFeed is as well positioned as any media company could be to weather whatever happens next,” Sanders said. “But we — like everyone else — have to accept that we have no idea what our industry or our world is going to look like next week, let alone in six months. That’s exactly why I’m so glad BuzzFeed News unionized last year. Our unit members have the NewsGuild’s guidance and a seat at the table in the company’s decision-making, from the pay cuts we’ve seen already to whatever happens next.”
BuzzFeed has lost some of its cool factor, but agencies are still impressed
The digital media industry had already been consolidating and shrinking before the pandemic struck. More than 7,800 journalists lost their jobs in 2019. Vice Media bought Refinery29, a company once worth $500 million, for mostly stock. Group Nine bought PopSugar for all stock. Bustle Digital Group acquired Mic, Inverse, and Gawker for bargain-basement prices.
Many industry watchers fear coronavirus will accelerate the consolidation of millennial-geared media companies that are on the edge of profitability but aren’t seen as essential now that marketers can reach the same audience through automated ad buys.
With all of that swirling, several of BuzzFeed’s top executives have moved on. Chief revenue officer Lee Brown left for Spotify. The newsroom lost Shani Hilton, who oversaw its video programming, to the Los Angeles Times. Lisa Tozzi, Buzzfeed’s global news director, went to Craigslist founder Craig Newmark’s startup, The Markup. Most significantly, Ben Smith left for The New York Times, fueling the perception that BuzzFeed News has lost its cool factor.
At the same time, the Times had become a digital and subscription success story, hiring 120 more journalists in 2018 for a total of 1,600. Smith said at the time that he left because he wanted to write and report more, but gossipers suspected he was unhappy because the newsroom he built was shrinking, not growing.
Smith acknowledged in his first Times column that the tables had turned for digital media, writing: “I’m proud to be leaving BuzzFeed News as one of a handful of strong, independent newsrooms still standing amid the rubble of consolidation. But I miss the wide open moment 10 years ago, when we were among a wave of new players reimagining what news meant.”
For some advertising agencies, Buzzfeed may still have what it takes to get them to spend — once they start spending again.
In January, OmnicomMediaGroup invited BuzzFeed to present to the agency. BuzzFeed sent representatives from across the company, from News to Tasty, to put on demos during a three-hour presentation. Cuppy, BuzzFeed’s mascot, was in attendance.
“They’re top of mind, and the turnout was phenomenal,” said Steven Bloom, managing director, enterprise partnerships at OmnicomMediaGroup on a recent call. “It shows BuzzFeed is focused on the agency community. I don’t know if there are any must-buys anymore. But their ability to play in different categories helps today.”
During a call on April 23 with clients and business partners, Peretti described how Buzzfeed’s producers had shifted to make content relevant for the new times: low-fi cooking videos, service content and counterprogramming for people looking for distractions and entertainment while quarantined.
“This is going to be a tricky time period,” said Noah Mallin, chief brand strategist of Imgn Media and a former media buyer. “But I do see them redoubling to make sure content is right for now — a lot of their video is connecting to reality TV, being a parent during coronavirus, what to binge.”
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Some don’t know what BuzzFeed stands for
Another view is that BuzzFeed’s breadth of offerings could work against it.
“In today’s environment, it’s critical for publishers to have a core focus,” said Doug Rozen, chief media officer at the Dentsu ad agency 360i. “Trying to be too many things to too many audiences makes it harder to stay top-of-mind with day-to-day media buyers who have a plethora of publisher options all hungry for ad dollars. This will be even more paramount as TikTok and Snap become the current catnip for marketers targeting trendsetters and/or younger audiences.”
Peretti is said to be an unwavering supporter of the news division. But it hasn’t developed a significant reader revenue stream that news operations now require and are a mark of a publication’s essentialness. Even inside, there’s a sense that while there are individual reporters doing great work, it lacks a coherent viewpoint — something not typically said of the New York Times.
The risk, as readers and advertisers pick media winners during this crisis, is that BuzzFeed will prove itself essential or just a vanity project, forced to further pare back the news operation or even lose its independence — leaving Peretti looking less like a savior of news than a brilliant entrepreneur who failed to see the limits of its growth.