The buzz is bust: Buzzfeed’s fall red-flags digital future
Once described as 'the most important news organisation in world', it is making waves of job cuts across the globe
“Buzzfeed is the most important news organisation in the world,” wrote Ben Thompson, a technology analyst closely followed by the Silicon Valley set.
By rejecting advertising in favour of advertorials distributed via the same social media channels as its journalism, Thompson believed Buzzfeed founder Jonah Peretti had created a new kind of media organisation that “perfectly aligned” the interests of staff and readers. With no need to write so-called clickbait to attract big audiences for advertisers, for the first time digital journalists would be completely free of commercial concerns.
That was four years ago. Today, Buzzfeed is in global retreat and making waves of job cuts around the world, having long since abandoned the pure new model of news funding that so enchanted Thompson and many others.
Peretti embraced brand advertising 18 months ago as Buzzfeed struggled to meet the optimistic sales forecasts built on the belief that he had cracked the puzzle of making big money from online publishing. In London, 17 out of 37 editorial roles have been marked for redundancy. Coming on the heels of dozens of job losses at the end of 2017, it means the Buzzfeed UK editorial operation will have dwindled from 76 staff to just 20 in little more than a year.
The pace of the retreat has matched the speed with which Buzzfeed burst on to the scene. For a time Peretti’s invention appeared to have the extraordinary properties with which it had been credited, as it built a huge following on Facebook and brands flocked to fund advertorials. In just two years it raised $400m from technology and media investors, including Sky owner Comcast, to fund a breakneck global expansion from its US base.
Offices were opened in London, Paris, Mumbai, Tokyo, Sydney, Sao Paulo and a dozen more cities. Buzzfeed invested in serious coverage that had previously been the preserve of newspapers and broadcasters. In Britain it built a team in the Westminster lobby and ran expensive long-term investigations, uncovering new revelations about Russia-sponsored murders, for instance.
Buzzfeed’s apparent failure to match its editorial success with financial returns has prompted a new round of soul-searching about the future funding of journalism, particularly in the US. There it built a 250-strong newsroom and competes with The New York Times and The Washington Post to break news on the investigations into Donald Trump.
Cutbacks came as Verizon, the telecoms colossus owner of rival digital news outlet HuffPost, announced 800 job losses, although most are not editorial roles.
In traditional publishing, Gannett, the owner of 1,000 local newspapers across the US, cut 400 jobs even as it battles a hostile takeover bid by a hedge fund known as an industry “vulture”.
The cuts at Buzzfeed and HuffPost drew a gloating tweet from Trump. No credible observer gives any credence to his claim that “fake news” is responsible.
Buzzfeed’s troubles do not betray financial strife either. As a private US company its main accounts are not publicly available, but the UK subsidiary shows no sign of distress. In 2017, the business, which also includes operations on the Continent, reported a pre-tax loss of just £1.9m, down from £3.3m. Sales were up more than 60% to £33m. Yet the axe first fell at the end of that year. Reduced revenue targets were broadly met.
The problem for Buzzfeed, according to Doug McCabe, chief executive of media specialists Enders Analysis, boils down to a gap between the expectations and reality.
Peretti, in effect, sold investors a technology company, and built them a media company. It means there will be no lucrative exit in a takeover or stock market float, and that Buzzfeed is under pressure to deliver returns by cutting costs.
“A media investor would look at Buzzfeed’s performance 2016 to 2017 and see excellent revenue growth, and very good profit management, but that’s not how a tech investor would look at it,” says McCabe. “A tech company has zero or near-zero content costs and so a massive increase in traffic and revenue will tend to deliver very much greater profits.”
Peretti has wondered out loud about combining Buzzfeed with other faded stars of the digital news boom, which include the youth brand Vice, to gain scale in advertising sales and cut more costs. Industry analysts have raised doubts over whether the potential benefits are worth the risks.
“The critical question for me is about demand,” says McCabe. “What do readers want? What does a reader gain from having a Buzzfeed-Vice business? Actually, the risk is readers lose something – the unique value of each brand is diluted.”
Another option could be for Peretti to spin off Buzzfeed’s news operation and retain its cheaper-to-run teams creating quizzes and other digital entertainment. The publisher’s defining characteristic since it was founded in 2006 has been its readiness to shape-shift in line with the latest technology-driven trends online. Yet, news has become Buzzfeed’s calling card.
News outlets that can are increasingly focused on readers who make a direct financial contribution, whether through subscriptions or donations. The trend partly reflects necessity as Google and Facebook leave few crumbs of the digital advertising pie, and partly aims to capitalise on the growing willingness of readers to pay. Buzzfeed, a media company like the rest, takes donations too.
– © The Daily Telegraph