Last month the left-leaning news site Huffington Post was taken over by Buzzfeed, another woke, money losing news website. It has immediately gone about cutting staff and closing divisions worldwide. Guido is told that the London news desk is to close and the operation is to be slimmed down to focus on politics, entertainment and lifestyle. Job losses have not yet been officially announced…
Between them the two left-leaning news sites famous for listicles and side-boob stories have lost investors over a billion dollars since launching. The trash-traffic site’s CEO, Jonah Peretti, is determined to keep in the expensive business of political reporting, despite stiff opposition on both sides of the Atlantic from Politico as well as the traditional news brands of broadcasters and newspapers. Good luck, you’ll need it…
There is little point listing reasons why BuzzFeed UK failed, it certainly wasn’t anything to do with the team that produced the content nor even that Facebook algo change, though that won’t have helped. It was quite simply that the business model was doomed. BuzzFeed has a successful business pitched at under 30s who want to read non-serious viral content. Advertisers are happy to pay for that. They won’t pay much however because the social media platforms also have a lot of raw viral content. Less curated, less explained, less analysed for sure, less costly too. Consumer advertisers don’t really care that much.
So setting up a “woke” hard news operation was a strategic error for the BuzzFeed brand. Blue chip advertisers that want to reach political news junkies, who are more likely to be decision makers, want their adverts to be adjacent to thought leaders or influencers of political leaders. So those types of advertisers like the broadsheets, specialist political magazines and websites like the Spectator, New Statesman, Politico and, frankly, Guido. Consumer advertising that you see on more generalist publications is in a lot of trouble, it is of low value.
“Go woke, go broke” is too simplistic an analysis. BuzzFeed’s new brand “Tasty” is producing baking videos which are bringing in a lot of dough. Setting up Tasty, a food focused channel for millennials made much more sense and has generated tens of millions of dollars in new revenue. It is the reason why BuzzFeed’s CEO Jonah Peretti moved into a $5 million mansion in the LA hills last year:
If however you just have general interest content, with general interest readers, you are going to suffer a lot from a general downturn in advertising. Membership plans might work if you have readers who identify strongly with your brand. They’re really just voluntary subscriptions and paying subscribers are a goldmine. BuzzFeed will not be the last general interest news media brand to fail.
Struggling Buzzfeed‘s CEO, Jonah Peretti, has emailed staff a memo telling them that there will be salary cuts at BuzzFeed and blaming the corona virus. The listicle loving digital-media company’s staffers will see their pay reduced between 5% to 25% on a progresive scale, of course. “I understand this will be a real hardship for everyone, but our goal is to make it possible for all of us to get through this,” Peretti wrote in the memo telling employees he will “not be taking a salary until we are on the other side of this crisis.” Go woke, go broke…
It is becoming a start-the-year tradition for Buzzfeed to fire staff in January, they did so last year and last night the CEO Jonah Peretti emailed staff telling them he’s firing 250 of them next week:
Hello BuzzFeeders,
I’m writing with sad news: we are doing layoffs at BuzzFeed next week. We will be making a 15% overall reduction in headcount across the company. I’m sending this tonight because I wanted you to hear it from me directly instead of from the press.
Over the past few months, we’ve done extensive work examining the trends in our business and the evolving economics of the digital platforms. We’ve developed a good understanding of where we can consolidate our teams, focus in on the content that is working, and achieve the right cost structure to support our multi-revenue model. We are confident the changes we are making will put us on a firm foundation and allow us to invest and grow sustainably for years to come.
I’m so proud of what our team accomplished over the last year, including diversifying our revenue, and growing our business double digits. Unfortunately, revenue growth by itself isn’t enough to be successful in the long run. The restructuring we are undertaking will reduce our costs and improve our operating model so we can thrive and control our own destiny, without ever needing to raise funding again. These changes will allow us to be the clear winner in the market as the economics of digital media continue to improve.
I’ll share more about our future structure in a few days, but today I want to focus on what will be a difficult week, especially for the people who are leaving the company. These are talented people, friends, and valued colleagues, who’ve made huge contributions to our success, and who’ve done nothing wrong. Even though I’m confident this is the right business decision, it is upsetting and disappointing.
On a personal note, I’ve never thought about my job as “just business.” I care about the people at BuzzFeed more than anything other than my family. This will be a tough week for all of us and I realize it will be much worse for the people losing their jobs. To them, I want to say thank you, I’m sorry our work together is ending this way, and I hope we get to work together again in the future. Our loss will be to the benefit of other organizations where I know you will go on to make formidable contributions.
We will be back to you with specifics on the process by Monday at the latest. Thank you all in advance for your compassion and kindness as we go through this process.
Jonah
Buzzfeed has burnt through over $500 million of investors money which they are unlikely to ever get back. Investors are no longer interested in an online land grab for readers without profits. Peretti is looking to merge the company with rivals as they strive to stem losses. Last year the struggling firm fired over a third of their UK staff. Presumably the UK editor Janine Gibson quit last week because she didn’t want to oversee another round of job cuts…
Buzzfeed UK filed their accounts for 2017 on Christmas Eve. They show that revenue rose an impressive 62% to £33,363,304, unfortunately expenses also rose 48% to £35,288,846 resulting in an operating loss of £1,900,229. Which is an improvement on the previous year’s £3,543,554 loss. Head count rose in 2017 from 204 to 283 staff, resulting in a wage bill of £19,073,982 giving an average wage cost of £67,399. That was way too high in today’s media environment…
These accounts only cover the financial year up to December 2017, sure enough the following January Buzzfeed let go of a third of the London staff. It will be interesting to see how this impacts the bottom line for this year. Buzzfeed previously got a substantial 23% of their traffic from Facebook, how the great algorithm change impacted Buzzfeed is yet to be seen. It is unlikely to have been positive for traffic…
Buzzfeed UK includes financial reporting for Germany, Brazil, Spain, Mexico and India – the French division was closed down. Buzzfeed’s CEO Jonah Peretti has told the New York Times that a merger with Vice and other big digital media publishers would be a way for them to compete with Facebook and Google for advertising revenue. One thing is for sure, sky high valuations for new media assets are coming back down to earth because “everyone is for sale“. Venture capital funded media assets like Buzzfeed are being sold at a fraction of their previous valuations. Buzzfeed has missed the window for an IPO and a chance for investors to cash in. Surviving in a tough market is the main game…
