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…
Buzzfeed has never made a profit in 13 years, after being in business that long it is hard to claim you are still a start-up, or as they put it in a statement accompanying the late filing of the UK subsidiary’s annual accounts “still in investment mode”. Which is another way of saying “still losing money”.
The UK subsidiary has quadrupled losses, turnover slumped 35% to £21.6 million, which they say was due to “intercompany revenue” from parent company BuzzFeed Inc. dropping £14.8 million. Whatever those financial shenanigans were they have come to an end. Investors will marvel at how Buzzfeed has burnt through over $500 million of their money which they will never get back.
The pivot to video which was Buzzfeed’s big bet doesn’t appear to be paying any dividends in the UK at least, nor will it until advertisers value the audience. If as, Guido suspects, they have a primarily youthful audience they will not be able to command rates much above Facebook, which means thin margins. Guido has been trying to figure out how to make video or podcasts commercially viable and concluded that until advertisers create audio or video content that needs distribution to his audience, it just won’t be profitable. The Spectator uses their excellent podcast output as a gateway drug to becoming a subscriber, Business Insider and HuffPo are generating significant revenue with sponsored videos. The Economist is very successfully monetising their podcast audience to the tune of millions from corporate advertisers. The Economist demonstrates that if advertisers can be shown you have a valuable audience, they will pay. Buzzfeed’s problem is that their audience is the same “trash audience” that can be bought off Facebook or Google for pennies…
Sky News‘s ‘Election Social‘ programme on Thursday evening is set to be a corker. Co-organised by BuzzFeed, the show’s political balance is non-existent. Sky News’s Lewis Goodall and Roland Manthorpe will co-host with two Buzzfeed journalists…
Guido understands that BuzzFeed was responsible for much of the running order, resulting in an extraordinary ideological bias. The only Conservative supporters announced for the show are youth activists Luke Black and Emily Hewertson. They will be facing a torrent of left-wing comment from Corbynistya writer Maya Goodfellow, the New Statesman‘s Sarah Manavis, left-wing writer Mollie Goodfellow, anti-tory comedian Michael Spicer, Corbynista stand up Sooz Kempner, leftie comedian Munya Chawawa, and Corbynista journalist Kieran Yates.
Taking into account the two lefty Buzzfeed hosts and former Labour activist Sky News correspondent, that’s an overwhelming 80% of the show taken up by left-wing commentators.
Last week, CityAM reported that Buzzfeed UK “is under fierce pressure from financial authorities for failing to produce its company accounts more than two months after the deadline.”
Government agency Companies House had lodged a proposal to strike Buzzfeed from the official register as its 2018 accounts, which were due by 30 September this year, have still not been filed. Today they were issued today with the official strike-off notice.
Why the accounts are over two months late being filed is not explained. According to City A.M. the company was “running at an unsustainable rate”. Buzzfeed’s accounts for 2017 showed a pre-tax loss of £1.9 million and the firm owed £7.7 million to creditors at the end of the year. It is very unusual to file accounts so late that the firm risks being struck off.
A statement from the company says
BuzzFeed UK Ltd. will be filing our 2018 financials by the end of the year. Earlier this quarter we concluded the global audit of BuzzFeed Inc. on time with no unusual findings.
We have great confidence in our global operations and are extremely pleased with the contribution they make to our wider company. This year saw us diversify our revenue putting us in an even better position than ever: launching shows like #What2Watch, selling products like spices with Schwartz and customisable Tasty cookbooks and putting rocket boosters behind our affiliate.
Which means the accounts for 2018 won’t be filed until 2020. The delay is only because of good news? Right?
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:
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.
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…