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- BuzzFeed just laid off 15% of its staff, including its first big cuts in its news division, BuzzFeed News.
- The cuts were a reckoning for a company that seemed like it had cracked the code and figured out how to support high-quality, online journalism with advertising.
- Now, critics are blaming CEO Jonah Peretti, saying that in his quest to make a 21st-century journalism company, he didn’t recognize the limitations of the business model for news.
Last month, 43 staffers at BuzzFeed News, the news arm of viral publisher BuzzFeed, were part of company-wide layoffs which cut overall headcount by 15%. Most didn’t see it coming.
Their shock turned to anger as people began ripping into cofounder and CEO Jonah Peretti. The layoffs dragged on over several days and management denied people pay for vacation time.
“I strongly suggest you receive some outside training on how to conduct this,” one staffer admonished Peretti on Slack.
It was the first major reckoning for a division that has produced big scoops like the infamous Christopher Steele dossier and is considered critical to the company’s journalism brand. In 2017, when 6% of Buzzfeed’s staff was cut after the company missed its revenue mark by 15-20%, the news division was largely unaffected.
The recent layoffs also were a reckoning for a company that, having raised an eye-popping $500 million, seemed to have cracked the code of an advertising-based digital publishing model.
Business Insider spoke with a dozen former and current employees about the state of Buzzfeed. Many have begun to question Peretti’s leadership — not just about how last week’s cuts were carried out, but also about decisions he has made that led the company to this point.
They expressed concerns about Peretti’s pursuit of aggressive growth, his unwavering faith in Facebook, and his drive for the startup’s continued independence.
Peretti declined to be interviewed for this story.
Peretti’s had big news ambitions
Within the last fifteen years, a number of online-only publications have emerged. BuzzFeed has been the biggest, attracting giant investments from venture capitalists and older media conglomerates. It raised nearly $500 million, including $400 from Comcast’s NBCUniversal, to grow to 1,450 employees by the end of last year.
The startup scaled quickly to hundreds of millions of readers, largely by taking advantage of a firehose of traffic and distribution offered by Facebook. It used entertaining quizzes, animal photos and emotion-driven content to soar past competitors. Buzzfeed’s audience, which primarily consisted of millennials, was also attractive to advertisers who wanted to reach the next generation of readers.
But Peretti — an MIT Media Lab graduate who once made a Nike email thread about"sweatshop" shoes go viral — had bigger ambitions for BuzzFeed.
He’d helped found news site The Huffington Post, which also grew a huge audience by mastering aggregation and Google search. He realized that news would set BuzzFeed apart and earn it a place in the pantheon of great media companies like Condé Nast, The New York Times, and the erstwhile Time Inc., with their vaunted news divisions.
Peretti also knew that to become a respected news site, BuzzFeed couldn’t do it on the cheap, according to people familiar with his thinking. BuzzFeed News would be an expensive but important endeavor, one that could help Peretti create a more prestigious brand by elevating his company’s overall journalism. Led by Ben Smith, a former Politico journalist, Buzzfeed News was eventually separated out from the rest of the newsroom and turned into its own division.
In a hiring announcement, Smith said, “BuzzFeed is the best in the world at distributing content on social sites, and it is a tremendous opportunity to join BuzzFeed — and its millions of readers — to build a new model for high-quality reporting."
Three days after Smith started January 1, 2012, BuzzFeed had its first big scoop, that John McCain endorsed his former rival Mitt Romney for president in the 2012 election.
“Everyone was talking about BuzzFeed,” said a BuzzFeed News source.
Buzzfeed News staff ballooned to 300
Under Smith, the newsroom made splashy hires like Pulitzer winner Mark Schoofs and Wired’s Mat Honan. By mid 2018, News alone had ballooned to 300 employees.
But news is notoriously pricey to produce, making it an odd fit in a company whose investors expected hockey stick growth. And when most digital ad dollars began pouring into Google and Facebook, many news outlets quickly found they needed multiple revenue streams in addition to advertising to sustain themselves.
When Smith joined BuzzFeed, The New York Times was still struggling to transition to digital. Its new paywall was unproven, and a Trump presidency, which would inspire a wave of reader subscriptions and revenue for news, was years off.
Now, the Times is the paragon of success in digital news, with two-thirds of its revenue coming from subscribers.
Critics say BuzzFeed never tried to monetize its readers as much as it should have and instead depended too much on traditional advertising campaigns. It bet on mass scale at a time when the barrier to entry for digital publishers was low and the supply of news was infinite, said Raju Narisetti, a business journalism professor at Columbia University and the former CEO of Gizmodo Media Group.
It didn’t take serious steps to make money until around 2017, five years after Smith’s hire, when BuzzFeed launched a morning show on Twitter, "AM to DM."
But its journalism ws getting noticed. In 2017, the news site was a Pulitzer Prize finalist for international reporting and made waves when it was the first to publish the unverified Steele Dossier.
“Jonah wanted to build a 21st-century newsroom that was more about reporting than aggregation," said Andrew Essex, who became acquainted with BuzzFeed in its early days while CEO of Droga5. "There’s an argument he’s done a wonderful job. They’ve done some important stories. The limitations are, it’s an expensive proposition, and there’s more supply than demand.”
Peretti employed the ‘reverse mullet’ strategy
Whereas Peretti helped HuffPost perfect the “mullet strategy,” BuzzFeed’s “reverse-mullet” strategy — addictive content in the front, hard news in the back — was hard to pull off.
The Reuters Institute’s 2018 Digital News Report showed that in the US, among people who heard of the outlet, BuzzFeed ranked 13 of 15 news outlets in trustworthiness, ahead only of Fox News and Breitbart.
BuzzFeed News’ lingering association with the parent brand and its size gave advertisers, conservative about where their messages appear, reason to keep it off their plans. BuzzFeed News still trails the kinds of outlets it’s competing with for advertising, like NBC News, CNN, and Fox News, which are at least five times bigger in audience, per Comscore.
“They made some traction, but it’s hard,” said John Wagner, group director of published media at the agency PHD. “You want prestige; would you optimize toward BuzzFeed or The New York Times, The Washington Post, USA Today? It’s a perception issue. We have recommended it, but it’s not an intuitive choice.”
And Buzzfeed went big internationally
Under Peretti, BuzzFeed’s quest for scale also fueled international growth.
The company was profitable from 2013 to 2014, and the period was recalled as a time of creativity.
“You felt entrepreneurial and innovative. You were surrounded by smart and quirky unique people,” recalled a former sales exec from that time.
Then in 2016, company got a second round of funding from NBCUniversal. After that, another former sales exec recalled, “The stakes became much higher. Everyone was looking for faster results.”
The company embarked on an ambitious global expansion, opening 10 editions between 2013 and 2017 in markets including the UK, Brazil, and Australia. While other publishers like HuffPost and Quartz hedged their bets by partnering with local news outlets abroad, BuzzFeed owned most of its overseas sites, reasoning that it needed to make sure its particular brand of content would work in those countries.
But the land grab came with business uncertainty. The native advertising that drove BuzzFeed’s US business was still new outside the US. Despite the fact that most ad buys are still done on a market by market basis, BuzzFeed’s European sales were handled centrally out of London. Average ad deal sizes are smaller in markets like the UK versus the US, but production costs were the same. And copycats like France’s Demotivateur were already competing with BuzzFeed for eyeballs and advertisers.
Then, the Facebook largesse came to an end. Facebook started cutting back the traffic it was sending publishers, then announced in January 2018 that it would cut the news it was distributing in people’s news feeds, in a blow to Facebook-dependent publishers like BuzzFeed.
That year, BuzzFeed closed its doors in France, laying off 14; and shifted to a partnership approach in entering new markets. This January, BuzzFeed scaled back in Australia, Brazil, Mexico, and the UK, and closed its Spain office.
And the pressure to make money escalated
After escaping cuts in 2017, BuzzFeed News finally came under pressure to make money. It cut its podcast department to focus on long-form video, and launched a $5-a-month membership program, to some awkwardness, given how much money the company as a whole had raised.
In July, BuzzFeed News launched a separate site to bolster its identity, but without the native ads that drove most of BuzzFeed’s revenue originally, and only monetized it through programmatic advertising, which isn’t enough to support a 300-person staff.
“Jonah got a little ahead of himself; in retrospect, he should have done the layoffs earlier,” the News source said.
With Facebook, some see Peretti as having another blind spot. Once the consummate Facebook booster, he began publicly making the case that the platform giants should give more money back to publishing companies. Last fall, he floated the idea of a merger with other digital publishers that were running out of runway, like Group Nine Media and Refinery29, as a way to gain more leverage with the platforms.
But the idea that BuzzFeed could get Facebook to change how it compensates publishers sounded farfetched to some and like a fig leaf for a company that was forced to consolidate to survive.
Today, BuzzFeed sees a bright business in making video shows for outlets like Netflix and Twitter, and selling toys and spatulas based on its popular food brand, Tasty.
In all-hands meetings with staff, Peretti has been steadfast in his commitment to news. But success in publishing today looks smaller, more focused, elite, and diversified, like Axios, which almost broke even two years after its launch with with revenue of $25 million; high-end subscription publisher The Information; and the national newspapers, that are increasingly subscription-driven.
Similarly, BuzzFeed News eliminated its national news and national security desks to focus on areas where it can be competitive, like tech, politics, and investigations. Staffers expect that what was once permitted to be a loss leader will only face more pressure to pay for itself.
For some vets, the recent cuts are a reminder of what might have been. In 2014, BuzzFeed president Jon Steinberg, who had joined the company in 2010 as its 15th employee, left; it was rumored that one contributing factor was that Steinberg wanted BuzzFeed to sell to Disney and Peretti wanted to stay independent. (The deal reportedly fell apart over BuzzFeed’s $1 billion ask, though sources close to the company say it was closer to $500 million.) Steinberg declined to comment for this story.
“They should have sold to Disney — when they could have,” said a former sales exec.
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Source: Business Insider