Buzzfeed recently announced a round of layoffs in an effort to right size their business model.
In an email to staff on January 23rd, CEO Jonah Peretti told his team that consolidating 15 percent of the company was done in an effort to create a sustainable cost structure and put the company on track for future revenue growth.
Industry coverage of Buzzfeed’s layoffs has been plentiful, and so has the speculation about what it all means.
So just what are people saying about Buzzfeed and should we marketers be worried about what it means for the future of media, publishing, and marketing as a whole?
That brings us to this week’s topic.
There are a few plausible explanations for why Buzzfeed needed to downsize its team.
First, it’s Google and Facebook’s fault. That’s one of the takeaways from Ben Thompson, an industry analyst and author of the Stratechery blog.
Thompson reasons that Google and Facebook have driven a commoditization of published content and concluded that, “the only way to build a thriving business in a space dominated by an Aggregator is to go around them, not to work with them.”
When you look at how both companies are constantly chipping away at organic reach, this seems like a plausible explanation.
The next possible cause for Buzzfeed’s financial woes? Maybe it’s a paywall thing.
In a recent New York Times article, writer Edmund Lee pointed out that companies like The Times had enjoyed increased revenue and profits in recent years because of the predictability that comes with subscription models. That’s 100% true. Subscription models mean monthly recurring revenue.
Meanwhile, Buzzfeed News has resisted paywalls and instead relies mostly upon programmatic advertising for the money they bring in. If Facebook and Google send fewer clicks, Buzzfeed brings in less revenue.
It stands to reason that Buzzfeed picked the wrong strategy here and should just change over to a subscription model like other publishers. Again, this could be part of the problem.
The truth is these factors probably had an impact, but the bigger driving factor behind the Buzzfeed layoffs has less to do with what they did wrong or what other companies did to them and more to do with a strategic shift in their business and revenue model.
I know, boring right? Nothing to see here folks, It’s just business as usual. The Internet still works fine folks.
First, when it comes to the big Aggregators, Buzzfeed has already been plotting how to avoid its dependence on Google and Facebook.
In a 2018 AdWeek interview, Peretti said, “When I look at the future of digital media, it’s going to be global, cross-platform, and have multiple revenue sources. And all of those businesses will work together versus being at odds with each other.”
While their revenue model used to consist primarily of native and programmatic advertising, today Buzzfeed is doing so much more to diversify its revenue.
A prime example of this thinking lies in sub-brands like Tasty, which has created a content brand around cooking that they’ve monetized not only through advertising, but also business partnerships, live-streams, TV-shows, merchandise, and more.
And as far as paywalls go, Buzzfeed knows it could be making more money by putting its news behind a paywall, but Peretti simply doesn’t seem believe in them as a matter of principle.
In the same Adweek interview, he said, “if all the best journalism in the world moves behind paywalls, it’s a problem for democracy and for the world. I think there needs to be high quality journalism that is freely available to the public.”
This tells me that the company looks at Buzzfeed News more as its civic duty than the main driver of revenue for the business. News is expensive to create, so they’ll have to rely on other brands within the company more for revenue.
Ultimately, if there’s any lesson to take away here, it’s in the business model behind new media.
It seems like Buzzfeed’s layoffs were needed in order to shift from an organization that could only monetize its content through advertising to one that is now funding a portfolio of themed media brands, each of which is focused on serving (and monetizing) a very specific group of consumers.
What do you think? Are the layoffs at Buzzfeed simply the story of one company’s growing pains or do they really say something bigger about consumers’ digital media behaviors and the industry as a whole? Leave your comments below and you might just win something cool.