Facing Diminishing Ad Revenues, Digital Media Outlets Downsize and Consider Consolidation

In 2014, BuzzFeed was the envy of the digital media landscape as print media was spiraling downwards and media companies were seeking to capitalize on web traffic and earn big from advertisement revenues.

At the time, BuzzFeed was drawing an average of 150 million visitors each month and had just secured $50 million in venture capital as the company was seeking to diversify its content beyond the numbered lists that had made it so massively popular.

Four years later, BuzzFeed had amassed a gargantuan 690 million monthly audience and developed the diverse content it had once envisioned, including BuzzFeed News, an impressive news division that has produced deeply sourced reporting, broken many important stories, and won some of journalism’s top awards.

However, financial hardships persisted. In 2017 revenue came in at roughly $260 million, falling $90 million short of BuzzFeed’s goal, and one hundred people were laid off.

Last Friday, the layoffs continued as BuzzFeed laid off another 15 percent of its staff, including 43 journalists from its 250-person news division, where the entire seven-person national desk and six-person national security desk were scrapped.

At the Verizon Media Group, which owns Yahoo, AOL and Huffington Post, staff cuts totalled 7 percent. Local daily and weekly newspapers across the country were hit hard as well, as media conglomerate Gannett cut nearly 400 jobs.

At the end of what the Columbia Journalism Review deemed “a brutal week for American journalism,” at least 1,000 people had lost their jobs across the industry.

In an internal memo to employees, BuzzFeed CEO Jonah Peretti described the layoffs as part of a broader effort to “put us on a firm foundation and allow us to invest and grow sustainably for years to come.”

“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,” Peretti said, adding that “these changes will allow us to be the clear winner in the market as the economics of digital media continue to improve.”

Just three weeks earlier, The Atlantic’s Derek Thompson said that it was “tempting” to describe the imminent “media apocalypse” to as the “inevitable end game of Google and Facebook’s duopoly,” which was estimated to account for 90 percent of growth in digital advertising revenue in 2017.

But for Verizon’s media division Oath, which was formed in June 2017 as the parent company of Yahoo, AOL and Huffington Post, chipping away at Google and Facebook’s dominance over ad revenue was a primary goal.

Instead, Oath’s revenues fell by 7 percent in the third quarter of 2018 and Verizon revised its prior goal of earning $10 billion in revenues by 2020. In December, Verizon announced that it was writing off nearly $4.6 billion in Oath’s value and rebranding it as Verizon Media, leaving the company worth just over $200 million.

At BuzzFeed, Peretti has hinted at consolidating forces through a series of mergers with other digital publishers as a means of combating the Google-Facebook duopoly and earning higher advertising revenue.

In an interview with the New York Times in November 2018, Peretti identified Vice, Vox Media, Group Nine and Refinery as publishers that “are doing interesting work.”

“If BuzzFeed and five of the other biggest companies were combined into a bigger digital media company, you would probably be able to get paid more money,” Peretti said.

Group Nine CEO Benjamin Lerer indicated that a future merger might be possible, given the natural camaraderie that exists among digital publishers.

“I don’t believe my competition is BuzzFeed or Vox or Vice,” Lerer told the Times. “We compete on a day-to-day basis for business, but the ultimate competition here is us against traditional TV and also protecting ourselves against the big platforms.”

“Consolidation in digital media is something that is going to happen,” he added.

Asides from being longtime friends, Lerer and Peretti are also connected through Lerer’s father, venture capitalist Kenneth Lerer, who is chairman of BuzzFeed and also sits on the board of Group Nine.

At the time of Peretti’s interview, the Times reported a handful of digital publishers had discussed mergers, but that talks were “very preliminary.”

Vox Media CEO Jim Bankoff told the Times that Vox would “always consider ways to better serve our audiences and strategically grow our business through building, partnering and acquisition.”

Meanwhile, Philippe von Borries, an executive at Refinery29 said that there might be “an opportunity for the leading media and entertainment companies that emerged over the past decade to come together.”

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