You know you’ve finally arrived as a media company when you have to start making redundancies like the rest of them. Let’s have a warm welcome then for Buzzfeed, which is to dismiss up to 100 employees – 6% of its workforce – after posting lower-than-expected revenues.
Buzzfeed UK, which also covers Germany and France, revealed a turnover of £20.5m for last year, when it published its results for the first time last month on Companies House. Executives said the figures were in line with expectations, claiming the firm was ‘in its early growth phase, and continuing to invest in a number of overseas subsidiaries’. Unfortunately the Wall Street Journal disagreed, reporting that Buzzfeed would miss its total revenue projections of $350m by up to 20%
Whatever the exact cause, the redundancies will dash hopes for Buzzfeed’s float - rumours of which have been bubbling since last year, when US telecommunications giant Comcast invested $200m at a then company valuation of $1.5bn.
Buzzfeed says it needs to focus on evolving its strategy. Why?
1. It needs new types of content
The product that made Buzzfeed’s name (it’s crack-cocaine-esque listicles) is still popular, and its politics section is well-respected, notably breaking stories about Jeremy Corbyn and Nicola Sturgeon in the run up to this year's general election. But this is not going to be enough if founder Jonah Peretti is to make it to an IPO - something he’s turned down bids from the likes of Disney in order to reach.
The company has recognised the uncomfortable reality that the digital ad revenues that were so important to its early success are no longer a reliable income source. Google and Facebook continue to sweep the board, taking as much as two thirds of the US online ad share according to the WSJ. Buzzfeed just can’t compete that on clicks alone.
‘Advertisers are increasingly demanding more granularity in targeting capabilities to reach consumers,’ said Monica Peart, senior director of forecasting at research firm emarketer. ‘Google and Facebook have positioned themselves at the front of this demand curve by being the ad publishers with some of the best-in-class targeting abilities in the digital ad market.’
To combat the dwindling advertising revenues, Buzzfeed has turned to consumer products and television series. It also announced that it will be expanding its products lab after it posted better-than-expected first year figures, and it will be setting up Buzzfeed Media Brand which encompasses the lifestyle brands such as Tasty and Nifty, with new additions set to be announced next year.
2. It needs new sources of revenue
‘Our business team, which was built to support direct sold advertising but will need to bring in different, more diverse expertise to support these new lines of business,’ said Peretti. ‘We are well positioned because we will continue to innovate and manage our operations with the focus required to succeed in a tough marketplace.’
Diversification for Buzzfeed hasn’t meant getting rid of ads altogether. Perettti dropped his long-standing opposition to banner ads earlier this year. It previously only sold advertorial slots, pages of branded editorial which are costly and cumbersome but generate more revenue from brands.
‘Today we’re all media companies, offering a wide range of multi-platform services,’ said Jens Torpe, CEO and co-founder of City A.M. ‘In this environment, the only thing that differentiates us is our audience and how well we know them and their consumption habits.’
It’s been a tough year for digital media. Buzzfeed’s rival media start-up Vice is set to fall short of its $800m revenue targets, and digital media firm Oath is set to cut 500 jobs under its new owner Verizon.There’s also the strange case of tech news site Mashable, which is set to be sold to PC Mag owner Ziff Davis for $50m, a fifth of its valuation only last year.
It might not be alone in its struggles then, but Buzzfeed’s strategy shift is a sign that digital media brands need to do more than just get clicks.
Image credit: Anthony Quintano/ Flickr