BuzzFeed’s brutal cuts at its offices around the world — including Australia — have prompted yet another round of think pieces about the website’s business model and the profitability of digital media.
Earlier this week The Australian said digital news had lost its “buzz”, while the ABC asked why “millennial” news doesn’t make money. The Ringer contextualised the cuts as “part of a trend towards austerity measures for digital media companies”; Vanity Fair effectively published an obituary, writing “if you live by Google and Facebook, you die by them”.
The subject of BuzzFeed’s profitability (or otherwise) has been coming up increasingly in industry media over the past couple of years, as the website has chopped and changed its offerings and business strategies. Despite its enormous traffic, it hasn’t met all expectations; it missed its revenue targets by 15-20% in 2017.
So, let’s retrace the steps. Where is this revenue supposed to be coming from?
BuzzFeed’s original money-maker was native advertising. It pioneered partner content — articles paid for by advertisers but written and formatted to look like any other content on the site — and until August 2017 the website didn’t even take standard banner ads. BuzzFeed News, which was moved to its own division and site in 2016, still does not take native advertising.
Now sponsored content is a major revenue-driver for most news websites, which largely followed BuzzFeed’s success. In Australia, News Corp and Nine’s websites regularly use native advertising on their websites, as does Guardian Australia, and smaller publishers including Junkee, Pedestrian and Mamamia. By 2017, news providers around the world were making 20% of their advertising revenue with native advertising.
This strategy hasn’t been without controversy for BuzzFeed. In 2012 and 2016, the site took political native ads during the US election campaigns. And in 2015 the relationship between advertising and editorial was under the spotlight when a news article critical of Dove was deleted. Unilever, which owns Dove, was a major advertiser with BuzzFeed.
In 2017, the site backflipped on the no-display ads/no-banner ads rule. Peretti had previously eschewed ads, saying they were ugly, irrelevant and slowed websites down too much.
But Peretti wanted to make more money from BuzzFeed’s huge audience, saying:
Tactically, programmatic has improved in terms of loading times, mobile experience and ad quality, and opens up another way for us to monetise our huge audience. The move also benefits our global strategy by allowing us to generate revenue in markets before we’ve built business teams to implement native monetisation.
In 2017, BuzzFeed also tried to cash in on the popularity of its viral food videos under the Tasty vertical. The BuzzFeed “Product Lab” division developed a cookbook, customised wine, a smart cooktop, and utensils sold at Walmart in the US, all using the Tasty branding.
And it hasn’t just been producing consumer goods for its own products. BuzzFeed’s product division has also been developing products for clients for more than a year.
Membership and donations
Last year, BuzzFeed News followed The Guardian’s hugely successful move into a membership option for its audience. For $5 a week, those who sign up receive member-only emails that go behind the scenes of BuzzFeed’s journalism. This followed the introduction of donations, but BuzzFeed has been adamant it will not introduce a paywall.
Not paying for content
Among those laid off last week was BuzzFeed’s head of quizzes Matthew Perpetua, who wrote about how a teenager from Michigan was the second-highest traffic driver in the world for BuzzFeed’s quizzes. New York Magazine tracked her down, and the teen spoke about how she, among other “community members” was encouraged by BuzzFeed staff to produce more free content.
Among BuzzFeed’s other more questionable employment practices that have come to light in recent days include initially refusing to pay out laid-off staff’s leave in the US (which they have now reversed), and employing cheaper “fellows” on contracts without as many entitlements.