BuzzFeed News shutdown marks the end of an era for digital media – 04/21/2023 – Market

Just two years ago, BuzzFeed News was lauded when it received its first Pulitzer Prize for an investigative story in which it used satellite imagery to identify infrastructure built by the Chinese government for the mass detention of Muslims.

Mark Schoofs, then the site’s editor-in-chief, described the work — part of a series of award-winning articles that earned the group a reputation for pioneering investigative work among its peers — as an “example of innovative forensics and creative reporting.”

Schoofs on Thursday tweeted a simple response to the news that BuzzFeed had closed its former news division as part of a drastic plan to cut company-wide costs and restore profitability. “Terrible day,” he said.

On the same day, rival digital media group Insider also laid off 10% of its staff in a battle to keep the company “healthy and competitive,” according to an email from Barbara Peng, president of Insider.

Former employees and analysts said BuzzFeed’s decision was a sign of the increasingly unfavorable fortunes of a group of digital startups that once had ambitions to disrupt the way people receive news.

Ben Smith, founding editor of BuzzFeed News who now runs media group Semafor, described the moment to the Financial Times as the end of an era of the kind of “journalism that was built to travel through the tubes of social media, and to cover the internet as a real and important place”.

He said “People have gotten fed up with this form of distribution and social media in general. What they want now is something more human, more curated, and something that, ironically, was built to help us navigate the chaos of social media. worn”.

In the same year that BuzzFeed won its Pulitzer, the company anticipated, at a time before its initial public offering, to have an implied valuation of $1.5 billion. After Thursday’s cost-cutting, its market capitalization has dropped to close to $100 million, prompting investors to question what’s next for the group that in the past seemed to be on an unstoppable rise thanks to its combinations. , in candy colors, of emojis and “listicles”.

The group’s last notification, on Thursday, read: “BuzzFeed News is going offline with a reminder that blippi pooped on your friend,” a typical click-through reference to a site investigation into a YouTube star.

The digital media company reported a net loss of $201.3 million last year, compared with a profit of $25.9 million a year earlier.

BuzzFeed isn’t alone in struggling in the battle to turn news into profit. Vox laid off around 7% of its staff at the beginning of the year. Vice is valuing a sale that is likely to fetch a price well below the high valuations given to the group in previous capitalization rounds.

Other news organizations have also laid off staff around the world as the advertising market has tightened and the economy has slowed, while the kind of venture capital backers that start-ups and still loss-making digital companies depend on to get money has become scarce since last year’s implosion in the tech sector.

Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investing, said “hype-based models” of digital news will no longer work as investors and shareholders need to see a faster path to profitability. .

“What we’re seeing is that these digital media brands have focused on building the massive scale businesses they felt was necessary to compete for advertising dollars – which is where all their money comes from – [mas] ended up turning their offer into something generic and lost sight of what made them distinctive and meaningful in the first place,” he said.

Miller added that “higher awareness but lower engagement cannot be a sustainable business model, especially in an economic environment that has become tougher. There is no such thing as a free lunch anymore, everything must be earned.”

Analysts say BuzzFeed got the economics of the news market wrong. Joseph Teasdale, vice president of technology at Enders Analysis, said BuzzFeed gambled that free journalism distributed by major technology platforms, with their wider audience, would bring in profits, but instead, the advertising dollars remained with their larger rivals.

“We’re at the end of the turning tide for these groups. They’ve been misjudged as technology groups — producing news content is expensive,” he said.

While Jonah Peretti, one of BuzzFeed’s founders, has personally taken responsibility for the losses, he has also blamed technology groups, which he says used BuzzFeed content without pay.

In a message to employees on Thursday, Peretti said he was guilty of overinvesting in BuzzFeed News “because I like their work and mission so much,” but that it “made me accept that the big platforms wouldn’t provide the distribution or financial support needed to support free, high-quality journalism – purpose-built for social media”.

BuzzFeed News was one of the first news outlets built to rely heavily on major technology platforms as a source of traffic and user referrals, taking advantage of the social strategy on which the group itself was structured, and designed to maximize reach with a wider audience. younger generation.

But the company found that instead, the big platforms downgraded and shifted pay-for-news strategies, while the market shifted again with the arrival of other platforms, like TikTok, which disrupted the way audiences most young people find and engage with current affairs.

This change came in the face of a broader slowdown in the digital ad market, another aspect noted by Peretti in his message, along with “a Spac market slump that produced less capital, a technology recession, a tough economy, a stock market in decline”.

HuffPost, which was acquired in 2020, will continue as BuzzFeed’s digital news site.

BuzzFeed was at pains to point out that these job cuts were not linked to any shift to AI-powered content. The company said it did not use artificial intelligence to generate news content, although it uses it, as well as human teams, to develop “entertainment content”.

Analysts say the future of profitable news likely involves the use of “paywalls”. “Is it possible to afford a digital newsroom through digital advertising alone? The evidence suggests not,” Teasdale said.

Other news channels, such as Semafor, aimed at specific groups of news users, have also entered the market.

Miller, who has invested in entertainment and gaming site Fandom and sports site Footballco, says digital platforms will have to focus on building a targeted business that serves a specific niche or community of interest.

But in the opinion of others, BuzzFeed News simply couldn’t move fast enough to adapt to changes in the digital marketplace. “BuzzFeed News and its editor Karolina Waclawiak have made progress towards different models, but their deadline has run out,” Smith said.

Translated by Paulo Migliacci