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Is BuzzFeed’s news division a viable business?

It was the kind of bombshell report that brings the news cycle to a standstill. On the night of January 17, BuzzFeed News published an article from investigative reporters Jason Leopold and Anthony Cormier claiming Robert Mueller had strong evidence that Donald Trump had instructed his former lawyer Michael Cohen to lie to Congress about his negotiations to build a Trump Tower in Moscow.

Within hours, the news was plastered across nearly every cable news chyron and media website, and Democratic members of Congress were already citing it as potential grounds for impeachment. “This stunning Trump Tower Moscow story establishes a clear case of Obstruction of Justice, a felony,” tweeted California Congressman Ted Lieu. Texas Congressman Joaquin Castro went one step further: “If the @BuzzFeed story is true, President Trump must resign or be impeached.”

That ended up being an important caveat, because within 24 hours, BuzzFeed’s reporting was cast in serious doubt. Mueller’s office, in what was considered an extremely rare move, released a statement that pushed back on the report, describing its characterization as “not accurate.” Appearing on CNN’s Reliable Sources that weekend, BuzzFeed editor-in-chief Ben Smith stated that the news organization was sticking by its reporting, but by this point Trump’s supporters, journalists, and even comedians had plenty of cannon fodder to launch at the millennial-focused publisher.

“Look, BuzzFeed,” quipped Michael Che on SNL’s Weekend Update. “I think it’s great — we all think it’s great — that you want to help, but this isn’t what we really need from you. Ya’ll are BuzzFeed. You do memes and lists.”

This refrain — that BuzzFeed should stick to publishing light-hearted, whimsical content — is a common one, and, seven years after it launched its news division with the hiring of Smith, I still see people express shock when a piece of serious journalism produced by the site breaks into the mainstream. There continues to be confusion about the role BuzzFeed’s news division plays within the larger parent company, and the site’s critics, disingenuously or not, love to use this confusion to cast aspersions on its reporting.

When BuzzFeed initially announced, in 2011, that it was hiring Smith away from Politico, where he had run a popular political blog for five years, the company positioned the move as a natural evolution in its mission to conquer the social web.  “We realized that a bigger shift is happening, and that there’s a big opening to be the kind of site that is social from the ground up,” CEO Jonah Peretti told Fast Company at the time. BuzzFeed, he said, “is focused on making content that people think is worth sharing, and a big piece of that is original reporting.”

There was no shortage of jokes following the announcement. “MR PRESIDENT, BEN FROM @BUZZFEED, WHAT ARE YOUR TOP TEN HONEY BADGER MASHUPS?” tweeted one journalist. But Peretti made good on his promise to give Smith the runway to build a 21st century newsroom. He was soon overseeing a stable of about 250 journalists and editors, and over the next few years the site published enough blockbuster articles to earn grudging admiration from its mainstream competitors.

Its reporting on Vladimir Putin’s targeted killing campaigns against his enemies was named a Pulitzer finalist. Its expose on R. Kelly’s predatory behavior against young female fans shook the music world, forcing powerful companies and individuals to distance themselves from the R&B singer. And it published the infamous article, authored by McKay Coppins, that reportedly spurred Donald Trump into finally running for president.

But while the quality of BuzzFeed’s news output has been consistent, there have been signs that the business side has been struggling. In 2016, the company announced that it was splitting up its news and entertainment divisions, positioning the move as a natural development in a rapidly-changing media environment. “Having a single ‘video department’ in 2016 makes about as much sense as having a ‘mobile department,” Peretti wrote in a staff memo. “Instead of organizing around a format or technology, we will organize our work to take full advantage of many formats and technologies.”

This is when we started to hear the first rumblings that company executives were placing pressure on BuzzFeed’s news division to justify its existence from a business perspective. The month before, The Financial Times had reported that the company had missed its revenue projections by $80 million, and this restructuring announcement seemed like too much of a coincidence to be taken at face value.

BuzzFeed’s business troubles only seemed to intensify. In late 2017, The Wall Street Journal reported that it would miss its projected revenue targets by “about 15% to 20%,” and later that same month it announced the layoff of about 100 staffers, with heavy cuts to its UK editorial team. By this point, Peretti was openly complaining about how little major platforms like Google and Facebook paid publishers, a theme he would return to repeatedly in the months to come.

BuzzFeed’s business model was also changing. Though it’s long been accused of being a clickbait operation, it’s historically been one of the least click-dependent organizations out there. It eschewed programmatic display advertising — the banner ads you see on most news websites — and instead relied entirely on native advertising, which meant that it didn’t need to squeeze pennies out of every pageview. But in mid-2017, it abandoned its anti-display advertising stance, allowing these ads to appear on the site for the first time.

What did this mean for the news division? Suddenly, web traffic was playing a larger role in the company’s bottom line, and the company was already on record admitting that BuzzFeed News received much less traffic than its entertainment counterpart. “Our biggest news story might have 1.5 million views,” executive editor Shani O. Hilton said in 2014, “which is a lot of people, but it’s a fraction of the biggest entertainment story that we have ever done, which was a quiz about which state should you actually live in. That had 45 million people or something crazy like that.”

The disparity between entertainment and news traffic became even more stark once Facebook announced its algorithm changes in 2018. “Stories that once reliably gathered 200,000 visits through Facebook were suddenly lucky to get 20,000,” reported Digiday.

In February of last year, Bloomberg reported that Smith was in active conversations with Laurene Powell Jobs, the billionaire investor who’s purchased stakes in media companies like The Atlantic and Axios, about acquiring BuzzFeed’s news division. Though nothing seemed to have come from the talks, a few months later BuzzFeed spun off its news team onto a completely separate website: BuzzFeedNews.com. What’s more, this newly-launched entity wouldn’t carry any native advertising, but would instead be monetized mainly through display ads. In September, it laid off its in-house podcast staff, shutting down many of its audio shows in the process. Data compiled by the website Thinknum found that hiring at BuzzFeed News had pretty much stopped by this point: “In August 2017 the division was hiring for 21 openings. By October 2018, BuzzFeed News listed only one open position.”

It seems clear that executives at BuzzFeed recognize that the news division can’t subsist on display ads alone. The format is known for producing paltry returns, especially as advertisers move their budgets away from news sites that publish content on controversial subjects. In 2018, it began experimenting with a membership option and formally launched the program to the public in November. For $5 a month, members get access to exclusive emails. For $100 a year, BuzzFeed will mail you a tote bag. The site has also has expanded its ecommerce content production, recommending products to its readers and taking a cut whenever someone clicks on a link and purchases something.

BuzzFeed News has seen success on the video side, selling a number of projects to streaming and cable companies. Hulu commissioned a documentary that would be based on its R. Kelly reporting. It produced a show for Netflix that followed its reporters in the newsroom as they chased stories. And it’s sold programming to several major platforms — a live morning show to Twitter; an interview series for Facebook Watch; and a documentary series to Apple News.

Meanwhile, the parent company continues to struggle. In November, Peretti gave a bizarre interview to The New York Times in which he floated the idea of merging several millennial-focused companies so they could have more bargaining power against Facebook and Google.

And last week, The Wall Street Journal broke the story that the company is laying off 250 employees — that’s 15 percent of its workforce and its steepest cuts yet. The layoffs hit the news division first, resulting in 43 journalists — 20 percent of the entire newsroom — losing their jobs.

Whether its Cohen report is the scoop of the century or journalism’s biggest flop remains to be seen. But what is clear is that BuzzFeed — long considered one of the world’s most innovative media companies — hasn’t found the magic bullet for how to fund 21st century news gathering. It’s proved that it can produce top-notch journalism that rivals the reporting found at the most prestigious publishers; now it just needs to find a way to pay for it.

Simon Owens is a tech and media journalist living in Washington, DC. Follow him onTwitterFacebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio,go here.


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