I can’t be the only person who was genuinely perplexed by the interview BuzzFeed CEO Jonah Peretti gave to The New York Times last week. In it, he floated the idea of a sort of mega-merger between several of the biggest digitally native news organizations, including Vice, Vox Media, Group Nine, and Refinery.
The motivation behind such a hypothetical merger? A combined entity, with all the scale that comes with it, would be able to negotiate better rates for the content it supplies to major platforms like Google and Facebook. “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.
Peretti’s statements were pretty bizarre. First of all, why make a proposal like this in such a public forum? While I’m sure he’s not the first CEO to ever muse in an interview about a merger, this was a hypothetical scenario that contained such specificity and intent that it seemed like he was using The New York Times as some kind of go-between for these publishing entities to start negotiations.
Second, I’m not really sure that such a scheme would actually result in the desired outcome. As a venture backed company, BuzzFeed has had just about all the access to capital and talent it needs to reach massive levels of scale. Its media advertising kit brags that it reaches 650+ million people. It’s difficult to see how simply adding more pageviews would improve its negotiating position with Facebook to such an extent that it would make a merger worth it.
But while Peretti’s proposal is bewildering and came seemingly from left field, this isn’t the first time he’s expressed frustration at the amount of money his company has been able to extract from the tech platforms. In October 2017, he appeared at a Wall Street Journal tech conference and made the argument that Facebook and Google should be sharing more revenue. “The business model of news is changing, and if Google and Facebook take all the revenue but don’t want to pay for the fact checking, the reporting, the more-intensive investigations, who does that work for?” he said. “I think Google and Facebook are going to have to fix that.”
Five months later, he elaborated on these thoughts in an interview with Digiday, arguing that, while BuzzFeed did receive revenue for content produced for Facebook Watch and Facebook Instant Articles, those places aren’t where Facebook extracts most of its value from BuzzFeed:
My big criticism of the strategy so far is all their revenue is generated in the news feed, and they only share revenue for new surfaces — Instant Articles or Watch — but don’t share any of the revenue from their main source of revenue, the news feed…
…it’s in Facebook’s interest to share news feed revenue, not because it’s good for the world, but it allows Facebook to have some control of what’s showing up in the news feed. If they say they want local or trusted news, they say that will get more distribution and more revenue, so companies can produce more of it. It doesn’t need to be some carriage fee or a thing where the amount of traffic is directly related to the revenue. It could be that they have a metric for time well-spent, and you’re paid 2 cents per minute of time well-spent.
Speaking as someone who’s read a lot of interviews with Jonah Peretti over the years, I was struck by how cynical and pessimistic he’s become about the role the tech platforms are playing in our media ecosystem. In fact, you don’t have to travel that far back in time to find quotes from Peretti where he’s expressed unbounded optimism about the rise of social media and how it has allowed companies like his to thrive.
In a 2012 interview with Sarah Lacy, for instance, he celebrated the fact that social media traffic had overtaken search traffic in importance, arguing that it was better that content views were being driven by people sharing articles, not Google’s “robot” algorithm. “With BuzzFeed, we don’t look at search traffic at all. We get some search traffic, we focus entirely on making things for people to share.”
By 2014, he was arguing to anyone who would listen that those who just count visits to BuzzFeed.com were ignoring the company’s true reach. In fact, the company started to reorganize its structure so it contained specific teams dedicated to creating native content for each major platform. Peretti charged his publisher, Dao Nguyen, with developing a new approach to data analytics that accounted for the company’s reach outside its core website. “[Unique visitors] as they are currently reported are decreasingly relevant to BuzzFeed,” Nguyen wrote in a 2016 article. She then shared this chart to show BuzzFeed’s massive reach when gauged by these new metrics:
In a 2016 end-of-year memo, Peretti was still pushing forward the narrative that the large platforms were allies to digital media companies like his:
As the leading independent, pure digital media company, we’ve shown we can build a great business by embracing the internet instead of fighting it … The emergence of social media initiated the convergence of content and communication. Content wasn’t just being consumed for informational value; it became a way for people to connect with other people in their lives. This opened up the possibility of building a more intimate connection with audiences … Understanding the inherently social nature of media is one of the biggest “digital advantages.” But despite the rise of social media and the growth of BuzzFeed, it will still take years until most of the industry fully understands.
It was less than a year later when Peretti completely changed his tune on the benefits of social media. So what happened?
Well, the reason that BuzzFeed had previously been so agnostic about whether its content was viewed on its own website or on other platforms was because, for most of its existence, the company had eschewed a business model that the rest of the media industry relied on: display advertising. Its embrace of native advertising as a business model meant it didn’t care where its famous Dear Kitten video was watched, and neither did Friskies, the video’s sponsor. In fact, it was much easier to get these ads to spread on platforms like Facebook — where BuzzFeed could give them boosts via Facebook’s sponsored posts — than it was to get people to click on a link and view them on BuzzFeed’s website.
BuzzFeed then got hit with a harsh reality: it’s actually incredibly difficult to get native advertising to scale. By the end of 2017, just when Peretti was executing a complete 180 on how he talked about social platforms, it was clear that the company had missed its lofty revenue goals; The New York Times claims that it generated $260 million that year, far below its projected $350 million.
So how did BuzzFeed’s business team respond? Well suddenly, after years of trashing programmatic display advertising as a business model, the company rolled ad tech out onto its website. In fact, it spun out its hard news coverage to a completely separate website that would be entirely monetized by programmatic advertising. It built out its affiliate marketing content, going so far as to launch a site specifically for product reviews. And most recently, it debuted a membership platform that would allow users to gain access to exclusive newsletters and other content for $5 a month.
What do all these new business models have in common? A heavy reliance on driving traffic to BuzzFeed.com. Suddenly, Peretti couldn’t be so agnostic about where people were viewing his company’s content; whether it’s clicking on an affiliate link, signing up for a membership, or being served with a programmatic ad, all those money-making interactions need to take place on BuzzFeed’s dedicated website.
In short, Peretti is no longer so enthusiastic about the social platforms because he can no longer afford to be. In its recent VC round, his company was valued at $1.5 billion, and in order to maintain that lofty valuation (and eventually launch an IPO), he needs to keep showing his investors healthy, year-over-year revenue growth. But by embracing a business model that the rest of the media industry relies on, BuzzFeed is suddenly beholden to the same market forces that have caused publishers to sound the alarm over the Facebook/Google duopoly for years.
For much of BuzzFeed’s existence, Peretti thought he was operating above the industry trends that have worried so many of his publishing colleagues. His latest complaints about the tech platforms are simply a lagging indicator that he’s been pulled back to earth.
Photo by Nik Shuliahin on Unsplash