BuzzFeed — an emblem of the new age of media — plans to lay off 15 percent of its employees, according to a memo sent to its staff Wednesday night, and similar media organizations are also undergoing major staff reductions. BuzzFeed currently employs 1,300 people and increased its revenue by 15 percent — to $300 million — last year. But BuzzFeed is still unprofitable.
Unfortunately, it’s little surprise that BuzzFeed had to take such measures to become profitable. People treat BuzzFeed as a free source of entertainment and to a lesser extent, news.
Consumers will go out of their way to avoid advertisements, especially with Google Chrome extensions that block popup and sidebar advertisements. And in a situation where there is no profitability, tensions rise, which pushes companies to cut staff.
BuzzFeed has had to take many corporatist measures, unlike a typical news/media organization, to calm impatient investors. For example, the company partnered with Walmart to launch the retailer’s household good brands inspired by BuzzFeed’s popular recipe app — Tasty.
Jonah Peretti, the CEO and founder of Buzzfeed, released 9 Boxes — a diverse revenue stream model to increase profit — in 2017.
Venture-backed startup companies like BuzzFeed often spend large sums of money to grow quickly. BuzzFeed’s venture funding has totaled almost $500 million, about 80 percent of which is from NBCUniversal.
The 9 Boxes model was released when BuzzFeed faced a significant financial obstacle after Facebook dramatically reduced the visibility of articles and videos from “professional publishers” in users’ news feed in 2016.
This change hurt online media content companies the hardest and pressured them to modify their business strategies to increase revenue streams. Bigger names such as Vox Media, Refinery29 and Group Nine, the publisher of popular sites such as The Dodo, felt the effects.
Vice Media has instituted a hiring freeze and plans to reduce its staff by up to 15 percent. Mic laid off its entire editorial staff. CNN Business reported that Verizon Media Group, which owns Yahoo, AOL and HuffPost, is planning to decrease its number of employees by 7 percent — roughly 800 staff members.
These companies face revenue issues because online advertisements generally bring in much less money compared to ads in print. Moreover, Facebook and Google have monopolistic power since they continue to absorb the majority of advertisement revenue.
Twitter does a better job at supporting journalism by sharing and promoting what journalists are doing. While it isn’t Facebook’s responsibility to support news organizations, it is in the site’s best interest to promote responsible journalism on a platform that has struggled with facilitating the spread of fake news.
In an interview with The New York Times, Peretti said BuzzFeed could merge with other similar online media companies in order to negotiate better terms with advertisement tech giants such as Facebook and Google, which earn billions of dollars annually from advertising revenue.
If BuzzFeed, Vox, Vice and a few other major organizations merged, they would gain more power like that of a monopoly to help combat Facebook and Google’s hold on the online advertisement world.
However, when news organizations combine, risk arises that the quality of content will deteriorate. The news company could be inclined to prioritize profits first and news second. Corporate leadership could pressure the content producers to publish articles geared to push an agenda rather than to inform the public.
Creating a parent organization through a merger would likely lead to even more layoffs. When there are monopolies, innovation can grind to a halt. A merger might discourage new media sites from forming that would provide valuable reporting. Yet the current business model for BuzzFeed and similar news organizations is unsustainable.
This is why online media companies, in addition to newspapers such as The New York Times and Washington Post that have a strong online presence, need to join together to negotiate better terms with the tech giants in control of online advertising.
This does not necessitate a single-parent organization, but rather, a cooperative that can act with joint power to combat the immense power Facebook and Google have.
