Why BuzzFeed never quite lived up to the hype

It wasn’t immune to the harsh economics of internet advertising that plagued most other media businesses.

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Why BuzzFeed never quite lived up to the hype

Back in 2015, Digiday interviewed Alexandra MacCallum, who at the time was The New York Times’s newly appointed head of audience development. Six months prior to the interview, the Times had put out its famed innovation report, and MacCallum headed up the team in charge of executing on the report’s recommendations.

Because many of those recommendations were based on strategies that were pioneered by BuzzFeed, MacCallum was naturally asked about whether the Times was competing with BuzzFeed. MacCallum was somewhat dismissive of the comparison:

“The whole mission of BuzzFeed is to get people to share,” she said. “That is not the mission of The New York Times. The mission of The New York Times is about the best journalism in the world and giving people accurate, timely information. I don’t think that BuzzFeed is competing in that space. I wouldn’t discount them as competition at all. But the Times should be there when people search for a big news event.”

That flippant response irked some people, including media columnist Mathew Ingram. In a Gigaom piece titled “News flash for the NYT: You and BuzzFeed aren’t that different,” Ingram pointed out that BuzzFeed employed over 1,000 people, including a serious journalism team headed by Ben Smith. His piece includes this extraordinary line: “Whether the Times likes it or not, it and BuzzFeed are in the same business, and at this point BuzzFeed is winning.”

With the benefit of hindsight, it’s easy to chuckle at such a sentence — especially when you consider The New York Times’s several-year run of monster growth — but it's hard to overstate how much BuzzFeed was hyped in the early 2010s as the media darling that had cracked the code for scaling and monetizing digital content.

This was an era when media executives would hang off every word of Jonah Peretti’s annual memos. In interviews, he and his staff confidently boasted that they didn’t consider major tech platforms like Facebook to be competitors and even claimed that they didn’t care whether BuzzFeed content was consumed on its own website. “[Unique visitors] as they are currently reported are decreasingly relevant to BuzzFeed,” wrote publisher Dao Nguyen in 2016. It was assumed that the company’s data analytics team had essentially solved internet virality, and its native advertising model was the envy of every media sales rep. As Brian Morrissey recently put it, “For a long time, BuzzFeed was seemingly the R&D lab of the industry. What BuzzFeed started, others followed." Because of that, VCs invested in BuzzFeed at valuations usually reserved for tech companies.

We all know what happened next. By the second half of the 2010s, most of that VC money had dried up, and it quickly became obvious that BuzzFeed was struggling to maintain its early growth. In 2017, it announced the first of multiple rounds of layoffs. Suddenly, Peretti wasn’t sounding so confident about his ability to fend off the tech platforms; that year he started complaining that they weren’t sharing enough in revenue.

Then there’s its recent SPAC IPO. Though the SPAC initially raised $250 million from investors, most of them pulled out prior to the IPO, leaving only $16 million. By the end of its first day of trading, its market cap had dropped to $1.13 billion, far below the $1.7 billion valuation bestowed by VCs just a few years before.

Don’t get me wrong; reaching a $1 billion valuation is an incredible achievement. But I think even Peretti himself would admit that the BuzzFeed of the early 2010s seemed destined for a much more explosive entry onto the public markets. So why didn’t it live up to the hype? A few reasons:

Native advertising proved hard to scale

While BuzzFeed was most well known to the public for its viral content — including its photo of a chimeric dress and its efforts to explode a watermelon — most industry watchers considered its native advertising operations to be its secret sauce. Legacy media outlets relied on the paltry returns of programmatic advertising, but BuzzFeed eschewed programmatic entirely and instead focused on creating sponsored content that was just as shareable as anything it published on the editorial side.

Native advertising seemed like a silver bullet, mostly because the tech platforms couldn’t produce it on their own. If a company wanted its video to go organically viral, then it needed to hand over creative control to BuzzFeed’s team of millennial meme makers.

But as it turned out, there was a reason the tech platforms didn’t operate their own branded content agencies: the model is extremely difficult to scale. Not only is it prohibitively expensive, but dealing with the bureaucracies of corporate marketing teams and Madison Avenue ad agencies is no picnic. I’ve worked on plenty of branded content projects, so I’ve witnessed firsthand as article drafts I’ve written were gummed up in the multi-layer approval process that bedevils any large company.

Eventually, BuzzFeed relented on its ban of programmatic advertising. Recently, it’s doubled down on a hybrid approach that combines native advertising with ecommerce, which helps with some of the scale problems, but The Information reported last month that even its ecommerce growth has slowed considerably.

Facebook shifted focus 

Facebook’s pivot away from news is well known. It used to love showering publishers with free traffic, but then in 2016 Mark Zuckerberg was accused of propping up an entire network of fake news outlets, and that made him decide to peace out. Facebook changed its Newsfeed algorithm, and publishers saw their referral traffic crater virtually overnight.

Prior to this shift, Peretti was touting Facebook as one of his company’s greatest partners. By 2017, he was giving interviews to The New York Times claiming that “the ultimate competition here is us against traditional TV and also protecting ourselves against the big platforms.” He’s since embarked on a string of acquisitions in the aim of having better negotiating leverage against Facebook and Google.

Hollywood is a hard nut to crack

People mock the industry’s “pivot to video,” but BuzzFeed’s video operations have always been impressive. Not only does it run several huge video channels under its own name, but its spinoff brand Tasty quickly became a video behemoth. Some of the biggest YouTubers today got their starts as BuzzFeed staffers.

But BuzzFeed wasn’t content with digital video; it had ambitions of breaking into Hollywood with a steady stream of feature films and prestige TV shows, so much so that it renamed its video arm BuzzFeed Motion Pictures.

And while the company has developed a few shows for a handful of streaming services, its output has been less than stellar. In 2019, Variety reported that it “has had few successes in the traditional film and TV development ecosystem,” and that it was revamping its strategy to focus more on digital projects.

As it turns out, TV and film businesses are even more difficult to scale than native advertising, at least without massive upfront investment. It’s common for new projects to get tied up in production hell for years, and even most TV shows that make it to air get cancelled within their first season.

***

I should probably end this piece on a positive note and acknowledge that I really do consider BuzzFeed to be a forward-thinking media company — perhaps the most successful among its cohort. Even with Facebook’s rollback, it has massive reach across just about every major platform. Its experiments in ecommerce are cutting edge. It also recently acquired Complex Media, which I’m on record as calling “one of the most innovative digital publishers.”

I just think it wasn’t immune to the harsh economics of internet advertising that plagued most other media businesses. The main reason for The New York Times’s success was that it made a huge bet on paid subscriptions at a time when hardly anybody else was making that bet. BuzzFeed went the opposite direction, and its growth stalled as a result.

And while its stock market debut hasn’t been a blockbuster success, it now has the runway it needs to keep experimenting. It succeeded in building a globally-recognized brand; now it just needs to evolve into a real business.

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