Founder looks to merg­ers to re­store Buz­zfeed’s for­tunes

The Charlotte Observer (Sunday) - - Business - BY ED­MUND LEE New York Times

Buz­zFeed has long po­si­tioned it­self as the fu­ture of pub­lish­ing – it prac­tices the mysterious arts of dig­i­tal me­dia bet­ter than any­one. From the be­gin­ning, its abil­ity to know, be­fore any­one else, what sort of con­tent would go vi­ral de­liv­ered it a large au­di­ence and helped the com­pany at­tract half a bil­lion dol­lars in ven­ture money and a steady stream of mostly pos­i­tive me­dia at­ten­tion.

Then came 2017, when the com­pany fell far short of its rev­enue goal of $350 mil­lion. Sales in­stead came in flat at about $260 mil­lion, ac­cord­ing to three peo­ple with knowl­edge of the mat­ter who spoke on the con­di­tion of anonymity to dis­cuss the com­pany’s fi­nances.

One hun­dred peo­ple were laid off. Con­sid­er­a­tions for a pub­lic of­fer­ing in late 2018 were shelved.

But ef­forts to re-es­tab­lish its for­tunes have al­ready be­gun. The com­pany ex­pects to sur­pass $300 mil­lion in rev­enue this year, the three peo­ple said.

To get there, Buz­zFeed now sells cook­ware at Wal­mart and ac­cepts ban­ner ads on its web­pages. It runs a morn­ing show on Twit­ter, a weekly one on Face­book and an­other on Net­flix, all of which are paid for by the plat­forms. Its news­room and its en­ter­tain­ment stu­dio churn out thou­sands of videos and ar­ti­cles each week, to an au­di­ence of 690 mil­lion peo­ple ev­ery month. The com­pany also gets a com­mis­sion when a reader buys a prod­uct on Ama­zon or other com­merce sites af­ter click­ing through from one of Buz­zFeed’s rec­om­mended prod­uct links, known as af­fil­i­ate mar­ket­ing.

And on Mon­day, Buz­zFeed News an­nounced a mem­ber­ship model that pro­vides ex­clu­sive ac­cess to news­let­ters and be­hindthe-scenes con­tent for $5 a month. A $100 do­na­tion gets you a tote bag. (Buz­zFeed’s web­site will re­main free.)

Still, these are largely stop­gaps. The bet­ter so­lu­tion, ac­cord­ing to Jonah Peretti, a founder of the com­pany and its chief ex­ec­u­tive, would re­quire a much more au­da­cious ef­fort: a se­ries of merg­ers with five or six top in­ter­net pub­lish­ers.

“You have Vice and Vox Me­dia and Group Nine and Re­fin­ery,” Peretti said. “There’s tons of them that are do­ing in­ter­est­ing work.”

He ex­tolled the logic of com­bin­ing forces: A larger en­tity could lobby for a higher per­cent­age of the ad dol­lars Face­book and Google share with pub­lish­ers when­ever their con­tent, videos in par­tic­u­lar, run on the plat­forms. In turn, pub­lish­ers can sup­ply them with con­tent that is safe for users and friendlier for ad­ver­tis­ers.

He pointed to how Face­book, YouTube and Twit­ter have had to an­swer for the lat­est con­tent cri­sis plagu­ing so­cial me­dia. In ad­di­tion to Rus­sia’s mis­in­for­ma­tion cam­paign to try to sway the 2016 pres­i­den­tial elec­tion in the United States, hate speech and con­spir­acy the­o­ries reg­u­larly show up on their plat­forms.

“Hav­ing some big­ger com­pa­nies that ac­tu­ally care about the qual­ity of the con­tent feels like some­thing that’s very valu­able,” he said.

Though ini­tial dis­cus­sions in­volv­ing a few com­pa­nies have taken place, they were all very pre­lim­i­nary, ac­cord­ing to five peo­ple with knowl­edge of the mat­ter who spoke on the con­di­tion of anonymity to de­scribe pri­vate dis­cus­sions. Buz­zFeed has spo­ken to at least one other com­pany, while other pub­lish­ers have had sep­a­rate dis­cus­sions, these peo­ple said. Peretti de­clined to name which com­pa­nies he has talked to re­gard­ing any po­ten­tial merg­ers.

Any deal would be dif­fi­cult to pull off given the num­ber of in­vestors in­volved and the com­pound­ing losses that would re­sult from com­bin­ing sev­eral money-los­ing star­tups. Staff cuts would be in­evitable.

Still, pub­lish­ers have been get­ting squeezed by the tech plat­forms as on­line ad­ver­tis­ing rates con- tinue to level off.

“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,” he said.

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