Buz­zFeed plans lay­offs as it aims to turn profit

The Tribune (SLO) - - News - BY ED­MUND LEE

Buz­zFeed, of­ten hailed as the fu­ture of pub­lish­ing and a lead­ing pro­ducer of dig­i­tal con­tent, plans to lay off 15 per­cent of its work­force, or about 200 em­ploy­ees, ac­cord­ing to a memo sent to the staff Wed­nes­day night.

The com­pany’s man­age­ment team, led by the chief ex­ec­u­tive Jonah Peretti, has been work­ing on the staff cuts over the past few months, two peo­ple with knowl­edge of the plans said. They asked not to be named be­cause they were not au­tho­rized to speak on the mat­ter. The cuts will af­fect the in­ter­na­tional and web con­tent de­part­ments, in­clud­ing the news divi­sion, led by Ben Smith.

Peretti sent a note to em­ploy­ees at 6:30 p.m. East­ern time with the sub­ject line “Dif­fi­cult Changes.”

“Hello Buz­zFeed­ers,” he wrote. “I’m writ­ing with sad news: we are do­ing lay­offs at Buz­zFeed next week. We will be mak­ing a 15% over­all re­duc­tion in head­count across the com­pany. I’m send­ing this tonight be­cause I wanted you to hear it from me di­rectly in­stead of from the press.”

The move is meant to trim costs and main­tain growth as the com­pany aims to hit prof­itabil­ity this year. Buz­zFeed, which em­ploys over 1,300 peo­ple, gen­er­ated more than $300 mil­lion in rev­enue in 2018. That was a jump of bet­ter than 15 per­cent from the pre­vi­ous year, but the com­pany still loses money.

Buz­zFeed de­clined to com­ment.

Known for its mas­tery of the vi­ral arts, the site re­lies on an army of ed­i­tors, pro­duc­ers and jour­nal­ists to pro­duce thou­sands of pieces of con­tent each week, as var­ied as cook­ing videos and break­ing news re­ports.

Buz­zFeed News came un­der scru­tiny in re­cent days af­ter pub­lish­ing an ar­ti­cle re­port­ing that Pres­i­dent Don­ald Trump had in­structed his for­mer lawyer, Michael Co­hen, to lie in his tes­ti­mony to Congress. In a rare pub­lic state­ment, the spe­cial coun­sel’s of­fice de­nied the re­port. Smith has said he stands by the ar­ti­cle.

Pub­lish­ers across the web have suf­fered as shift­ing reader habits and whim­si­cal-seem­ing al­go­rithm ad­just­ments at Face­book have cut into rev­enue. Vice Me­dia re­duced staff last year in a bid to reach prof­its, and Mic, a site aimed at younger readers, cut the ma­jor­ity of its staff be­fore be­ing sold off in a fire sale to a com­peti­tor.

Ad­ver­tis­ers gen­er­ally pay less to reach on­line readers than print devo­tees, but in­vestors were bank­ing on the idea that on­line ad rates would sig­nif­i­cantly rise and dig­i­tal pub­lish­ers would dom­i­nate. That hasn’t hap­pened as Face­book and Google con­tinue to siphon the ma­jor­ity of ad dol­lars.

Buz­zFeed’s board re­cently agreed that the com­pany needs to start turn­ing prof­its, the peo­ple said. The site has lost money for most of the years it has been in op­er­a­tion, not un­usual for a startup. Ven­ture-backed com­pa­nies like Buz­zFeed of­ten spend big at first in a bid to ex­pand. But as the com­pany closes in on a decade in busi­ness, in­vestors want to start see­ing prof­its.

In his note, Peretti said “The re­struc­tur­ing we are un­der­tak­ing will re­duce our costs and im­prove our op­er­at­ing model so we can thrive and con­trol our own des­tiny, with­out ever need­ing to raise fund­ing again. Th­ese changes will al­low us to be the clear win­ner in the mar­ket as the eco­nom­ics of dig­i­tal me­dia con­tinue to im­prove.”

Buz­zFeed has raised nearly $500 mil­lion in ven­ture fund­ing, with $400 mil­lion com­ing from NBCUniver­sal.

Peretti, a grad­u­ate of the MIT Me­dia Lab and a founder of Huf­fPost, be­gan Buz­zFeed in 2006 as an ex­per­i­ment and turned it into a gen­uine busi­ness by 2011. He amassed a large fol­low­ing by hit­ting on a for­mula that took ad­van­tage of the new pub­lish­ing plat­forms on Face­book, YouTube and Twit­ter. Buz­zFeed’s monthly read­er­ship is noth­ing to LOL at: 690 mil­lion, a fig­ure that has made it the envy among dig­i­tal pub­lish­ers.

That still may not be enough. Buz­zFeed took a hit when Face­book in­tro­duced a sweep­ing change in 2016 that sig­nif­i­cantly re­duced the vis­i­bil­ity of ar­ti­cles and videos from pro­fes­sional pub­lish­ers in its News Feed, its main artery of con­tent.

In a Novem­ber in­ter­view with The New York Times, Peretti prof­fered an au­da­cious so­lu­tion: a se­ries of merg­ers with five or six top in­ter­net pub­lish­ers, in­clud­ing Vice, Vox Me­dia, Group Nine and Re­fin­ery.

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