BuzzFeed’s restructure puts focus on commerce & brand partnerships – but at what cost? – Econsultancy

The recent layoffs at BuzzFeed have prompted a great deal of discussion, speculation and alarmed commentary, particularly from those in the journalism industry, about whether one of the most well-known new media companies still has a future.

The widespread restructuring has seen a total of 15% of the company’s workforce laid off, with the impact particularly felt by BuzzFeed’s international offices. Two of the company’s most senior figures, Chief Content Officer Melinda Lee and Head of BuzzFeed Originals Summer Anne Burton, are among those departing, along with a number of other well-known staff members.

BuzzFeed’s downsizing seems to further confirm the precarious position of online publishers that rely on ad revenue – if further confirmation was needed – in the current Facebook-and-Google-dominated environment. But over the past few years, BuzzFeed has been experimenting with a number of additional revenue streams, including brand partnerships, ecommerce, audience insights, and product development, that it hopes will sustain the company into the future.

CEO Jonah Peretti’s memo to BuzzFeed employees about the restructuring, published in full by Digiday, gives some interesting insight into where and how BuzzFeed plans to focus its efforts in future. But it also raises many questions about how BuzzFeed intends to stand out in the new markets it is moving into without many of the people – and much of the content – that made it unique.

And even if it can, will the company’s reputation – and revenue – take a hit following the revelations that have emerged during the restructuring about the extent to which it leans on unpaid community members to create content?

There’s a lot to unpack, so let’s dive in.

Commerce, meet marketing

A good portion of Peretti’s memo about the restructuring is about consolidation. In particular, it describes how BuzzFeed will be merging its various content arms – including BuzzFeed Media Brands, which encompasses BuzzFeed’s spin-off brands like Tasty and Goodful; BuzzFeed Originals; and branded content (i.e. native advertising) – into one organisation “to build a stronger “BuzzFeed Network” supporting all our brands with content and distribution”, in Peretti’s words.

Under the new structure, content creators will have more freedom to distribute their content on whichever channel makes the most sense creatively, rather than being tied to one particular content arm. In other words, so that the talents of those content creators who are left at BuzzFeed can be spread as widely as possible across BuzzFeed’s various outlets.

BuzzFeed’s “growing commerce practice” is also being merged into its marketing department, with Chief Commerce Officer Ben Kaufman stepping into the “expanded” role of Chief Marketing Officer.

BuzzFeed Commerce is BuzzFeed’s experimental foray into the world of physical products, and its biggest diversification away from the world of online publishing and personality quizzes. It encompasses lines of cookware and homeware produced in collaboration with retailers like Walmart and Macy’s under its Tasty and Goodful brands, as well as BuzzFeed Product Lab, which designs and licenses “shareable” products like the “Fondoodler”, a “hot glue gun for cheese”.

Why brands can’t resist partnering with BuzzFeed Tasty on Facebook

BuzzFeed Commerce has also set up “experiential” retail outlets like Camp, a summer camp-themed store on New York’s Fifth Avenue, in a bid to explore the potential of brick-and-mortal retail. The concept and execution are reminiscent of “Hardware”, Google’s pop-up retail experience.

BuzzFeed Commerce maintains a link back to its online content, though, in the form of BuzzFeed Partner Innovations. Partner Innovations, the newest addition to the Commerce umbrella, is BuzzFeed’s consulting business: using the insights gleaned from its branded content and editorial, BuzzFeed partners with companies that want to reach the elusive Millennial audience and creates “viral” products for them to distribute.

For example, at the height of the fidget spinner craze of summer 2017, BuzzFeed worked with teen-oriented beauty brand Taste Beauty to create the Glamspin: a fidget spinner with a flavoured lip gloss in each of its lobes. The concept was conceived after BuzzFeed noticed that many of its readers who clicked on articles about fidget spinners also read articles about lip gloss. The product was a clear hit and became a best-seller upon its release.

Combining BuzzFeed’s wealth of insights into the tastes and habits of its mostly young audience with product innovation sounds like a smart move, as brands are increasingly desperate to find new ways of connecting with discerning young consumers. And bringing Commerce into the marketing department also makes a great deal of sense: research by Econsultancy has found that giving the marketing team ownership of customer data is a key trait of successful companies, and so it seems right to align the customer insight-powered Commerce arm with marketing.

However, the success of BuzzFeed Product Insights and similar ventures hinge on BuzzFeed continuing to be the go-to destination for young people looking for entertainment and fun quizzes, and BuzzFeed’s restructuring may have dealt a blow to that status on two fronts. One, the layoffs saw the loss of around 40% of the BuzzFeed Originals team, who are responsible for BuzzFeed’s quizzes along with comedy series like The Try Guys, as well as its Director of Quizzes and Games, Matthew Perpetua.

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And two, in the wake of the layoffs it has emerged exactly how much BuzzFeed relies on unpaid contributions from community members for its traffic and revenue – a reliance which it only plans to increase following the restructuring.

The problem of BuzzFeed Community

The name Rachel McMahon has become synonymous with BuzzFeed’s latest round of layoffs ever since the outgoing Director of Quizzes and Games at BuzzFeed wrote in a blog post that, “In the recent past, the second highest traffic driver worldwide has been a community user in Michigan who is a teenager in college who, for some reason, makes dozens of quizzes every week.”

Many of BuzzFeed’s quirky quizzes and online articles are actually written for free by members of the public through its in-built publishing platform, BuzzFeed Community. Anyone can publish Community content after signing up for a free account, and while the vast majority of Community contributors will never have a viral hit with the site, some are extremely good at what they do. BuzzFeed has cultivated these prolific contributors over the years, encouraging them to keep publishing content to the site.

It’s kinda amazing how much revenue-generating traffic the site gets from unpaid community volunteers,” Perpetua went on. “So, in a ruthless capitalist way, it makes sense for the company to pivot to having community users create almost all of the quizzes going forward. I understand math. I get it.”

The “teenager in college” referenced in Perpetua’s blog is 19-year-old Rachel McMahon, and since her identity was revealed, she has been at the centre of a storm of online indignation levied at the way that BuzzFeed profits off the work of these unpaid community contributors without revealing to them how much they are worth. Multiple headlines focused on the fact that McMahon was repaid for her efforts with “swag” (BuzzFeed occasionally sent her merchandise as a thank-you for being a prolific contributor) and a gift card. Dozens of people took to Twitter to assure McMahon that she shouldn’t have to work for free.

While McMahon initially expressed doubt about her ability to negotiate a salary from BuzzFeed with hundreds of other contributors willing to work for free, she stated that she would be taking a break from creating quizzes to re-evaluate her options – and has been inundated with job offers on Twitter (including one from Netflix. Yes, really).

The loss of one prolific contributor isn’t going to single-handedly kill off BuzzFeed’s quiz traffic, but the attention drawn to BuzzFeed’s practices may result in the company being pressured to pay more contributors – the opposite of what Peretti intends to do. In his memo, he wrote that, “We can build a profitable media businesses [sic] on top of Facebook and YouTube, but only when the content we make is high quality, with massive scale and relatively low production costs.”

It is this attitude of ‘massive scale at the lowest possible cost’ that led to the layoff of many of BuzzFeed’s quiz-producing staff, including Matthew Perpetua – and that Perpetua took aim at in his blog post. Sources in BuzzFeed told Digiday that BuzzFeed will also be expanding its Fellowships program for graduates “to make up for the loss in manpower”, hiring up to a dozen Fellows and extending the duration of Fellowships from three months to 12.

“Though it’s unlikely those fellows will be tasked with producing hard news, they will be expected to produce a lot of the personality-focused content that BuzzFeed has long been synonymous with,” writes Digiday’s Max Willens.

But up-and-coming young graduates may be less eager to work for BuzzFeed in the wake of widespread layoffs and negative press, while its unpaid community members may also start demanding compensation for their efforts – putting Peretti’s “massive scale” and “low production costs” in jeopardy. And BuzzFeed needs them if it is to maintain its traffic-driving body of entertainment content, quirky image, and the ‘Millennial insights’ that it is building its growing commerce business around.

Betting on long-form video

Thanks to Jonah Peretti’s focus on a multi-revenue model for BuzzFeed, the company has fingers in a lot of other revenue-generating pies. But some of these may be as precarious as its reliance on unpaid contributors.

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BuzzFeed is continuing to bet on long-form video, with Peretti writing in his memo that, “Long-form video with higher production costs can be a great business, but only when we partner with platforms and networks.” This is in spite of the fact that Facebook was revealed to have vastly inflated the metrics that led to the journalism industry’s infamous (and disastrous) “pivot to video”, and the tepid level of interest shown so far in Facebook Watch – where BuzzFeed has launched a slate of new original series – and Instagram’s IGTV.

BuzzFeed also partnered with Netflix to create Follow This, a docuseries giving a behind-the-scenes insight into BuzzFeed’s newsroom – which Netflix cancelled last month, five months and 20 episodes after its launch.

Ironically, this is one area into which BuzzFeed seems prepared to invest more funding – even though it might be better served spending that money on its signature quiz content instead.

Too much of a change – or not enough of one?

Following the departure of so many of BuzzFeed’s iconic members of staff – from Cates Holderness, the woman behind ‘The Dress’ and ‘Weird BuzzFeed’, to John Gara, who created the now-famous “hands in pans” genre of recipe videos that can be seen all over the internet (and especially on BuzzFeed’s own Tasty) – it seems as though a great deal of what made BuzzFeed a distinctive brand is changing. But in other ways, the company may not be changing enough.

As I’ve just explored, BuzzFeed is still committed to entering into ‘partnerships’ with major tech companies like Facebook and gearing its offering to consumers around their platforms. In his memo, Jonah Peretti declared that “We can build a profitable media business on top of Facebook and YouTube” – despite the fact that Facebook and YouTube’s parent company Google bear no small responsibility for the precarious position that companies like BuzzFeed find themselves in.

BuzzFeed has long depended on Facebook as a source of traffic and reach, with its funny articles and quick quizzes perfect material for sharing on social networks. In 2015, it was one of the earliest launch partners for Facebook Instant Articles, a fast, mobile-optimised reading experience that required publications to publish content within Facebook’s walled garden in exchange for the promise of additional ad revenue. Three years later, BuzzFeed itself reported that Instant Articles’ launch partners were abandoning the feature as it became a breeding ground for fake news.

BuzzFeed was also an early phenomenon on Facebook Live, scoring one of the platform’s biggest hits with its ‘exploding watermelon’ video. But although BuzzFeed’s success was held up as an example for brands to emulate, few were able to replicate it in the long term – including BuzzFeed itself. In May 2018, Digiday reported that BuzzFeed was turning to Twitch after seeing “significant decreases in Facebook Live video views on its News channel”.

Facebook’s changes to its News Feed algorithm in 2018 dealt BuzzFeed another blow, with a former employee telling Digiday that the changes had a “substantial impact on the reach of BuzzFeed’s content … That loss of distribution made covering many topics unsustainable, particularly in foreign markets.”

And yet BuzzFeed’s CEO is still determined that BuzzFeed can build a profitable business “on top of” Facebook and Google’s platforms – just so long as the scale is huge, and the costs are as low as humanly possible. Has Peretti not learned enough from the events that led BuzzFeed to cut 15% of its staff, including some extremely valuable employees? Or is he counting on BuzzFeed’s diversified revenue model, including lucrative native advertising and a burgeoning commerce business, to keep it competitive?

Ben Thompson of Stratechery wrote in a piece entitled ‘The BuzzFeed Lesson’ that while he didn’t believe Facebook and Google were at fault for the current state of online publishing (which he attributes to “infinite competition” and “uncompetitive advertising offerings” on the part of publishers), nevertheless:

“What is clear … is that the only way to build a thriving business in a space dominated by an Aggregator [Google or Facebook] is to go around them, not to work with them. In the case of publishers, that means subscriptions, or finding ways to monetize … beyond text.”

Jonah Peretti’s strategy, based on his memo, appears to be both: he wants to work with Google and Facebook, but also find other ways to monetise. Based on everything that we’ve covered here, we will have to wait and see how this approach plays out for BuzzFeed.

But after such widespread layoffs, the pressure is on for BuzzFeed to prove that the restructuring was worthwhile – and that it can still be an example of a profitable new media business in a publishing landscape that seems more uncertain than ever.

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