Buzzfeed layoffs and what it means for Digital Media
- Buzzfeed to slash its workforce by 15% (around 200 employees).
- Huffpost cut 10% of its editorial staff (Verizon, its parent company to cut down 800 jobs).
- Vice Media to layoff 10% of its staff (about 250 people).
Is 2019 a bad year for digital news industry?
Digital news industry has been having a bad time for a few weeks now. Digital media stars Buzzfeed, Vice and Verizon, the parent company of Huffpost and Yahoo, all announced layoffs recently. With over 2100 jobs to be cut down and the announcements being less than a week apart, speculations are rising to figure out what this means.
Here’s what the companies have to say about it.
Buzzfeed that started in 2006 as an experimental project became the classic case study of content going viral, attracting steady and positive media attention and about half a billion dollars in venture money. Fast forward 2017, the company’s sales was $90 million short of its $350 million revenue goal (Source: The New York Times). In 2018, one hundred people were laid off, public offering considerations were shelved. 2019 didn’t start off any better for Buzzfeed as it announced cutting another 15% of its workforce (200 employees).
Vice Media is a digital media and broadcasting company primarily targeting youth and young adults with their online content. Headquartered in Brooklyn, New York, this Canadian company was valued at $5.7 billion in 2017 (Source: The Forbes). CEO Nancy Dubuc announced a reorganization that will cause a 10% staff reduction. In a memo sent to the staff, Dubuc said that “the focus shifts to executing our goals and hitting our marks” after the budget for 2019 was finalized.
The Verizon Group:
Verizon, formerly Oath, announced to cut 7% off its “Media Group” workforce on 23 January. The company owns digital platforms such as AOL, Yahoo, HuffPost, TechCrunch and many other content brands. After a month long internal review, CEO Guru Gowrappan told the staff in a memo that group would narrow it’s focus on mobile and video based products, stating emphasis on Yahoo branded entertainment and news platform. With over 14,000 employees globally (in 2017), this layoff is going to affect 800 jobs.
The potential why’s
With each company is facing different challenges and states different reasons, it might look like a series of unfortunate incidents, but looking at the masses losing their jobs in a few weeks, we can’t help but be concerned. While the exact issues are different, they are collectively pointing out to few worry-worthy problem clusters. If your business falls anywhere near those, you might want to brace up to weather some turbulence in near future.
Monopoly of ad space:
We cannot lay the entire blame on this one but the digital ad space is undeniably being monopolized by the tech giants Google and Facebook. The overdependence on these to distribute digital news content is crippling the companies in the long run.
The social media mammoth and the search engine titan were set to capture 57% of the advertising revenue in 2018 according to eMarketer forecasts. With Amazon joining the race, the bulk of the digital ad revenue is consumed leaving the other ad dependent companies with hardly any space to left to run their businesses profitably.
Dan Kennedy, a journalism professor at Northeastern University warns that “the free ad-based model on which a lot of digital media projects are built is in jeopardy.” Quite a few companies are trying to bypass this hurdle by moving to a different revenue model, but we cannot say that they are all successful.
Moving to a different revenue model:
The rise of the internet enabled a new kind of media to prosper even while upending traditional journalism. While it seemed like some digital outlets figured out how to build a thriving business in online publishing, between increasing challenges and decreasing profits, the longevity of profits is in question, if not the companies themselves.
The companies receive a percentage in the ad dollars that Facebook and Google give the publishers for being their supply. While the duo does not aim to cut off the small publishing platforms, it doesn’t look like they are working to change the situation and truth to be told, they have no incentive too either.
The digital media entities whose business model depends on digital ad revenue are trying to find new models as digital ad space is being monopolized. While plenty of people on the sidelines are advocating other revenue streams and content channels such as podcasts, newsletters, premium subscription content, specialized content, more companies are failing to seeing success than not. The nuclear option that still remains open is switching to the paywall system, an increasingly trending and seemingly necessary move in online news.
Amidst the declining revenues of most digital publishing platforms, The New York Times is doing surprisingly well turning heads. The 2018 Q4 earnings beat the expectations and the companies stock increased more than 12% even though the print ad revenues dropped by 6.5% (from 2017) and print subscriptions increased by only 3.4%. The digital metrics on the other hand were impressive, the digital subscription revenue increased by 17.7% and the digital subscribers increased by 27% (as compared to 2017). (Statistics source: CNBC)
This leads to analyzing what the Times is doing differently that seems to be obviously right. While the Times rode along with the advertising wave, reformatting the articles to make them more attractive, the headlines getting catchier and more risque, the company’s digital business model has always been straight forward: Publish content that people want to read, give them a taste of it for free and then ask them to pay for it.
This paywall system seems to be working well for it so far even when the rest of the industry has been preaching that content should be free to all. The truth is, in the words of Jeff Bezos, the CEO of Amazon, “readers are smarter than that”. Quality content is expensive to produce and people might be willing to pay for it if it is asked, but “trending content” that goes viral only does so because it is free. It looks like the future might hold some reevaluation of content.