BuzzFeed CEO Jonah Peretti published his annual letter to shareholders Monday afternoon, outlining his vision to turn the flagship BuzzFeed publication into an AI-driven technology and media company.
The “pivot to AI” may be the new “pivot to video” of years’ past (which wasn’t a great strategy for most, to put it kindly). Peretti himself once touted the opportunities in short-form video and creator networks. But that strategy hasn’t led to strong business outcomes — its 2023 revenues, excluding Complex, declined 26% to $253 million, Peretti wrote in the memo.
At a time of declining referral traffic and other audience attention challenges, Peretti’s solution is for BuzzFeed to focus on its own platforms to drive traffic and pursue generative AI chatbots as a new content format. Whether this will lead to a sustainable business model for a legacy digital publisher remains to be seen.
Here’s what Peretti is telling investors — and what he really means:
Referral traffic declines
What Peretti said: “BuzzFeed — a brand that was built on the rise of social media and Facebook — has undergone an intense period of adaptation over the past few years as audience behavior has shifted. In 2020, Facebook-referred traffic to BuzzFeed was six times higher than direct traffic to our site. Today, Facebook is no longer a material source of referral traffic. From 2020 to 2023, Facebook traffic has declined 74%. Over that same period, our direct traffic has grown by 12%. Today the majority of traffic referrals are direct, from our app or internally generated through cross promotion and recirculation.”
Translation: Facebook referral traffic has plummeted so much in the past three years (ultimately leading to the death of BuzzFeed News) that BuzzFeed has become its own primary referral traffic engine. As a primarily ad-supported business, this environment is in part to blame for BuzzFeed’s business challenges over the years. BuzzFeed isn’t alone in feeling the effects of Facebook’s move away from publishers, but it is unique in that this now means its best traffic referrer is… itself.
Chatbots are the future
What Peretti said: “We are at the start of creating an entirely new medium that is so responsive and dynamic that our content and platform will feel almost alive. And while hyper-personalized algorithms of the major platforms can be isolating, we see this medium as a way to build and enhance communities of people, through content and experiences that build on social relationships and shared interests, in much the same way that social content was once made to share. We think there are ways to unlock new forms of storytelling and imagination, create conversational media, and endlessly remix and evolve the creative output of our teams and our audience. In the near future, we will bring this work together into a reimagined BuzzFeed web and app experience as we continue to push the boundaries of what is possible with AI and drive the industry forward. I can’t wait to show our audience what we are building next.”
Translation: Generative AI chatbots are the future of digital media. There’s nothing too new about Peretti’s enthusiasm and optimism around chatbots — he’s touted their ability to increase audience engagement and time spent on site for over a year now. In this memo, Peretti dismisses what other publishers are doing with generative AI to produce “static articles” (boring!), and instead promotes the use of the technology to create more interactive formats like quizzes, games, custom content generators and assistants (more fun!).
Platforms still have all the power
What Peretti said: “This is why I’m convinced the platforms are making a strategic mistake by not supporting media companies like ours. Creators are a cheap or free source of content for the platforms, but media companies bring so much more, including a content development infrastructure that is long-term oriented, and helps the platforms break out of the “local maximums” that limit the development of their services. They’re missing out on the chance to build sustainable, positive and socially-beneficial media ecosystems. Collaborations with publishers and media companies would also create a competitive moat for platforms, because it’s hard to compete with any single entity that aggregates the best of everything: premium content, creators and personal updates. Despite my best efforts, I haven’t been able to convince the platforms to cultivate a media ecosystem where quality publishers can thrive — when the allure of commoditized content, and zero and low-cost creator labor is impossible for platforms to resist.”
Translation: Being a publisher is difficult. Publishers like BuzzFeed have little if any negotiating strength to push tech companies to build an environment conducive to audience and revenue growth. Platforms still hold all of that power.
Pivoting to become a tech company
What Peretti said: “We had a choice when we reset BuzzFeed’s strategic direction earlier this year. We could have become more of a media company, more of a content company or more of an agency to make content for clients. We chose to move in the opposite direction to become more of a tech company. The reason is because the “tech way of thinking” — the implicit ideas that underlie the industry — are what will end up defining our shared future. Companies grow and thrive when they prize scalability, technological leverage, zero marginal costs, machine learning and positive feedback loops. There is a reason TikTok beat Quibi. Or Netflix outcompeted all the big media companies. Even Disney was originally led by a technologist who invented a new medium, creating the first animated feature film with Snow White. Tech billionaires may say dumb things sometimes, but the core *ideas* behind the tech industry, and the pursuit of scalability and technological leverage, provide the best path to: grow a company, have a big impact and, in our case, spread truth, joy, and creativity on the internet.”
Translation: To reiterate, being a publisher is really hard. Because of that, publishers can’t just remain regular-old media companies that produce content. The solution, Peretti is saying, is to become more like a tech company (and the development of AI is key to that). While BuzzFeed isn’t the first media company to position themselves in this way, these strategy shifts tend to receive a fair dose of skepticism from those in the media industry. While one could argue a focus on new technology developments like generative AI is not the same as bending to the tides of platform algorithm changes, it still could leave a publisher vulnerable to the changing trends of content consumption. As Neil Vogel, CEO of Dotdash Meredith, warned in a 2022 episode of “The Rebooting” podcast: “Any publisher that tells you they’re a tech company, run for the hills.”
What Peretti said: “Resetting our strategic direction to focus on our owned and operated sites and apps allows us to directly benefit from the application of technology to our business, especially GenAI…. BuzzFeed, Inc. is stronger and poised to capitalize on the emergence of GenAI to build the defining media company for the AI era.”
Translation: Peretti sees the future of BuzzFeed as a media company set apart from the rest by its applications of AI technology, hence his bullishness on shifting BuzzFeed to become more of a tech company than a media company — or is it, an AI media company relying on technology? Are they the same thing? It’s a bit unclear. But what is clear is this memo reiterates Peretti’s bullishness on the business growth opportunities from producing more AI-powered content like chatbots and other personalized formats to increase time spent onsite (BuzzFeed’s first experiment with a personalized, AI-powered content module in its app boosted pageviews by 24%, he wrote).
Business was bad, so the focus is on programmatic and affiliate
What Peretti said: “This new direction also allows us to focus on the parts of our business that are high margin, scalable, and tech-enabled, specifically programmatic advertising and affiliate commerce. In 2023, our programmatic advertising business brought in approximately $90 million and returned to year-over-year growth on our owned and operated properties in the second half of 2023 despite a tough market. Similarly, our strong affiliate business drove over $500 million in sales for our retail partners which generated approximately $50 million in revenue for us in 2023. Both these business lines are poised to benefit from the application of Gen AI, which is now capable of reading and understanding our content, creating new opportunities for automating contextually aligned advertising and personalized shopping.”
Translation: BuzzFeed’s business has struggled. But two bright spots are BuzzFeed’s programmatic and affiliate businesses, both of which just so happen to be suited to generative AI technology, which could further their growth. However, whether or not this will be enough to get the company back on track remains to be seen.
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