Business Liquidity

Quick Thoughts On BuzzFeed, Platforms, And Power

Jonah Peretti, the CEO of BuzzFeed, believes there’s one way for publishers to gain leverage over Facebook and Google: partner with or acquire other digital media outlets.

It’s an idea that has potential. Google and Facebook operate some of the largest and most powerful platforms on the Internet, and that often means media companies have to play by their rules. But some of that power could be diminished if the publications joined hands. For instance, imagine a world where BuzzFeed, Vox, and Vice simultaneously refused to let their content be shared on Facebook. That could grant the publishers leverage over the social platform, a turnabout from their historically disadvantaged position.

However, as the NYT pointed out, “[a]ny deal would be difficult to pull off given the number of investors involved,” and “staff cuts would be inevitable.” A quick review of the investing groups behind digital media brands underscores the Times’s point.

For instance, Peretti cited Vice, Vox Media, Group Nine, and Refinery as “doing interesting work.” Including BuzzFeed, those digital media publishers have 51 total known investors. Collectively, those investors have put nearly $2.5 billion into those digital media startups, over half ($1.4 billion) of which has gone to Vice Media. That’s a lot of investors and money to keep happy.

Additionally, BuzzFeed isn’t known for acquiring other outlets. Out of the five known acquisitions the company has made, none of them appear to be for another news outlet. Instead, BuzzFeed has focused it acquisitions on products that helped bolster its social media initiatives.

And there are other problems Peretti would likely face in becoming the negotiating figurehead for digital media. His company has not raised the most capital. That distinction belongs to Vice Media. Meanwhile, Vox Media is already showing signs of becoming a digital media conglomerate. Nearly all of Vox’s acquisitions are content plays, and the company has demonstrated an ability to keep its umbrella of publishers distinct from each other. For example, Vox acquired Recode in 2015, and though it will be subsumed by Vox, its brand and voice will seemingly be retained.

Additionally, it’s not as if this strategy Peretti is floating hasn’t been thought of before. Oath, Verizon’s media arm, is likely the largest corporate attempt to gain a foothold over big tech. But despite owning some of the largest publications on the Internet, the division has struggled to compete against Google and Facebook in the advertising market. Other startups have also failed to make inroads. SAY Media, which acquired outlets like ReadWrite, struggled to turn a disjointed set of outlets into market leverage. SAY Media, which raised $81.3M, eventually sold its acquired publications to other companies. It then gave up on the idea of becoming a publisher platform completely.

That doesn’t mean that acquiring outlets is a bad idea, but there are signs that taking on Facebook and Google’s digital advertising dominance is not the right strategic move for publishers. Furthermore, there are signs that advertising revenue, while still important, could be waning in significance.

As publishers move away from pure advertising plays, including BuzzFeed, the importance of top-line traffic (pageviews) may diminish. Google and Facebook traffic could be converted into funnels for subscriptions. In this world, traffic is still important (you need new visitors to turn into paying customers), but it would make Google and Facebook more partners instead of dictators—a shift for all players in the industry.

However, at this time, digital media is still quite fragmented, and Google and Facebook are not. That’s an advantage for tech’s incumbents.

Moreover, it’s unlikely we’ll see BuzzFeed be the leader of whatever consolidation may happen in the space. It hasn’t demonstrated an ability to acquire outlets, nor does it have the capital to acquire its way to leverage, especially when you consider that VCs expect large returns on their investments.

And finally, some publishers wouldn’t benefit from a partnership or acquisition. Axios, for example, is VC-backed and doing just fine without outside help. How many other publishers are in a similar position is unclear, but it’s not hard to imagine Google and Facebook setting up their algorithms to favor publishers who aren’t part of a cartel of outlets making increased demands for revenue.