• by Sara Guaglione , December 13, 2017

To fight the duopoly of Google and Facebook gathering up the majority of digital ad dollars, BuzzFeed CEO Jonah Peretti says the media company has to reorganize its ad sales department, focus on its lifestyle and service-journalism brands and evolve them into multiple revenue stream opportunities.

“The media is in crisis,” Peretti wrote in a memo published last night, arguing that Google and Facebook “are taking the vast majority of ad revenue and paying content creators far too little for the value they deliver to users.”

He said this puts “high-quality creators at a financial disadvantage and favors publishers of cheap media,” which spread fake news and spam users with repetitive, click-bait content and pirated videos.

Last month, BuzzFeed said it was laying off about 100 employees in the U.S. and restructuring its advertising sales organization “amid a tough digital media market.” The Wall Street Journal reported the company will miss its revenue targets by 15% to 20% this year.

Peretti says in order to fix the fragmentation of the media ecosystem, BuzzFeed must fix the relationship between media and tech, evolve to a multi-revenue model and build a strong portfolio of brands.

Peretti argues that tech platforms should pay more for high-quality content. BuzzFeed will encourage this by focusing on “strong journalism; lifestyle brands with distinct, meaningful positions; new formats and more of the classic BuzzFeed articles, lists and quizzes that connect with our audience.”

At the end of the day, “the best media companies generate revenue from many sources, tapping a combination of advertising, subscriptions, studio development, brand licensing and merchandising,” he wrote. A diverse business model for BuzzFeed means focusing less on direct-sold ads.

By 2019, about half of BuzzFeed’s revenue will come from outside its direct sold advertising business, up from about 25% this year. 

"Once a strong proponent of native advertising over display ads, BuzzFeed made the decision to run banner ads on its homepage, story pages and mobile apps this fall, to further monetize its large audience."

Peretti used BuzzFeed’s Tasty brand as an example. The popular cooking vertical has a partnership with Walmart, cookbook deal with Penguin Random House, viral videos on Facebook, content series on YouTube and a cooking device.

“We are pursuing the Tasty model of success across our business, and will accelerate our work building strong digital brands that connect with people’s actual lives with the creation of BuzzFeed Media Brands,” Peretti wrote.

Notably, while Tasty was mentioned often in his memo, there was little talk of BuzzFeed News.

BuzzFeed will now organize its advertising business into nine “boxes”: BuzzFeed, BuzzFeed Media Brands, which includes Tasty and Nifty, and BuzzFeedNews. Each gets its own advertising, commerce and studio development arms.

“Today, brands need to be loyal to consumers,” Peretti wrote. “The world needs shareable content that exists outside of political discourse, that brings people together around common interests.”

BuzzFeed will expand the Tasty model to its other verticals, such as Nifty for home and Goodful for health and wellness, as well as launch others. Peretti teased that a new beauty and style brand is coming soon.

While this year’s efforts in growing BuzzFeed’s business “didn’t translate into as much revenue growth as we would’ve liked,” he said this is not “a sign of the digital media apocalypse. In truth it’s something a lot simpler (that doesn’t make for as good a headline): We’re growing up. We’ve outgrown the ability to build our business on essentially a single, very distinct revenue stream.”

Peretti’s new take on BuzzFeed’s business is particularly interesting; in many ways, the company owes its success to its distributed model. Cick-catching content attracted eyeballs from millions of Facebook shares from millennial readers.