Buzzfeed went public yesterday, its stock debuting on Nasdaq under the ticker BZFD.
Not only did BuzzFeed’s stock, which trades under the ticker BZFD, close down 11 percent at $8.56 on its first day of trading after a brief early surge, the company also raised a lot less money than it had expected from the deal that put it on the stock market. [...] On Monday, champagne was passed around BuzzFeed’s office, which has sat largely empty for nearly two years because of the pandemic. Employees were shown a video that presented different parts of the company as ingredients for a cake. It was filmed in the style of BuzzFeed’s popular Tasty food videos, with Tasty represented by flour, BuzzFeed as the sugar, BuzzFeed News as eggs, HuffPost as butter and Complex as hot sauce.
It ended today down another 8 percent, to $7.85. So, it's not exactly a raging success story. But there are reasons to go public besides to raise money from the stock market. For one, early investors were anxious to finally cash out, which they could do yesterday. And, more importantly for the future of the company itself, a public listing makes it easier for Buzzfeed to merge with and acquire other digital publishers, as founder Jonah Peretti told the Financial Times. For a while now, Peretti has been telling anyone who will listen that the path to stability and sustainability for digital media runs through consolidation; as Bryne Hobart writes, a sluggish public offering is counterintuitively good for Buzzfeed, if only because it validates Peretti's claim about the necessity of banding together:
If BuzzFeed's public debut is disappointing, and other online media companies have trouble either raising more funding or going public, it would be an interesting vindication for Peretti's thesis: they really will need to consolidate or die, and BuzzFeed, as the one publicly traded stock as currency, could end up doing the consolidating. The paradox of the BuzzFeed offering is that the best thing for the company strategically is the worst for it tactically: disappointing growth, a low valuation, and the opportunity to be the buyer of last resort in an industry that—as BuzzFeed’s management correctly deduced—needs to consolidate to survive.
You’re reading the Tuesday edition of Read Max, a newsletter about the future. If you like this newsletter, please share it with your friends! I got off social media for brain reasons so I can’t spread the word except through local flyering. And if you don’t subscribe, please consider doing so.
Boy, what a decade it’s been! Ten years ago, when I still worked at Gawker, digital media was becoming a hot target for investments, and blogging began to seem less like a doomed and precarious and endeavor and more like a potentially stable if not wildly well-remunerated career. Facebook was sending hundreds of millions of visitors to our sites every year with no sign of letting up; the Times was sufficiently spooked by its new rivals' success to commission an infamous memo about its own digital strategy. Gawker was growing; Vice was handing out bags of cash at its Christmas parties; Buzzfeed was quite literally driving people insane. Venture capitalists and media executives would show up in New York every few months to start absurd new media ventures with big fat checks. (Not that most of us saw any of that money.) I don't mean to pull a Roy Batty here ("I watched C-beams glitter in the dark at a Vice holiday party. All those moments will be lost in time, like blog posts after a redesign."), just to communicate how wide open the future could seem at the time. The people who signed the checks took for granted that legacy media companies were done, that digital media companies would build the future, and no one knew precisely what it would look like. Maybe Buzzfeed would be the next Disney. Maybe Gawker would build its own Reddit (?) and employ me for decades to come.
LOL. The future no longer seems very open; in fact, its contours seem very, very clear. What had once been a rat's nest of 15 or 20 recognizable independent digital-media startups has been reduced, through purchases and mergers, to four consolidated brand portfolios that have any chance at medium-term survival: BuzzFeed-Huffpost-Complex, Vox-Verge-SB Nation-Eater-NYMag, Bustle-Mic-Gawker, and Vice-Refinery29. All of these rely for revenue on some mix of display advertising and sponcon, ecommerce and affiliate marketing, and direct payments in the form of subscriptions or membership. All of them have laid off workers. All of them are likely to go public (or try) within the next couple years, to cash out investors and to make consolidation easier. The most optimistic outcome for any one of these companies is that it leads the next round of mergers and acquisitions and emerges at the top of a larger portfolio of brands, giving it more leverage with advertisers and further diversifying its audience and revenue streams. The sector is now the province of private-equity vultures rather than venture-capital sharks. No one looks at digital media companies and sees unicorns anymore; they see stones that might have a little more blood in them.
What's changed? Not much about the fundamentals, really. The big difference between now and 2011 is that there's no longer the expectation (or recent experience) of "disruptive" upheaval in media infrastructure. Part of what made the digital media sector so attractive to venture capitalists in the early 2010s was how frequently and how quickly the landscape of media distribution was changing. Every few years a new growth opportunity would emerge — SEO! No, wait, social sharing! No, wait, dark social! No, wait, video! No, wait ecommerce! — offering potentially huge audiences or revenue figures. (But also necessitating debilitating shifts in editorial tone, resources, and strategies.) No one expects a new Facebook (or, for that matter, a new iPhone) to emerge anytime soon, transforming the whole sector; we've reached a point where we know what works and what needs to happen. It just turns out that “what works” and “what happens” doesn’t lead to one bazillion readers, or to advertisers paying lavish amounts of money. The lack of extreme volatility might make life a little clearer (if not necessarily easier) for the media workers who are employed by the remaining companies. But it also makes the whole field less attractive to venture capitalists.
I'd sort of hoped to make it through one week of newsletters without bringing up web3, but it does seem worth mentioning in this context. The promise of web3, to the VCs most excited about it, lies in its supposed potential to disrupt incumbents — which, these days, are Facebook and Google. If web3 can supplant these companies (the way they supplanted their various predecessors), then it reopens the range of future possibilities for any tech-adjacent business, which these days is basically all businesses, especially newsmedia. In a world where you don't actually know what the media business will look like in the next five years or so, absurd valuations might actually prove to be prescient. If you're a web3 believer, you think I'm crazy to say that there's no expectation of disruptive upheaval: the blockchain is coming, and it's going to transform old media forever!
I suppose Buzzfeed and the story of the last decade in digital media has been on my mind a lot as I read up on web3, especially as I see VCs like a16z’s Chris Dixon talk up web3 journalism and especially as they complain about establishment media.
I mean, I don't know that journalists really are particularly negative toward crypto or web3 — the pieces I read seem very generous. But if they are negative, you might note that journalists have a pretty intimate experience of how bullish VC bets actually pan out in the medium and long term. Of course, Dixon has that experience, too: he invested in Buzzfeed and served on its board. Sadly, this old post he wrote about it seems to have been deleted. If only it were on the blockchain!
Vice CEO Nancy Dubuc apparently is now saying that Vice’s future is as a third-party platform for creators. Hard to express how nostalgic that makes me — I remember when Vox, Buzzfeed, and Gawker were all saying the same thing!
This is a depressing assessment, but it doesn't need to be pessimistic, precisely: Buzzfeed isn't likely to become the new Disney, but it's also unlikely to pull a PolicyMic and disappear any time soon. The newsrooms in three of the four companies mentioned above are unionized, which will at least blunt the effects of further consolidation on journalists and other unionized media workers. It might be boring that all of the digital media companies are following the same path toward the future, but… there's a clear path. As Peretti told the FT: “Digital media was overhyped, and then under-appreciated, and now is in a place where it will be evaluated more like a business. Not ‘Is it hot or not?’, but what kind of growth and revenue and profit is it delivering? We made half a billion dollars in revenue this year.”
It’s telling that the most exciting development in digital media — certainly from the VC perspective — is old-fashioned newslettering.
One feeling I can’t shake is that Jonah Peretti would’ve been a perfect web3 guy — a relentlessly positive theory poptimist who loves new technology and isn’t at all opposed to making a buck. I don’t know if it means anything in particular that such an ideal web3 type, born 10 years early, is now the CEO of a publicly traded media conglomerate.
I get that Complex is the hot sauce, but why is there hot sauce on cake?