BuzzFeed co-founder and CEO Jonah Peretti is the kind of guy who never sees the cloud, only the silver lining, no matter how dark things get. Revenue last year came in between 15 and 20 percent below targets (Peretti won’t say exactly how much), and more than 100 people were laid off. Then Facebook announced a controversial shift in its News Feed algorithm this month, one the company says will de-emphasize news from mainstream publishers. This last item seemed to be a dagger pointed straight at BuzzFeed’s heart, since the company has built itself into a digital behemoth in large part by catering to Facebook’s standards with respect to content.
While he admits his digital-media empire has had a difficult few months, Peretti sticks to his optimism about BuzzFeed’s model and its identity as a social-first media organization in an interview with CJR. What follows is an edited transcript of our conversation.
What do you think of Facebook’s latest changes to the News Feed algorithm? Do you think they will benefit BuzzFeed or hurt it?
A lot of changes that Facebook has started making really play to our sweet spot, which is making social content that is about bringing people together. It’s hard to predict [what the effect will be], but overall it plays to the kind of content we tend to make. I think Facebook got too much into content that was just the kind of thing you could read on some random website, as opposed to something that really makes sense on Facebook. So to have more content that actually makes people happy or provides meaning in people’s lives or is about what they like to cook or what they do on the weekend, that’s very aligned with Facebook’s objectives.
You said in the past that BuzzFeed’s strategy was “fishing for eyeballs in other people’s streams,” an approach that seemed to be based primarily on Facebook. Has that changed?
I don’t think our strategy has changed so much as we’ve added to it. We started as a website, with native advertising as the main goal, and we were much more vertically integrated, so we made our own ad products and so on. Then we shifted to a model where we wanted to be distributed—to make content that could be consumed all across the web, including on our own site. Then we had a lot of success reaching a huge audience across these platforms, so the next evolution of that strategy is to say, okay, we should focus on using that reach to build all these strong brands like Tasty and Goodful and BuzzFeed News, and then generate revenue in multiple ways from those brands. A vertically integrated company often will have one source of revenue, but for a company that’s distributing across many different platforms it makes more sense to have multiple revenue sources, because maybe you make money one way with Snapchat, maybe a different way on YouTube, maybe a different way on Facebook.
Your end-of-the-year memo to staff seemed much more critical of Facebook than in the past. In the memo, you talked about how you think they need to pay media companies more for their content.
When it comes to monetizing video, I think YouTube is doing a pretty good job. In Facebook’s case, there has been a lot of thought that in the future they might do a better job [of paying creators], but right now they’re not doing a great job. There’s a certain length of time [publishers] can wait for that future to arrive, and I think [Facebook needs] to accelerate.… Instant Articles is fine, it’s meaningful for us, but it’s still not a good enough product to support news, it’s still not paying enough to fund journalism. My main criticism of Facebook is it has done lot of experiments, but it’s making gobs and gobs of money on News Feed, and its partners are providing a large chunk of that content, but that’s the one place where it’s not sharing revenue.
There’s a certain length of time [publishers] can wait for that future to arrive.
What do you think about Facebook’s plan to rank news sources based on trust? Do you think it will work?
If you were Facebook, and you wanted to design a trust ranking, you would want to have a pretty light touch. It doesn’t want to have some major news source like Fox News or The Washington Post or The New York Times be hurt by the algorithm just because lots of people distrust it. Facebook is going to have to deal with the partisan issue and adjust for that. … The real issue isn’t how high HuffPost or Talking Points Memo should rank, the real issue is hundreds and hundreds of super sensationalistic news sources that no one’s ever heard of; they need to design a trust ranking that hurts those kinds of publications.
Other than benefiting media companies who need more revenue, what would paying media companies do for Facebook?
If I were running Facebook, I’d want to be able to influence the News Feed not just through traffic but also through money. If you want to get rid of fake news or sensationalistic content or whatever it is, the best way to influence the content that’s there and shape it in a positive way would be to say I am going to reward content with traffic—which it already does—but I’m also going to reward it with revenue. Those two things together would allow for an economic model that would give it some control over the News Feed, but without that it’s very hard for [Facebook] to control what’s in it. You can’t control random people who post things, and you don’t have much control over news companies if you’re not paying them anything. The reason cable operators paid for content was they wanted media companies to invest in better content so more people would sign up for cable.
There were a number of reports that BuzzFeed missed its revenue targets for 2017 by as much as 20 percent. Is that true? And were the layoffs primarily an attempt to cut costs?
We had another year of growth in 2017, but we’re always trying to grow more and faster. I would say we had a good year but not a great year. What we saw was that growth was faster than expected in some areas, so what we did at the end of year was we restructured to focus on the areas where we were seeing lot of growth, like show development, commerce, programmatic, turnkey ad products, and so on. The UK was a bit of a different situation, it was a tough business climate, and we invested more than we should have earlier than we should have.
What were some of the things that didn’t work well in 2017?
Some of the products that were really big for us in 2016 didn’t grow the way we had hoped: some of the higher touch, labor-intensive creative work. The really strategic stuff where we partner with a brand and help them solve business problems [is still working but] these were things that were more akin to a 30-second commercial. It’s pretty labor intensive and it’s less differentiated and it’s less social. There was demand from the market but it wasn’t an area where we felt we had enough of a competitive advantage, and it was something that was really underperforming relative to other products we had.
So the market was asking for something maybe it shouldn’t have been asking for, and we sometimes obliged more than we should have. In some ways I think we’re seeing social companies like BuzzFeed and Facebook kind of going back to their roots: With this recent change, Facebook is saying we want actual social content, not the kind of content you’d see on YouTube or TV. And what BuzzFeed has found is similar.
You made a fairly big change in August 2017 by deciding to use programmatic and display ads on BuzzFeed, something that you have historically been pretty negative about. Why the reversal?
We figured that there are also ways we can generate additional revenue from all the content we’re creating that don’t take a lot of extra effort, like licensing our products or running programmatic across all the great content we’re creating. We were very careful as we tested programmatic, we took a small proportion of our audience and showed it to them, and we saw zero impact on engagement. So what I realized was that some of my thinking [about how bad it was] was out of date. One way of looking at it is we were already doing programmatic, just not on our own site—so we looked at how much revenue we were generating from YouTube and Snapchat and Instant Articles and thought, whoa, this is meaningful, why are we not doing this on our own site?
After the revenue miss, some analysts said the plans for an IPO were off. Have you given up on that idea or is it still a possibility?
An IPO is one option among many. Our focus has always been to just build a good company for the long term and then you’ll have a lot of options.
Correction: Due to a misunderstanding, an earlier version of this interview implied that BuzzFeed’s practice of working strategically with brands wasn’t performing well.