BuzzFeed seems almost resigned to digital media’s downward spiral.
Its ad revenue has been plummeting since going public at the end of 2021. And the outlook hasn’t gotten much better as stiffer competition between major social media companies shuts out digital publishers that depend on social traffic, alongside increased competition around short-form video content.
“Traffic referrals from the major platforms has diminished as they continue to prioritize their own vertical video formats amid intense competition for audience share,” BuzzFeed CEO Jonah Peretti told investors during the company’s Q3 earnings call on Thursday. “This has a direct impact on our ability to monetize.”
That “direct impact” came in the form of a 35% YOY decline in Q3 ad revenue, which dropped from $50 million last year to $33 million this year.
However, Peretti said organizational restructuring and layoffs this year contributed to a small Q3 profit, leading to a positive $3 million in adjusted EBITDA.
Spending trends down
Despite the modest profit, BuzzFeed’s ad revenue situation is grim.
Spending by CPG, entertainment, financial services and tech advertisers continued to be soft this quarter, while retail spend “grew modestly,” said BuzzFeed President Marcela Martin.
The dip in ad revenue requires BuzzFeed to “adjust to the new realities of an altered digital media landscape,” Peretti said. It plans to do so by reprioritizing content that keeps users engaged on BuzzFeed’s owned and operated sites and apps.
What does that look like in practice? Doubling down on generative AI games, building out a creator network and prioritizing news content for HuffPost, Peretti said.
Leaning into news may seem like an odd strategy, considering BuzzFeed shut down its Pulitzer Prize-winning BuzzFeed News brand in April. But Q3 was HuffPost’s best quarter in terms of homepage traffic since BuzzFeed acquired it in February 2021, according to the earnings release.
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Generative AI games – like Nepogotchi, in which players raise their own “nepo baby” – have proven to be a winner for BuzzFeed. Gen AI content is driving 60% more traffic to BuzzFeed’s sites compared to non-AI content, and engagement with gen AI content grew by double-digit percentages compared to Q2, Peretti said.
Yet gen AI doesn’t seem to be bringing in enough sponsored content opportunities. Content revenue was down 32% YOY, from $38 million in Q3 2022 to $26 million this year, thanks to a decrease in demand for sponsored content, Martin said.
One factor behind the decreased demand was the WGA and SAG-AFTRA strikes, since dollars from movie and TV tie-ins have been harder to come by this year, Peretti said. That means less sponsored content like the “How Would You Die on ‘Game of Thrones’?” quiz.
However, Peretti is bullish on the First We Feast brand’s ability to bring in sponsorships – particularly its hit show “Hot Ones,” where celebrities are interviewed as they eat progressively spicier chicken wings.
BuzzFeed acquired First We Feast when it purchased Complex Media in 2021. Though BuzzFeed is reportedly in talks to sell Complex, it plans to keep First We Feast as a tentpole in its long-form video portfolio.
Commerce revenue dropped 3% YOY to $14 million, making it BuzzFeed’s smallest yet most resilient revenue stream. That’s thanks largely to the publisher’s long-term partnership with Amazon.
To capitalize, BuzzFeed is looking for more ecommerce opportunities, including more CPG products like the recently released “Hot Ones” Hot Pockets.
Short-form video woes
The proliferation of short-form video and fierce competition among social media platforms as they compete with TikTok for audience attention share has been the largest factor contributing to BuzzFeed’s monetization meltdown, according to Peretti.
Efforts by social media companies to keep users engaged on their own platforms instead of linking them to outside publishers contributed to time spent on BuzzFeed’s properties dropping by 19% YOY, Peretti said.
BuzzFeed has tried to follow the trend by expanding its own short-form video offerings. But “shorter videos are harder to monetize than the longer-form content that was traditionally popular on YouTube,” Peretti said in response to an investor question.
Plus, increased competition among platforms means they’re less willing to share short-form video revenue with publishers, he added. In response, BuzzFeed is working on selling more short-form video directly to advertisers.
But Peretti seemed to have soured on short-form video, claiming users are getting tired of “the ADHD sort of scrolling behavior” and are seeking deeper engagement with long-form media. That might sound like copium, but Peretti is serious about boosting time spent on BuzzFeed’s sites, and he suggested gen AI games and longer-form video content are better strategies to achieve that than short-term video.
However, he said, “it will take time for these new initiatives to ramp up and scale and offset the traffic and monetization challenges reflected in our financial performance.”
