(Dow Jones) Facing a significant revenue shortfall this year, BuzzFeed is laying off about 100 employees and reorganising its advertising sales and business operations as it moves away from relying purely on native advertising.
BuzzFeed plans to reduce its US staff by 8%, with all the cuts coming from the business and sales side of the organization, the company said Wednesday. Some editorial staffers and business-side employees in the U.K. will also be let go. BuzzFeed employs about 1,700 people world-wide.
The job cuts and organizational changes are part of an effort to diversify the company’s sources of revenue, at a time when fierce competition for online advertising dollars is making it tough for digital media companies to maintain the significant growth rates expected by investors.
Jonah Peretti comments
“As our strategy evolves, we need to evolve our organization, too—particularly our business team, which was built to support direct-sold advertising but will need to bring in different, more diverse expertise,” Jonah Peretti, BuzzFeed’s co-founder and chief executive, said in a memo to staff.
As part of the restructuring, Greg Coleman, a high-profile ad-world veteran who has served as BuzzFeed’s president since 2014, will step aside, but remain an adviser to the company. The firm has begun a search for a chief operating officer and to fill a number of high-level business roles as it increases focus on e-commerce, programmatic ad sales and video licensing and development.
Earlier this month, The Wall Street Journal reported that BuzzFeed had put its plans for a 2018 initial public offering on hold and was on pace to miss its revenue target of about $350m this year by some 15% to 20%. The company said it still expected to show revenue growth for the year, up from $250m in 2016. Vice Media is also expected to fall short of its revenue target of $800m this year, the Journal reported.
Ad revenue growing
While spending on digital advertising is still growing, competition for those dollars is increasing. As the so-called duopoly of Facebook and Google are projected by eMarketer to command more than 63% of US digital-ad spending in 2017, digital-media companies are finding that things like creating custom content for brands that jumpstarted their businesses early on have become harder to scale.
In its early years, BuzzFeed found great success through its innovative use of “native” advertising—a high-cost, labor-intensive marketing format in which advertising is custom-made for brands to resemble editorial content.
That success attracted major investment, including $400m from Comcast Corp.’s NBCUniversal, whose latest infusion about a year ago valued the web business at about $1.7bn.
Additional revenue streams
But more recently, BuzzFeed has pursued additional revenue streams, branching into digital video licensing, television and film development, e-commerce and programmatic advertising.
Coleman’s departure signifies the changes in the prevailing online advertising landscape. A pioneer of the digital media world, Coleman helped drive sales at some of the earliest online success stories with stints at Yahoo, AOL, the Huffington Post and ad tech firm Criteo.
BuzzFeed’s chief revenue officer, Lee Brown, will become part of the company’s senior management team, reporting directly to Peretti.
“Our business is more diverse and balanced than it was a year ago and, very importantly, for the first time a quarter of our annual revenue will come from sources other than direct sold advertising,” Peretti said in the memo. “We’re going to continue to aggressively build out our advertising capabilities, but also accelerate this evolution in 2018.”
With that in mind, BuzzFeed is moving to create a number of new lifestyle verticals modeled after its food product, Tasty, which has found success with lower-cost and simpler-to-produce advertising models such as product placement and sponsored content.
Buzzfeed will also put increased resources into its e-commerce business and rebrand its Los Angeles-based film and television business, BuzzFeed Motion Pictures, as BuzzFeed Studio, which will focus more on outside development deals, like one it signed with the Oxygen network earlier this year for an investigative news series.