BuzzFeed CEO Jonah Peretti printed his annual letter to shareholders Monday afternoon, outlining his imaginative and prescient to show the flagship BuzzFeed publication into an AI-driven know-how and media firm.
The “pivot to AI” stands out as the new “pivot to video” of years’ previous (which wasn’t a great strategy for many, to place it kindly). Peretti himself as soon as touted the alternatives in short-form video and creator networks. However that technique hasn’t led to sturdy enterprise outcomes — its 2023 revenues, excluding Advanced, declined 26% to $253 million, Peretti wrote within the memo.
At a time of declining referral visitors and different viewers consideration challenges, Peretti’s answer is for BuzzFeed to focus by itself platforms to drive visitors and pursue generative AI chatbots as a brand new content material format. Whether or not this can result in a sustainable enterprise mannequin for a legacy digital writer stays to be seen.
Right here’s what Peretti is telling traders — and what he actually means:
Referral visitors declines
What Peretti mentioned: “BuzzFeed — a model that was constructed on the rise of social media and Fb — has undergone an intense interval of adaptation over the previous few years as viewers conduct has shifted. In 2020, Fb-referred visitors to BuzzFeed was six occasions greater than direct visitors to our website. As we speak, Fb is now not a cloth supply of referral visitors. From 2020 to 2023, Fb visitors has declined 74%. Over that very same interval, our direct visitors has grown by 12%. As we speak nearly all of visitors referrals are direct, from our app or internally generated by way of cross promotion and recirculation.”
Translation: Fb referral visitors has plummeted a lot previously three years (ultimately leading to the death of BuzzFeed News) that BuzzFeed has turn into its personal major referral visitors engine. As a primarily ad-supported enterprise, this surroundings is partially responsible for BuzzFeed’s business challenges over time. BuzzFeed isn’t alone in feeling the effects of Facebook’s move away from publishers, however it’s distinctive in that this now means its greatest visitors referrer is… itself.
Chatbots are the long run
What Peretti mentioned: “We’re firstly of making a completely new medium that’s so responsive and dynamic that our content material and platform will really feel virtually alive. And whereas hyper-personalized algorithms of the most important platforms may be isolating, we see this medium as a technique to construct and improve communities of individuals, by way of content material and experiences that construct on social relationships and shared pursuits, in a lot the identical means that social content material was as soon as made to share. We predict there are methods to unlock new types of storytelling and creativeness, create conversational media, and endlessly remix and evolve the artistic output of our groups and our viewers. Within the close to future, we are going to carry this work collectively right into a reimagined BuzzFeed internet and app expertise as we proceed to push the boundaries of what’s attainable with AI and drive the business ahead. I can’t wait to indicate our viewers what we’re constructing subsequent.”
Translation: Generative AI chatbots are the way forward for digital media. There’s nothing too new about Peretti’s enthusiasm and optimism round chatbots — he’s touted their capability to increase audience engagement and time spent on website for over a year now. On this memo, Peretti dismisses what different publishers are doing with generative AI to provide “static articles” (boring!), and as a substitute promotes the usage of the know-how to create extra interactive codecs like quizzes, video games, customized content material turbines and assistants (extra enjoyable!).
Platforms nonetheless have all the ability
What Peretti mentioned: “Because of this I’m satisfied the platforms are making a strategic mistake by not supporting media firms like ours. Creators are an inexpensive or free supply of content material for the platforms, however media firms carry a lot extra, together with a content material growth infrastructure that’s long-term oriented, and helps the platforms escape of the “native maximums” that restrict the event of their companies. They’re lacking out on the prospect to construct sustainable, optimistic and socially-beneficial media ecosystems. Collaborations with publishers and media firms would additionally create a aggressive moat for platforms, as a result of it’s laborious to compete with any single entity that aggregates the most effective of every part: premium content material, creators and private updates. Regardless of my greatest efforts, I haven’t been capable of persuade the platforms to domesticate a media ecosystem the place high quality publishers can thrive — when the attract of commoditized content material, and nil and low-cost creator labor is unattainable for platforms to withstand.”
Translation: Being a writer is tough. Publishers like BuzzFeed have little if any negotiating energy to push tech firms to construct an surroundings conducive to viewers and income progress. Platforms nonetheless maintain all of that energy.
Pivoting to turn into a tech firm
What Peretti mentioned: “We had a selection after we reset BuzzFeed’s strategic path earlier this 12 months. We may have turn into extra of a media firm, extra of a content material firm or extra of an company to make content material for purchasers. We selected to maneuver in the wrong way to turn into extra of a tech firm. The reason being as a result of the “tech mind-set” — the implicit concepts that underlie the business — are what’s going to find yourself defining our shared future. Firms develop and thrive once they prize scalability, technological leverage, zero marginal prices, machine studying and optimistic suggestions loops. There’s a motive TikTok beat Quibi. Or Netflix outcompeted all the massive media firms. Even Disney was initially led by a technologist who invented a brand new medium, creating the primary animated characteristic movie with Snow White. Tech billionaires could say dumb issues typically, however the core *concepts* behind the tech business, and the pursuit of scalability and technological leverage, present the most effective path to: develop an organization, have a huge impact and, in our case, unfold reality, pleasure, and creativity on the web.”
Translation: To reiterate, being a writer is de facto laborious. Due to that, publishers can’t simply stay regular-old media firms that produce content material. The answer, Peretti is saying, is to turn into extra like a tech firm (and the event of AI is vital to that). Whereas BuzzFeed isn’t the primary media firm to place themselves on this means, these technique shifts are inclined to obtain a good dose of skepticism from these within the media business. Whereas one may argue a deal with new know-how developments like generative AI will not be the identical as bending to the tides of platform algorithm modifications, it nonetheless may depart a writer weak to the altering developments of content material consumption. As Neil Vogel, CEO of Dotdash Meredith, warned in a 2022 episode of “The Rebooting” podcast: “Any writer that tells you they’re a tech firm, run for the hills.”
What Peretti mentioned: “Resetting our strategic path to deal with our owned and operated websites and apps permits us to straight profit from the applying of know-how to our enterprise, particularly GenAI…. BuzzFeed, Inc. is stronger and poised to capitalize on the emergence of GenAI to construct the defining media firm for the AI period.”
Translation: Peretti sees the way forward for BuzzFeed as a media firm set other than the remaining by its purposes of AI know-how, therefore his bullishness on shifting BuzzFeed to turn into extra of a tech firm than a media firm — or is it, an AI media firm counting on know-how? Are they the identical factor? It’s a bit unclear. However what is obvious is that this memo reiterates Peretti’s bullishness on the enterprise progress alternatives from producing extra AI-powered content material like chatbots and different personalised codecs to extend time spent onsite (BuzzFeed’s first experiment with a personalised, AI-powered content material module in its app boosted pageviews by 24%, he wrote).
Enterprise was unhealthy, so the main target is on programmatic and affiliate
What Peretti mentioned: “This new path additionally permits us to deal with the elements of our enterprise which might be excessive margin, scalable, and tech-enabled, particularly programmatic promoting and affiliate commerce. In 2023, our programmatic promoting enterprise introduced in roughly $90 million and returned to year-over-year progress on our owned and operated properties within the second half of 2023 regardless of a tricky market. Equally, our sturdy affiliate enterprise drove over $500 million in gross sales for our retail companions which generated roughly $50 million in income for us in 2023. Each these enterprise traces are poised to learn from the applying of Gen AI, which is now able to studying and understanding our content material, creating new alternatives for automating contextually aligned promoting and personalised procuring.”
Translation: BuzzFeed’s enterprise has struggled. However two vivid spots are BuzzFeed’s programmatic and affiliate companies, each of which simply so occur to be suited to generative AI know-how, which may additional their progress. Nevertheless, whether or not or not this shall be sufficient to get the corporate again on observe stays to be seen.
