Buzzfeed is taking over HuffPost in one of the most significant online news moves of 2020. The deal represents a shift for Verizon Media, which formerly owned HuffPost. The sale also represents a shift for Verizon, which has emphasized digital media brands. Verizon has acquired several companies over the past decades, including AOL and Yahoo. AOL acquired HuffPost, then known as The Huffington Post, in 2015.
A Return Home for HuffPost
The BuzzFeed acquisition has a personal angle, which makes it different from other deals. Jonah Peretti, currently CEO of BuzzFeed, was one of the founders of The Huffington Post. Peretti left the Huffington Post in 2011 to focus on BuzzFeed.
BuzzFeed operates mainly through selling online advertising and relies on nearly $500 million of funding from investors. The company has 1,100 employees in more than ten offices around the world and is best known for its quizzes, lists, and videos. Also, BuzzFeed has developed other brands such as BuzzFeed News, which specializes in investigative reporting. Furthermore, the company's BuzzFeed Studios unit produces film, online video, and content for broadcast.
In terms of website traffic, BuzzFeed News had an estimated 108 million visitors in October 2020, according to Similar Web. Compared to BuzzFeed News, HuffPost's web traffic is significant but much smaller at 85.5 million monthly visitors. BuzzFeed's audience has strong coverage for the Millennial audience and reaches 70% of American Millennials each month. The Millennial generation, born between 1981 and 1996, started to outnumber Baby Boomers as the largest US generation in 2019.
The Wild Ride for Digital Advertising and Media in 2020
Digital media brands have had a bumpy year in 2020. Early in the year, many major brands such as Coca Cola pulled back on their advertising budget. Meanwhile, some brands like Chipotle moved their online advertising spending to newer platforms like TikTok.
Overall, digital advertising is projected to grow by 6% in 2020, according to the IAB 2020/21 COVID Impact on Advertising survey. However, that estimated growth is not evenly distributed. Paid search, an area where Google is the dominant player, is expected to grow by 26%. Also, social media advertising is expected to grow by 25%.
These trends suggest that Facebook and Google will continue to be significant players. In contrast, smaller websites such as BuzzFeed may struggle to grow effectively. In Q3 2020, Google earned $11 billion.
Survival Rather Than Growth
The HuffPost and Buzzfeed merger is different from other media deals. The two companies have had a challenging year due to the COVID-19 induced recession. Industry analysts consider the deal to be more about survival than growth in the short term.
From Billion-Dollar Valuation to Losses
Unlike other online media companies, BuzzFeed is taking a different approach to its employees; Their editorial team unionized in 2019. Nonetheless, the company has had to cut costs by $30 million in 2019 to break even. Early in 2020, BuzzFeed was expected to be profitable. That estimate changed rapidly as the year progressed. In early November, Peretti forecasted that keeping losses to less than $20 million would be more reasonable. The move represents a fall from the company’s recent history. In 2016, BuzzFeed was valued at $1.7 billion. Today, the company's valuation is likely a fraction of that high as growth slows.
Will BuzzFeed Ever Consider Subscriptions?
In the media business, advertising and subscriptions have long provided a significant portion of revenue. BuzzFeed News generates some subscription revenue. Subscribers who pay $100 for an annual membership gain access to exclusive content. However, BuzzFeed’s main focus appears to be on advertising.
New York Times Achieves Record Digital Subscription Revenue
Other media brands and platforms put a stronger emphasis on subscription revenue. In 2020, the New York Times achieved a significant milestone. For the first time in history, the Times is earning more digital revenue than it does from print subscribers. This milestone was a decade in the making — the media company started to charge for online content in 2011. However, print subscription revenue fell 3%. Even the New York Times is struggling despite a high-quality print and digital offering.
How Small Online Brands Are Earning Subscription Revenue
Aside from big media brands, smaller services are emerging to make it easy to earn subscription revenue. For example, Substack makes it easy for writers to create a paid newsletter. Sinocism, a paid newsletter specializing in Chinese news, charges $15/month or $168/year, with discounts offered to students.
Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.