BuzzFeed CEO Jonah Peretti released his annual letter to shareholders on Monday afternoon, outlining his vision to transform the flagship publication into an AI-driven technology and media company.
“Pivot to AI” may be the new “pivot to video” from a few years ago (which, to be kind, was not a great strategy for most people). Peretti himself once touted the potential of his network of short videos and creators. But that strategy has not translated into strong business results, with 2023 sales excluding complexes down 26% to $253 million, Peretti wrote in a memo.
As we see declining referral traffic and other audience attention challenges, Peretti's solution is for BuzzFeed to focus on its own platform to drive traffic and use generative AI chatbots as a new content format. It's about pursuing. It remains to be seen whether this will lead to a sustainable business model for traditional digital publishers.
Here's what Peretti is telling investors and what he really means.
Reduced referral traffic
Peretti said: “BuzzFeed is a brand built on the rise of social media and Facebook, but we've gone through a period of intense adaptation over the past few years as audience behavior changes. BuzzFeed Referenced by Facebook in 2020 traffic to was 6 times higher than direct traffic to our site. Today, Facebook is no longer a significant source of referral traffic. From 2020 to 2023, Facebook traffic decreased by 74%. Over the same period. In , our direct traffic increased by 12%. The majority of our traffic referrals are now generated directly from our apps or internally through cross-promotion and recirculation.”
Translation: Facebook referral traffic has declined significantly over the past three years (ultimately leading to the demise of BuzzFeed News), with BuzzFeed becoming its own primary referral traffic engine. As a primarily advertising-supported business, this environment has contributed to BuzzFeed's business challenges over the years. His BuzzFeed isn't the only one feeling the impact of Facebook's move away from publishers, but it's unique in that this means BuzzFeed's biggest traffic referrer is now… itself.
chatbots are the future
Peretti said: “We are setting out to create an entirely new medium that is so responsive and dynamic that content and platforms feel like they are alive. Like social content, we see this medium as a way to build and strengthen communities of people through content and experiences based on social relationships and shared interests. Once upon a time, we were forced to share. How we can unleash new forms of storytelling and imagination, create conversational media, and endlessly remix and evolve the creative output of our teams and audiences. In the near future, we'll integrate this work into a reimagined BuzzFeed web and app experience as we continue to push the boundaries of what's possible with AI and move the industry forward. . We can't wait to show our viewers what we're building next.”
Translation: Generative AI chatbots are the future of digital media. There's nothing new in Peretti's enthusiasm and optimism for chatbots. He has been touting chatbots' ability to increase viewer engagement and time on site for over a year now. In this memo, Peretti denies that other publishers are using generative AI to create “static articles” (boring!) and instead uses quizzes, games, and custom content generators. , is promoting the use of technology to create more interactive formats, such as assistants (more fun!).
The platform still has all the power
Peretti said: “This is why I believe platforms are making a strategic mistake in not supporting media companies like ours. Creators are a source of cheap or free content for platforms, but media companies are a source of long-term oriented content. It provides much more than that, such as development infrastructure, and helps platforms break out of the “local maximum” that limits the development of content. their service. They are missing out on an opportunity to build a sustainable, positive, and socially beneficial media ecosystem. Collaborations with publishers and media companies will also create a competitive moat for the platform. Because it's hard to compete with a single organization that brings together the best of everything: premium content, creators, and personal updates. Despite my best efforts, the lure of commoditized content and zero- and low-cost creator labor is impossible for platforms to resist, creating a media ecosystem where quality publishers can thrive. I couldn't convince the platform to foster it. ”
Translation: Becoming a publisher is difficult. Publishers like BuzzFeed have little bargaining power to push technology companies to create environments that increase viewership and revenue. The platform still retains all its power.
Transforming into a technology company
Peretti says: “When we reoriented BuzzFeed's strategic direction earlier this year, we had a choice: We wanted to become more of a media company, a content company, or an agency that creates content for our clients. We chose to go in the opposite direction, to become more of a technology company. The reason for this was because of the “technology mindset,'' or the underlying tacit Because the way we think will ultimately define our common future. Companies grow and thrive by focusing on scalability, technological leverage, zero marginal cost, machine learning, and positive feedback loops. There's a reason TikTok beat Quibi. Or Netflix outperforming all major media companies. Even Disney, originally led by the engineers who invented the new medium, created the first full-length animated film with Snow White. Tech billionaires may say stupid things from time to time, but the core “idea” behind the tech industry, and the pursuit of scalability and leveraging technology, drives companies to grow, make a big impact, and And in our case it provides the best path to spreading the truth. , joy and creativity on the internet. ”
Translation: Again, being a publisher is really hard. As such, publishers cannot continue to be regular old media companies that produce content. Peretti says the solution is to become more like a technology company (developing AI is key). BuzzFeed is not the first media company to position itself this way, but such strategic shifts tend to be met with considerable skepticism from media industry insiders. While some may argue that focusing on developing new technologies like generative AI is not the same as succumbing to a wave of platform algorithm changes, it still helps publishers adapt to changing trends in content consumption. may remain vulnerable to Neil Vogel, his CEO at Dotdash Meredith, warned on his 2022 episode of the podcast “The Reboot.” He said, “Any publisher who says they're a technology company, run for the hills.”
Peretti said: “By reorienting our strategic direction and focusing on the sites and apps that we own and operate, we can directly benefit from the application of technology to our business, especially GenAI. BuzzFeed, Inc. is stronger and poised to leverage the emergence of GenAI to build the media company that will define the AI era.”
Translation: Peretti is bullish on BuzzFeed becoming more of a technology company than a media company, as he sees its future as a media company that differentiates itself from other media companies through the application of AI technology — or Are you an AI media company? Relying on technology? are they the same thing? It's a little difficult to understand. What is clear, however, is that the memo recognizes Peretti's business growth opportunities by creating more AI-powered content like chatbots and other personalized formats to increase time spent in the field. (BuzzFeed's first experiment with personalized, AI-powered content modules within its app resulted in a 24% increase in page views, he wrote).
Focus on programmatic and affiliate marketing due to poor performance
Peretti said: “This new direction allows us to focus on the high-margin, scalable, technology-enabled parts of our business, specifically programmatic advertising and affiliate commerce. Our advertising business generated approximately $90 million in revenue and returned year-over-year growth in our owned and operated properties in the second half of 2023 despite a challenging market. Similarly, our strong affiliate business generated more than $500 million in sales for our retail partners and approximately $50 million in revenue for the company in 2023. Both of these business areas are poised to benefit from Gen AI applications. It understands our content and creates new opportunities to automate contextual advertising and personalized shopping.”
Translation: BuzzFeed's business is struggling. But his two bright spots for BuzzFeed are programmatic and affiliate businesses, both of which also happen to be well-suited to generative AI technology, which could lead to further growth. But whether this is enough to get the company back on track remains to be seen.
