As HuffPost and BuzzFeed separate from the staff, has the digital content bubble exploded? | Media



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IIn 2005, Jonah Peretti, a 29-year-old media studies graduate, helped create a news and commentary website called Huffington Post. A year later, he launched an experimental parallel project called BuzzFeed.

Both sites would help create an online media boom, as investors eager to buy equity stakes in the belief that these opportunities were more agile and more in tune with the desires of readers who grew up on the Internet rather than with traditional newspapers and broadcasters.

On Wednesday, HuffPost's parent company, Verizon Media Group, and BuzzFeed announced plans to lay off hundreds of people. The news revealed a collision between the dream of an online media boom and the harder reality of accountants: questions about the long-term profitability of digital media companies and, as a result, concerns about the future of digital media. online journalism.

"And there was literally no profitable model for digital news? Or none of those that evolve and last without, say, the established reader base and the New York Times brand? Asked MSNBC presenter, Chris Hayes, summing up the growing fear of media executives that broken.

The same press officials accept the fact that in the modern world of mobile consumption, most sites are just another form of distraction. Their competitors are not just competitors: they are a vast online ecosystem of entertaining, shareable and social content.





BuzzFeed.



BuzzFeed announced plans to lay off 200 people.

"It's clear that we have a digital content bubble," said Rasmus Kleis Nielsen, director of the Reuters Institute for the Study of Journalism at Oxford University. "There is no doubt that we will see more cuts, both in traditional media and in digital media."

He explained that part of the problem was that investors who supported new online media companies were thinking of investing in fast-growing technology companies, rather than in traditional news organizations.

"In some ways, for journalism to succeed, it needs patient investors who are content with additional growth and a modest return on investment."

This attitude fueled the financial culture of companies, which often hired staff at breakneck speed. The online Mic site rented glitzy offices at the World Trade Center in New York shortly before the collapse of the company after the changes made to Facebook's algorithm last year, which heavily affected the traffic of many publishers in New York. line.

BuzzFeed has focused on retaining employees by offering generous working conditions such as free lunches including sushi and rock oysters. Vice was famous for the decadence of his parties under former executive director Shane Smith, who was in charge when the company was accused of badual harbadment and misconduct.

Large online media companies, often referred to as start-ups, although often more than 10 years old, must now control their costs. At the same time, investors are asking questions about the real value of their participation.

Disney, who had previously discussed the purchase of BuzzFeed, had invested $ 400 million in Vice in 2014, but has now reduced the value of its stake by 40%. Sites such as Mashable have been offloaded from fire sales, as a result of significant reductions.

The BuzzFeed e-mail announcing layoffs made it clear that the company would no longer seek additional funds, and the company appears to have abandoned its previously proposed plan to float.





Jonah Peretti.



Jonah Peretti helped found the Huffington Post and BuzzFeed. Photo: Brian Ach / Getty Images for TechCrunch

This is despite the fact that the company hopes to earn revenue of $ 300 million in 2018 following an uncertain growth in revenue, while its UK edition is close to profitability – a performance that would delight many points of view. traditional sale but would not be enough for investors.

Even though online media companies have struggled against a large number of low-rent competitors mimicking their distribution methods, they have also had to deal with more established media that leverage their experimentation skills.

In its infancy, BuzzFeed mastered the art of playing the Facebook algorithm by building lists and publications based on identity and entertainment issues that would attract readers and encourage them to share it. As a result, an established mark online could be doubled by the use of a biological distribution network: the readers themselves.

The result was a series of messages that would reach millions of points of view, aided by carefully studied information, such as adding the word "really" to a quiz title could overload its traffic.

This information helped maximize viral reach, with attention to detail and a thorough badysis of what prompted humans to share what sometimes belied their seemingly frivolous content and titles.

Gradually, changes to Facebook's algorithm have eroded a competitive advantage in the field. BuzzFeed was looking to expand its presence on other platforms and invest in serious news journalism that allowed it to publish the Trump dossier and be selected for a Pulitzer Prize.

At BuzzFeed, Peretti constantly suggested that Facebook would be forced to pay for content, a result that has yet to materialize, before attempting to create TV-style programming for other companies. Last year, he launched the catchy idea of ​​a mega merger of online media companies on Facebook and Google, but company sources have downplayed it. importance.

On Wednesday, he announced to his employees that they would be looking to diversify their earnings outside of the main website and that he hoped to be "a clear winner in the market, as the digital media economy continues to s & # 39; improve ".

Instead, there has been an unexpected comeback to mainstream department stores, such as the New York Times, which has seen huge demand for subscriptions as newspapers close their doors in the rest of the country.

Some outlets rely on reader contributions, a model that has helped the Guardian's parent company stand out after years of heavy financial losses.

Others prefer to hand over to wealthy people: the Atlantic enjoys an investment from Laurene Powell Jobs, the widow of Apple's founder, Steve Jobs, while MEL Magazine has been hailed for its coverage of online culture, although it 's about the branding project of a razor maker.

"The challenges faced by institutional actors and new players are very similar," said Nielsen, who urged his competitors not to rejoice over the pain felt by the new rivals, many journalists being about to lose their job.

"We live in a world where competition for people's attention, advertising and money is intense. There may be a schadenfreude – these people have already been in the future – but this is by no means good news for traditional players. "

How cuts in online media affect online publishers:

Vice

employees3000
Evaluation: $ 5.7 billion in 2017
Returned$ 600 million
Job Suppressions: Aims to downsize by 15% by attrition and freeze recruitment.
What is happeningThe company was valued at $ 5.7 billion under its former chief executive Shane Smith, but has since seen Disney reduce the value of its stake by 40 percent, suggesting that its current value is much lower. Smith resigned last year to be replaced by television director Nancy Dubuc. The company is focusing more and more on its internal advertising agency Virtue and on the television news show it produces every night for HBO.

Verizon Media Group

employees: 11,000
Evaluation: $ 5.2 billion in 2018
Returned$ 600 million
Job Suppressions: 800
What is happening: The parent company of HuffPost, AOL, Yahoo and Tumblr was founded with the aim of fighting Google and Facebook by creating a new media giant, but struggled to gain market share. After a brief stint under the name of Oath, the group was renamed after its parent company canceled $ 4.6 billion of its value before announcing major job cuts. Employees discovered that they had to be fired through an invitation from the HR calendar, according to HuffPost's own reports.

BuzzFeed

employees1,400
Evaluation: $ 1.6 billion in 2016
Returned: $ 300 million
Job Suppressions: 200
What is happening: Founder Jonah Peretti is seeking to reduce advertising revenue on the company's main website, with a greater focus on third-party licensing and online shopping for profitability. The company's information division has been attracting attention, particularly with its controversial article that Donald Trump asked his lawyer to lie to Congress.

Microphone

employees: 0
Evaluation: $ 5 million
ReturnedUnknown
What is happening: The publisher was known for its catchy Facebook videos and exploded while the social network gave priority to video, but had difficulties when Mark Zuckerberg's company changed its algorithm. Mic employed more than 100 people but almost all of them lost their jobs when the company collapsed at the end of last year after spending tens of millions of dollars in funding. Its badets were sold to Bustle Group at a reversal price of approximately $ 5 million.

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