Digital news loses its buzz

The exploding watermelon was a huge hit. But 2½ years later, the media organisation that broadcast Facebook’s most watched live video, BuzzFeed, is itself ­imploding.

Jonah Peretti, founder and chief executive of Buzzfeed. Picture: Reuters

The exploding watermelon was a huge hit. But 2½ years later, the media organisation that broadcast Facebook’s most watched live video, BuzzFeed, is itself ­imploding.

Facebook was supposed to be a boon for BuzzFeed, which relies on tech-savvy millennials to click on its ads and read sponsored content. In 2016, 807,000 simultaneous viewers — most of whom were millennials — looked on as two BuzzFeed employees stretched rubber bands around a watermelon until the stress caused the fruit to burst.

Those eyeballs counted for little and it has become clear the great online media experiment isn’t working, collapsing under the stress imposed by technology ­giants. The company announced last week that it would shed 200 jobs, or 15 per cent of its global workforce.

Yesterday, BuzzFeed Australia general manager Simon Crerar revealed the cuts will hit the 40 people employed in this country.

“BuzzFeed management have informed us that 25 roles in Australia are facing redundancy,” he tweeted. The 25 people will be consulted as 11 positions are cut, all of them in Sydney.

The company’s Australian arm insists it isn’t going anywhere, despite telling employees in letters it was “reducing its overall news footprint”.

“We’ve built a strong brand, loyal audience and growing business in Australia, and BuzzFeed remains committed to building on that foundation for the long-term,” a company spokesman says.

But the lay-offs are the latest sign that the honeymoon is over for online media outlets, once heralded as saviours of the industry.

New-age publishing houses such as Vice, BuzzFeed and Vox are all struggling to survive, ­leading industry observers to conclude that the business model for free, online-only journalism is non-existent.

Australian staff say they were blindsided. “After waiting for five days to see if me or my team will be affected by the lay-offs, now it turns out I have to wait until my meeting at 3.30pm tomorrow to see if I even have a job!!! How great is clear communication!!!!!!!!,” BuzzFeed Australia’s lifestyle editor, Jemima Skelley, tweeted.

Former Australian news editor Rob Stott said BuzzFeed had good intentions, but the company was in over its head.

“This is just cruel,” he tweeted in reference to the company’s decision to not pay US workers their entitlements, a move it backflipped on yesterday. “Devastated for my friends at (BuzzFeed). They’re truly some of the most talented people I’ve ever worked with. It’s going to be a huge loss to the Australian media landscape.”

Amid all the OMGs and LOLs of BuzzFeed’s quizzes and less serious content were young hard-hitting journalists who were nominated for Walkley awards and broke stories including Michaelia Cash’s involvement in police raids on the AWU offices, alleged mistreatment of youth on Nauru and alleged inappropriate behaviour by Labor MP Emma Husar.

Word from inside the company is that working there is much like working at a tech company like Apple or Facebook, just without the salary or stock options.

Employees are fed perks like free lunch and snacks, and don’t have to work on their birthday. BuzzFeed’s New York City office is home to a frozen-yoghurt machine and employees get to vote on the flavour every month.

In 2015, BuzzFeed chief executive Jonah Peretti bought all 700-plus of the company’s staffers worldwide an Apple Watch after the company hit its traffic goals, including reaching 200 million unique visitors and 750 million video views in a single month.

“Apple Watch FTW!!! Congrats to the BuzzFeed team on an amazing November!” Peretti said in a Twitter post, using the millennials’ acronym meaning “for the win”.

Things were looking rosy for the company when it combined “listicles” and quizzes with a hard-hitting journalism unit, offering its content for free but supported through online banner ads and ­native advertising, also known as sponsored content. Almost four years later, the mood inside the company’s Sydney headquarters is despondent, but one reporter tells The Australian solidarity among staff is strong.

BuzzFeed attempted to update traditional journalism while emulating the business model of the tech giants. But those tech giants are responsible for much of the woes traditional media outlets are enduring. It was wrongly assumed the old rivers of gold from newspaper advertisements would flow naturally into online outlets. But Google and Facebook control almost three-quarters of digital ad dollars, leaving a growing number of publications — online and in print — to fight over what’s left.

Here at least the Australian Competition & Consumer Commission is fighting back, arguing that Facebook and Google each have monopoly-like positions in advertising and social media.

The consumer watchdog has proposed two new bodies — an ombudsman to grapple with consumer complaints and a regulator to look at how Google and Facebook operate in the advertising market and how they distribute traffic. The ACCC report found Google is responsible for 94 per cent of online searches in Australia and represents a large chunk of the search advertising and referrals to other media outlets.

It also found Facebook’s Instagram app — incredibly popular with millennials — owns 46 per cent of Australian display advertising revenue. Facebook once looked like a valuable partner for the likes of BuzzFeed but is instead proving to be its undoing.

Marcus Strom, a director of the Walkely Foundation and president of journalists’ union the Media, Entertainment and Arts Alliance, says the axing of BuzzFeed’s staff proves there is no “Aladdin’s lamp” to solve the crisis facing digital media.

“Journalism has a very strong future, people need to consume news. But how this works financially is still being tested,” he tells The Australian.

“Journalists shouldn’t be paying for the poor management decisions of billionaire tech bros. I’ve got no problem with workplaces being fun places to be … If people want to skateboard while they’re at work, I’ve got nothing against it. But it’s no replacement for good superannuation and guaranteed sick leave and parental leave.

“Digital cultures can teach a thing or two to stale old newsrooms. But that doesn’t replace proper workplace benefits, pensions, a career structure, and training. These are the sorts of things that are needed to support a vibrant media industry.”

Other tech billionaire media owners have stuck with more traditional business models, which so far are holding up.

Amazon boss Jeff Bezos bought The Washington Post in 2013 and set up a paywall, and the paper went from losing money to turning a profit in 2016.

Salesforce co-chief executive and tech billionaire Marc Benioff bought Time magazine last year for $US190 million, and is maintaining it as a paid, print-focused publication.

Southgate Media managing director and co-founder Chris Kerrisk, a former Herald and Weekly Times senior executive, tells The Australian that to survive, digital journalism needs to better differentiate itself from social media. He described it as a battle of substance versus fluff.

“At the heart of this differentiation should be the commercial model,” he says.

“Publishers face a vastly different cost base to create bespoke content upheld to editorial standards and accountability. Journalism following a similar free model dependent exclusively on cost per thousand advertising will work counterintuitively to the development of well-researched and fact-checked content.”

Cost per thousand, also known as cost per mille or CPM, is a term used to describe the price of 1000 advertisement impressions on a web page. If a website like BuzzFeed charges $2 CPM, an advertiser must pay $2 for every 1000 impressions of the advertisement.

Given that news websites like BuzzFeed, Junkee and Business Insider don’t have a paywall, they rely largely on such advertising to drive revenue alongside other streams such as native advertising and events.

“In conjunction with advertising, publishers need to move towards a commercial model whereby 100 per cent of digital news content is paid and accounted for, just like print,” Kerrisk says. “Professional journalism in digital, as in print, requires a healthy mix of revenues between advertising and paid.”

Peretti said in an interview last year that his company had been dependent on one revenue stream for too long.

“Early on, we said we’ll do native advertising,” he said.

“When Trump was elected and during the Brexit, there was a bit of a crisis in advertising. People were thinking: ‘Should we reach out to these voters?’

“Brands weren’t sure what they wanted to say, they didn’t have a voice. There was a big demand during that period of chaos for banner ads and classic display ads to show the product. Part of our strategy was diversifying revenue to work with all the advertisers.

“Our revenue is more diverse than it’s ever been. Subscriptions and advertising work against each other. What’s nice about our model is that our model works together. Direct advertising will be half our revenue next year. Last year it was about three-quarters, this year will be two-thirds.”

In an interview late last year, Peretti floated another plan to save online publishers: a merger of outlets.

“You have Vice and Vox Media and Group Nine and Refinery,” he said. “There’s tons of them that are doing interesting work.”

He added that such an entity could better compete with Facebook and Google for ad dollars.

“If BuzzFeed and five of the other biggest companies were combined into a bigger digital media company, you would probably be able to get paid more money,” he said.

It’s understood discussions between the rival companies have already taken place.

The subscription model seems to be the only one working for publishers. The Informationis a subscription-only, online-only publication, and publishes only two stories a day, between about 23 reporters. There’s no free trial available, and subscribers pay $US39 ($54) a month for specialised long-form news articles about the tech industry.

It’s owned and operated by former Wall Street Journal reporter Jessica Lessin, who has grown the website from a tiny publisher to a respected news breaker.

“Unlike most other news sites, we don’t have venture capital or corporate owners,” Lessin says on her website. “I own the publication.”

Her website and other paywalled publications are profitable, and the uncomfortable reality for websites like BuzzFeed is that they will be forced to at least consider charging for content if they want it to still exist.

At the end of BuzzFeed’s 45-minute watermelon video, onlookers walk up and feast on the melon’s remains, devouring what’s left of the smashed fruit.

In 2019, Facebook and Google are still feasting on what is becoming an ever-shrinking modern media industry.