BuzzFeed Lays Off 100 As It Reorgs Business For Programmatic, Commerce

BuzzFeed laid off 8% of its domestic workforce, or 100 people, Wednesday as the company diversifies beyond native advertising. Recode first reported the cuts.

With 25% of revenue in 2017 coming from programmatic, affiliate links, commerce and non-native ads, many staffers working on the branded content side are being let go.

Despite building a nine-figure revenue business solely on native, BuzzFeed is just the latest publisher being forced to diversify in a media landscape dominated by Facebook and Google, according to Forrester senior analyst Susan Bidel.

“I’m not at all surprised they are evolving their business model to reflect the realities of the digital advertising ecosystem,” Bidel said. “The pure-play native they practiced doesn’t scale, it’s expensive and it doesn’t fit into the marketer’s spreadsheet of media buying. I never thought they would be profitable.”

Other publishers have worked to diversify their revenue streams, as CPMs fail to justify the cost of creating quality content, Bidel said. For example, The Washington Post sells its ad tech in addition to advertising and subscriptions. The New York Times relies on subscriptions, conferences and products, Bidel noted, adding: “It remains to be seen if they will be successful.”

With the layoffs and reorganization, BuzzFeed is following a similar path.

The publisher expects its total workforce to be smaller than before. But it will hire experts in its growing revenue lines, while laying off staff on the branded content side, a BuzzFeed spokesperson said.

Direct sellers who focused on native campaigns will bear the brunt of the layoffs. Business support teams around branded creative will also be affected.

BuzzFeed expects to bring on programmatic sellers, the spokesperson said. Since launching programmatic ads in Q4 as part of its revenue diversification efforts, BuzzFeed has been building an ad ops team to handle its programmatic ads.

BuzzFeed is also looking for a chief operating officer to replace President Greg Coleman, who joined three years ago. The former ad tech exec, who logged time at Criteo and Yahoo, will remain an adviser to the company. But he’s choosing this moment to move on.

BuzzFeed’s layoffs come two weeks after it reportedly missed its $350 million revenue target by 15% to 20%. BuzzFeed never confirmed that it missed its numbers, instead telling The Wall Street Journal it grew revenue for the year.

If growth from BuzzFeed’s bespoke native business tapered, the opposite holds true for its more scalable business lines.

BuzzFeed said its programmatic business is having a strong Q4, with heavy demand for its inventory.

This success makes sense to Bidel. “BuzzFeed tried to create its own market, rather than fit into the market dynamics that advertisers wanted,” she said. “Publishers historically respond to the demands of their advertisers – remember, it’s the advertisers who have the money, so they are ultimately in control.”

BuzzFeed was able to go so long without diversifying its revenue not because the model worked, but because it had the faith of its investors, Bidel said.

“[CEO] Jonah Peretti was extremely adept at managing investors and managing perception for the company,” Bidel said. “They raised a significant amount of money, and he was good at explaining why it should work to people who were not necessarily familiar to the advertising business. He managed their expectations until he ran out of runway.”

To further strengthen its programmatic business, BuzzFeed needs to switch from having one-on-one conversations with marketers to building relationships with agencies, DSPs and exchanges, Bidel said. And though the publishing business overall faces pressure from Facebook and Google, BuzzFeed has strong prospects.

“Buzzfeed is a respected brand among consumers and marketers, so they should be able to make this transition pretty effectively,” Bidel said.

This post was syndicated from Ad Exchanger.