RIP BuzzFeed News

[dixiehack]

Not part of my daily media diet, but I still feel for anybody losing their gig.

BuzzFeed News will shut down | CNN Business

 

[Mr. X]

 

[Mr. X]

From The New York Times:

BuzzFeed Shuts Down Its Namesake News Division

 

[Mr. X]

From The Wall Street Journal:

BuzzFeed News Is Shutting Down, and Vice World News Could Be Next

 

[DanOregon]

something, something "digital is the future."

 

[Shropshire Slasher]

I hope none of them is out of work for long. BuzzFeed will look good on a resume, no matter how obscure the reporter.

 

[User 149557]

I kinda stopped reading news online a few years ago and went back to papers and magazines via my library and Libby. Full-on luddite now. So this news for someone whose sense of the internet ended in about 2017 is astounding. We all made fun of it, but it collapsing would’ve seemed impossible seven years ago.

 

[Azrael]

maybe private equity isn't the solution to the journalism business model puzzle

Private equity firms are BuzzFeed, Inc.'s (NASDAQ:BZFD) biggest owners and were hit after market cap dropped US$19m

 

[The Big Ragu]

maybe private equity isn't the solution to the journalism business model puzzle

Private equity firms are BuzzFeed, Inc.'s (NASDAQ:BZFD) biggest owners and were hit after market cap dropped US$19m

Whoever had bought into the company at the absurd valuation it once was trading hands at -- private equity firms or a pack of martians -- would have eventually suffered the same fate. The company never actually earned anything. There is no magical "solution" to a business model that loses money. So in that regard, you are saying that the "journalism business model puzzle" is one in which Buzzfeed should have never even existed in the first place. The only reason it did exist was a zero interest rate environment that created trillions of dollars of malinvestment. ... and drove valuations of companies with a story (but no earnings) into the stratosphere in a speculative bubble frenzy.

Predictably, when that artificial "free money" environment was pulled away because consumer price inflation put a crimp in the fantasy, the company lost more than 90 percent of its value pretty quickly. I was posting about this on here quite a bit, while the silliness was going on. Right before the pandemic (when they turned the monetary spigots back on to reinflate the bubble temporarily) Buzzfeed was already floundering.

Just look at Vice Media and BuzzFeed. Two, three years ago, they were throwing around valuation numbers in the BILLIONS, and had some whales throwing a lot of money at them (THAT was the stupid money, because we are talking billions of dollars). Those days are over, and now they are just companies that have never made money and continue to lose money.

This was eventually going to be Buzzfeed's fate. It was a matter of when, not if. It continually lost money.

 

[Azrael]

Whoever had bought into the company at the absurd valuation it once was trading hands at -- private equity firms or a pack of martians -- would have eventually suffered the same fate. The company never actually earned anything. There is no magical "solution" to a business model that loses money. So in that regard, you are saying that the "journalism business model puzzle" is one in which Buzzfeed should have never even existed in the first place. The only reason it did exist was a zero interest rate environment that created trillions of dollars of malinvestment. ... and drove valuations of companies with a story (but no earnings) into the stratosphere in a speculative bubble frenzy.

Predictably, when that artificial "free money" environment was pulled away because consumer price inflation put a crimp in the fantasy, the company lost more than 90 percent of its value pretty quickly. I was posting about this on here quite a bit, while the silliness was going on. Right before the pandemic (when they turned the monetary spigots back on to reinflate the bubble temporarily) Buzzfeed was already floundering.



This was eventually going to be Buzzfeed's fate. It was a matter of when, not if. It continually lost money.

Worth asking if Buzzfeed News was closed because it didn't make money.

Or because it didn't make enough money.

News divisions have been a prestige loss-leader for close to a century.

 

[The Big Ragu]

Worth asking if Buzzfeed News was closed because it didn't make money.

Or because it didn't make enough money.

News divisions have been a prestige loss leader for more than a century.

Buzzfeed had a peak valuation of somewhere between $1.5 and $2 billion. That is insane for a company that never earned much of anything. The news division actually was losing money, but you also need to look at this in a different way. There are billions of dollars of investment that went into this thing. ... only to create those losses. If you don't spend a lot of money trying to build a business and incur losses, it's one thing. When you spend a lot of money to build something and it loses money, it typically requires that much more investment to keep the money-losing operation propped up and operating. And finding that investment is an impossibility in the more sober environment we're in.

To me, the fascinating thing is how timing is everything in bubble environments. Buzzfeed as a private company actually was able to ride the monetary bubble for a long time and raise an enormous amount of money -- most of it from some big media companies that were working with borrowed money (when funding costs were making it free to borrow). The smart companies like this understood that it wasn't their genius that was fueling their growth, it was that money being created out of thin air was sloshing around trying to find a home, and people could speculate on dog poop and earn huge returns by flipping "investments." The game -- whether they realized it or not -- was to not be the one left holding the bag. It's the greater fool theory. I am not calling Jonah Peretti a fool, but unfortunately he waited too long to try to personlly cash out. The SPAC craze happened in 2020 into 2021 on the back of all of the money the Fed unleashed into markets with the pandemic as the excuse for one last blast of stupidity. That was the time for him to move. He waited just a smidge too long, and by the time they tried to pull their SPAC together, the valuation he could pitch had dropped to only about $240 million. Then. ... the bubble started to pop all at once as the Fed started raising rates and letting it's balance sheet decline, and all of those SPAC investors pulled their money before the offering. The offering netted the company only about $16 million. This was a company that NBCUniversal had bought into at a valuation in the hundreds of millions of dollars. $16 million was a long way down, and it is evidence that the only thing making the company even remotely viable was the ability to keep raising a ton of money in perpetuity. When that ended. ... the operations had to end. It's wasn't that it isn't profitable enough. It's that its business model isn't viable.

 

[wicked]

More proof that someone, probably users, needs to pay the freight for content.

It sure ain't the advertisers who are. I hope this fantasy comes to an end sooner rather than later.

 

[justgladtobehere]

This story reminds me of the movie Shattered Glass. One aspect was how Forbes online (maybe some other legacy company) broke the story. The idea was that online media was the new thing and revolutionary. Well...

 

[Azrael]

BuzzFeed News’ business model turned to dust because they were always at the whim of mercurial tech titans | James Hennessy

 

[Azrael]

Vice Media cancels its flagship 'Vice News Tonight' program as it makes 'painful' layoffs and restructures the company | CNN Business

 

[The Big Ragu]

Vice Media cancels its flagship 'Vice News Tonight' program as it makes 'painful' layoffs and restructures the company | CNN Business

Another distorted debt markets, "free money" story that created huge misallocations of capital.

The company raised billions of dollars because the cost of money was artificially suppressed for so long. That despite it never having actually proven itself as a business that MADE MONEY (what a novel idea). ... what would have been a prerequisite to attract capital in an unmanipulated, free market.

The company had a peak bubble valuation (at the height of the Fed-driven insanity) of close to $6 billion. It's absurd. It was a cash burning machine. Shane Smith turned away an offer of $3.5 billion from Disney while bubble world was still in effect. I am sure he wishes he had taken it.

All of those equity investors have long ago taken write downs on what they put into the company. A company that never proved itself, and burned through cash like it was nothing, should never have attracted that kind of investment in the first place. But that is what the Fed gave us. It ended up reliant on debt financing when the hype wore off and there was no more stupid venture capital money left. Today, we are no longer in a zero interest rate environment that rewards failure, because one consequence of all of the free money that allowed this company to last this long in the first place, is the consumer price inflation they now feel forced to try to combat, and that has required making the cost of money more expensive. In real terms (the cost of money relative to inflation), money is still very cheap, but even nominal interest rates at the level they are now, makes it so that companies like this that have been living on borrowing, can't service their existing debt, and refinance at higher cost as it is coming due. And they don't have viable businesses. It's game over.

The insanity that led to Vice Media and Buzzfeed in the first place went on for so long that there is a generation of people who don't seem to understand how absurd that environment was. Sadly, there are some serious wake up calls still to come at some point.

 

[wicked]

Blaming the Fed means you're letting the companies that tossed their money away off the hook.

The Fed sets policy. It may be misguided, as you say. I'll take your word on it, because I know zero about the markets and you are a smart guy.

But each of these businesses are run by rational actors. You don't get to the top by being a Whitlock-level moron. No one anywhere put a gun to these executives' heads and told them to invest in a house of cards. If they wanted to make bad investments, it's the free market, they do what they want.

 

[The Big Ragu]

Blaming the Fed means you're letting the companies that tossed their money away off the hook.

The Fed sets policy. It may be misguided, as you say. I'll take your word on it, because I know zero about the markets and you are a smart guy.

But each of these businesses are run by rational actors. You don't get to the top by being a Whitlock-level moron. No one anywhere put a gun to these executives' heads and told them to invest in a house of cards. If they wanted to make bad investments, it's the free market, they do what they want.

I am not blaming the Fed for those companies failing. They failed because they were companies that lost a lot of money. It's that simple.

The question I am addressing is. ... Why did companies that never proved their concepts (i.e. -- show that they were viable and could earn money) ever get their hands on that capital in the first place?

And my point is that those companies never would have never existed in the first place (at the sizes people got to know them) without the distortions to the debt markets we have been living with. That "policy" you are talking about has given us epic malinvestment that wouldn't have existed if the debt markets that set the cost of money (the most important price there is) had been freely traded rather than being price fixed by a czar intent on enabling a giant debt binge (and a lot of malinvestment on the back of it). Vice Media and Buzzfeed are prime examples of that malinvestment. Without money having been made free -- so that nobody was valuing it the way they would have if there was a cost -- they would have never attracted the billions of dollars of capital (and then debt financing) that they blew through in the first place. The whole conversation about what went wrong would be moot. Companies like those would have started small, and been forced to prove their concepts (by earning money. ... what a concept!) before they were ever able to scale up.

 

[SixToe]

The insanity that led to Vice Media and Buzzfeed in the first place went on for so long that there is a generation of people who don't seem to understand how absurd that environment was. Sadly, there are some serious wake up calls still to come at some point.

I realize I'm of a different generation, though like many today I get my news and entertainment online almost 100 percent of the time.

(See that generational thing? I can't use a percent symbol. Still spelling it out LIKE IT SHOULD BE DONE :D)

But I never warmed up to Buzzfeed or Vice as serious entities. I know they have reporters and/or content producers who did serious work, and garnered accolades. But they never clicked with me. It always was, to me, clickbait bull**** sites that at some point said, "Hey, no, really, seriously, we're trying to be real and good and serious and trust us!" And I just couldn't.

Again, you win a Poolitzer or two and have some serious online work, that's very cool. I just never could get over the fact it was like finding a little fruit cup section amid the ****ty yet satisfying gas station food.