The US news and entertainment company BuzzFeed is to acquire HuffPost (formerly known as Huffington Post) from telco parent Verizon. The all-share deal brings together the two most famous digital news brands after 15 years of great expectations and heavy losses.
It marks a further stage in the consolidation of US digital media following Vox Media’s acquisition of New York magazine and Vulture, Group Nine’s deal with PopSugar, the Vice “merger” with Refinery29, and (more positively) Business Insider’s purchase of Morning Brew.
BuzzFeed CEO Jonah Peretti — who also co-founded HuffPost with Arianna Huffington in 2005, along with investor Ken Lerer — will lead the combined BuzzFeed/HuffPost group. The combination is expected to boost BuzzFeed’s audience by 29%, to 103m monthly uniques – ironically, about 50% of the reach that BuzzFeed once claimed on its own. As part of the sale, Verizon will have content syndication rights and a minority stake in BuzzFeed. It is also believed to have injected cash into the business to pay for reorganisation costs and HuffPost trading losses.
It’s a historic deal in more ways than one.
In 2011, AOL had bought the HuffPost for a dizzy $315m. Four years later, Verizon, owner of Yahoo and TechCrunch, acquired AOL for $4.4bn, most of which was written off by 2018.
At the start of HuffPost, Ms Huffington had been the big personality upfront and Peretti was quietly focused on “content that would spread” which formed a key part of the site’s DNA. Happy to be in the engine-room, he was responsible for developing the celebrity gossip behind the front page of serious news and commentary. The site was one of the first systematic users of SEO and spawned Peretti’s side project, experimenting with viral content – which became BuzzFeed. His technologies tracked items of content that were contagious, things that appeared on one person’s Facebook page and then on many other people’s.
HuffPost’s early reputation was burnished by its worldwide editions and an army of volunteer bloggers, many of them distinguished journalists, scientists and politicians. Meanwhile, BuzzFeed pioneered listicles and “news you can share” in the years before clickbait lost its appeal to readers and advertisers alike.
But while HuffPost rewarded its investors with peak-time deals, BuzzFeed resisted the temptation to cash in on valuations of up to $1.7bn. It has raised no less than $450m over the years (most of it from Comcast’s NBCUniversal). But, just like the legacy news brands with which it competes, BuzzFeed learned the hard way that Facebook and Google can “give” huge audiences but also “take” most of the advertising dollars.
Peretti, a Manhattan-born graduate of M.I.T.’s Media Lab, had been called a “viral marketing hotdog” by the New York Times and “the poster boy of guerilla media” by AlterNet. Fast Company named him one of the “New Faces of Social Media” and cited BuzzFeed as one of the “50 Most Innovative Companies” in 2012. Business Insider listed him as one of the “11 Rising Tech Stars to Watch in 2012.”
He had seemed obsessed by the simple question: “What makes ideas spread?” It had started in college, when he ordered a customized pair of Nike shoes with the word “sweatshop” on them. Nike refused to fulfill the order, and he sent the email chain with customer service to 12 friends. They forwarded it on and, eventually, it reached millions of people. The viral emails became prime-time news, and so did Jonah Peretti.
He all but invented native advertising and taught marketers to write BuzzFeed-like stories which promoted their brands and lived on Facebook or Twitter as much as on his own domain. But that was then.
In recent years, both BuzzFeed and HuffPost have had to slash costs in the face of declining ad revenues and fierce competition for digital audiences. BuzzFeed has all but retreated to the US after burning tens of millions of dollars on international expansion.
It is reasonable to surmise that Peretti’s shareholders would have accepted the “merger” only if it enabled substantial cost savings and would, therefore, quickly produce positive cashflow. BuzzFeed’s 2020 revenue is said to be $200-250m. HuffPost revenue may be only $40m, with net losses of up to $25m.
The BuzzFeed CEO has claimed it would belatedly break through into profitability in 2020 (despite revenue that is at least 25% down) and the Financial Times says it is now cash positive. Peretti told the New York Times today: “The reason we were attracted to it is the brand and the audience. We want HuffPost to be more HuffPosty, and BuzzFeed to be more BuzzFeedy — there’s not much audience overlap. These are different audiences they serve. On the editorial side and the consumer side, we want to have a lot of independence and autonomy for HuffPost and for it to determine its own brand.”
They were unusually frothy words by the straight-talking BuzzFeed founder who had admitted in 2018 that his company could not continue in its present form: “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.”
Two years later, he’s (sort of) made it – and so has a very relieved Verizon which had almost run out of prospects for HuffPost.
The deal is all about scale economies: shared content, revenue and costs. It’s a rescue of two famous news brands that once promised, err, global domination. What next?