Jon Steinberg was formerly president of Buzzfeed. While he was there, he helped the company’s annual revenue soar from $0 to $60 million.
He left after the company reportedly had an offer to sell to Disney for hundreds of millions of dollars, and CEO Jonah Peretti turned it down.
Steinberg is now CEO and founder of Cheddar.TV, a startup that wants to be the CNBC for cord-cutting millennials. I co-hosted Cheddar’s third-ever episode with Steinberg on Wednesday morning at the New York Stock Exchange, where the CEO of another media publication, LittleThings’ Joe Speiser, was a guest.
I asked both Steinberg and Speiser about what’s currently going on at Buzzfeed, which reportedly missed big on its 2015 projected revenue.
Their takeaway: Buzzfeed uses a high-touch advertising model that requires lots of hands-on attention with clients, which makes it hard to scale past a certain point.
A revenue slowdown
On Tuesday, the Financial Times reported that Buzzfeed missed big on its 2015 projected revenue, pulling in $170 million rather than the $250 million it hoped to generate. Worse, the FT says that Buzzfeed’s 2016 revenue projection has been chopped in half to about $250 million instead of the $500 million it hoped it would generate over the next few months.
A spokesperson for Buzzfeed disputed the revenue figures reported by FT to Business Insider but declined to give more specific numbers.
Buzzfeed’s chairman (and Business Insider board member) Ken Lerer told us that Buzzfeed’s 2016 revenue goal was never changed or slashed, and it was never anywhere near as high as $500 million. Instead, Lerer reiterated that Buzzfeed hit its revenue targets for the first quarter of 2016 and is on track to hit its second quarter target. Further, he says Buzzfeed is on pace to meet its 2016 revenue goal.
“Buzzfeed has made the transition from a strict legacy business to be the leader of what digital content is going to be in the future,” Lerer told Business Insider. He declined to discuss whether or not Buzzfeed missed its 2015 revenue target.
‘Difficult to scale’
Speiser, whose company is much smaller than Buzzfeed’s but is profitable, blamed Buzzfeed’s reported 2015 miss on its advertising model.
uzzfeed’s model is.. it’s hard to scale that kind of high-touch, branded advertising,” Speiser told Business Insider on Cheddar.
“For a company like LittleThings, the majority of our revenue is programmatic, so we’re selling our impressions to an auction, an automated system, so it’s a lot easier for us to scale. We have 50 million uniques, and we can monetise almost all of them instantly without hiring 50, 60, or 100 salespeople. But it’s a different model, and it’s a little bit easier for us.”
Steinberg believes that over time, digital media companies like Buzzfeed will be well positioned to replace television imcumbents.
But he also believes digital media companies need to figure out multiple sources of revenue and it will be difficult to sustain them on just advertising revenue alone. He believes the solution for video-focused, digital media companies like Buzzfeed will be to work out deals with carriers who will pay publishers to host their content.
“Everybody is finding this trend of video replacing television is absolutely enormous,” Steinberg told Business Insider on Cheddar. “I think this Facebook Live thing is game changing, and I think all these digital media companies have the potential to replace the dominant media of our time.
“People in their 20’s and 30’s are never going to watch television, they’re never going to get cable boxes, and you know, I’m not going to comment on the FT article, I don’t know where they got that information from, I have no idea if it’s right or not. But if you’re a strong media brand today, you’re a hell of a lot better off than an incumbent media company. These companies have no digital media strategy to speak of.”
If you’re a strong media brand today, you’re a hell of a lot better off than an incumbent media company.
When we asked him to elaborate on a “hypothetical company called Schmuzfeed,” he continued:
“I think a big trend, because it’s what I’m betting [Cheddar] on, is media creators in video will get paid by the carriers. I don’t know if those carriers will be Comcast or Time Warner or Charter. They may be T-Mobile and Sprint and Amazon and Facebook. But that’s definitely going to happen … As we figure out how to move into video, which is challenging — it’s hard to figure out how do you do this to make it engaging — but we’ll all get paid for that.
“[My cofounder] Peter and I are reading this book about ESPN called “Those Guys Have All The Fun.” It’s a phenomenal book. And they have this revelation that ad revenue is not enough. You need the duel revenue stream. And that’s really the key to this business too.”
If Buzzfeed did miss on its 2015 revenue goal, it wouldn’t be the only digital media company to do so. Currently, the digital media industry is in the middle of some major shifts that make advertising revenue harder to predict. Mobile consumption and digital video consumption have taken off faster than most media companies could have predicted, but advertising dollars tend to lag traffic when new industries are born. It took a long time for advertising companies to shift their budgets from traditional print organisations to digital media upstarts. The shift from traditional television companies to the next generation of video producers will be similarly slow.
You can watch the full Cheddar.TV episode over on Facebook. The part about Buzzfeed begins at the 27 minute mark.