Jonah Peretti is traditionally an optimist about the media business, and especially about his own business, which has been a beacon for digital first media businesses. But in the past six months, even he has had to come to grips with the fact that reach and scale don’t necessarily turn on the revenue spigot as everyone used to believe. As an example, in a recent Digiday podcast he cites his Tasty business, which has over 100 million visitors on Facebook, and yet he makes NO money from Facebook and has had to develop different revenue streams. Tasty makes money through recipe and product sales, and through native advertising.
Peretti missed his numbers in the last quarters, which was a surprise even to him. But when asked whether this was Facebook’s fault, he was quick to explain that there’s no way Facebook can solve the problem for the digital media industry. He has divided the industry into segments, and he feels each segment has a different problem and a different potential solution.
For high end media companies like Conde Nast and the NY Times, legacy cost structures mean that digital advertising can never match the declines in advertising revenue that have taken place over the past two decades.
Facebook cannot solve the problem for those media players through revenue sharing. For these, only subscriptions can point the way forward. Low end companies are often revenue-generating on digital advertising, but this is the domain of fake news, conspiracy theories and misinformation, and Peretti certainly doesn’t want Facebook revenue sharing with those players.
But for the middle tier, of which Buzzfeed is a member, Peretti thinks that Facebook could do what YouTube currently does: share revenue equitably with the publishers who generate the most traffic.
However, it does not, and thus Buzzfeed has to create its own new revenue streams. One of those traditionally was native advertising, where the site was a pioneer. But an unusual thing happened when Trump was elected: digital marketers realized how divided the country was, and were no longer sure who their audiences were. Marketers began to ask themselves questions like “Should we reach out to Trump voters”? “Should we show the LBGT community and immigrants we still support them as a brand”? Brands didn’t know what they wanted to say after the election, so that took away the impetus for native advertising. In addition, native advertising had become commoditized, and was no longer as attractive to site visitors.
Instead, marketers retreated to brand advertising. Banners came back, as did performance ads, and Buzzfeed , which had sworn never to run a banner ad, had to diversify backwards! In the meantime, the digital audience continued to fragment, making niches profitable and sites with Buzzfeed’s reach less appealing – especially since GDPR.
Nevertheless, almost two years past Brexit and Trump, brands have figure out that they have to take one side or the other, and they’ve figured out what they want to say so they’re coming back to native.