Listicle factory BuzzFeed is crumbling at the seams, with its finances derailing it into bankruptcy. 

In April 2023, the CEO of BuzzFeed, Jonah Peretti announced that its Pulitzer Prize winning business, BuzzFeed News, would shut down. The mother of clickbait, had run itself into a debt fueled dumpster fire that was beyond saving. What events led up to one of the most popular internet brands to lay-off 15 percent of its workforce in 2023 and become a shadow of its former self?  

BuzzFeed origins

To better understand how Buzzfeed drove itself into financial ruin, we have to turn back the clock and see how this edgy website came onto the scene, taking the internet by storm seemingly overnight. In June 2017, Business Insider spoke with founder and CEO of BuzzFeed, Jonah Peretti and his journey that resulted in a media company valued at $1.5 billion and employing about 1,500 people globally. 

Peretti however, wasn’t a stranger to online media before creating BuzzFeed. He worked together with Ariana Huffington and Ken Lerer to launch The Huffington Post (HuffPost). Before banding together to launch his own online media, Peretti himself rose to internet stardom when repurposing Nike’s customizable shoe program Nike ID to send a message to the company. 

Peretti took the opportunity to customize his shoes by placing the text ‘sweatshop’ under the iconic swoosh. The design was aptly removed by Nike, which got him in a heated, yet brief, debate with Nike. As his requests remained unanswered he forwarded his interaction to his friends, who decided to keep forwarding the message to their connections. In a short period, the message reached millions of people.  

This stunt led to Peretti crossing paths with Andrew Breitbart, the latter searching for a creative mind that could help him push his conservative agenda to broader audiences. Knowing Peretti was involved in creating online conversation, Breitbart knew he could turn his voice into a business. On the other side of the table was Peretti who had little knowledge of how to run a business. The two clicked, upon which the journey to start a business was founded. 

Unironically, this lack of entrepreneurial knowledge would come to bite Buzzfeed years down the line, as it gradually started to fall over the cliff into financial ruin. But before that could happen, Peretti met with Arianna Huffington to discuss how they could band together to launch their own news and entertainment platform. Several meetings and brainstorms later, the team and the idea came to life.  

Breitbart had turned into a polarizing figure as time passed by. Peretti acknowledged that he was difficult to work with and would have been more nuanced hadn’t the political climate changed so drastically. Breitbart would come under the spotlight during the Trump administration, which allowed him to tap into online discourse by creating divisive content that riled up opposing parties. 

New media

The concept around Buzzfeed was the total opposite of the frameworks that dedicated traditional media outlets. Peretti referenced CNN which redefined news broadcasting. CNN created the 24 hour news genre. A format not possible before the wide adoption of cable television, which greatly expanded the available channel slots. No longer were broadcasting agencies like CNN limited to the available slots on networks who wanted to serve a wide variety of different shows such as soap operas and game shows. 

Peretti expands on the concept for internet media companies. The online space allowed them to reimagine traditional media. Newspapers were only able to publish so much with each issue. The internet meanwhile, unlocked an unlimited range of new content opportunities, that could tap into new audience cohorts. These audiences meanwhile, fed valuable behavioral data back to the publishers, who in turn could tap into trending topics. 

Publishers could now see in real-time what content users were clicking on, what they shared and at which point they dropped off. Peretti noted that tracking user behavior was a major difference between newspapers and television. These companies can only hope that what they are putting out there, will find a great enough audience to keep them in business. New entrants meanwhile, cannot compete with conglomerates like Disney and NBC, who have a tight hold over the market. 

This faith in data was foundational for how BuzzFeed would be set up. Peretti said before the team launched its new venture, it had created the Buzz Bot which could detect trends through Instant Messaging. The team had developed a crawler that roamed around the web in search of valuable connections in the blogging space. Peretti’s friend, Cameron Marlow, meanwhile had created Blogdex, which tracked link acceleration across blogs. 

Early founding editor at BuzzFeed, Peggy Wang, analyzed the incoming data. The data was infused with spam, but there were nuggets buried within. Wang would write summaries of interesting topics, which would be sent out through the IM connected Buzz Bot, creating viral momentum.

Peretti noted generating strong advertising revenue was difficult, highlighting that at launch, the website had 300,000 unique visitors and one year later 600,000. These numbers might sound impressive as an isolated case, but insufficient to build an advertising business, Pertti added. The company needed to scale to build a strong advertising offering. 

BuzzFeed revenue soars 

During its early years, BuzzFeed became an investment darling. Media companies saw the potential within BuzzFeed’s data model that allowed the company to rapidly expand. In 2016, NBCUniversal announced it would invest an additional $200 million into online media company BuzzFeed. The push by NBC pushed BuzzFeed’s valuation to $1.7 billion. NBC had now increased its stake in the company to $400 million. The additional capital would allow NBC to sell more ad space across the BuzzFeed network to advertisers. Simultaneously, BuzzFeed itself could now offer a wider range of advertising options to its advertising clients. 

Annual revenue at BuzzFeed started to climb rapidly. In 2018, the media company generated $307.25 million in revenue, steadily increasing to $321.31 million in 2020. Revenue jumped to $397.56 million in 2021 and soaring to $436.67 million in 2022. Revenue from advertising increased over the same period. In 2018, BuzzFeed generated $106.28 million in advertising revenue, increasing to $128.44 million in 2019. 

In 2021, it nearly doubled advertising revenue compared to 2018, reaching a four year high with $205.79 million in revenue. In 2022, advertising revenue decreased slightly to $202.83 million, but, it saw revenue from its commerce and other segments, soar to $68.09 million. Net income however looked bleak. In 2018, BuzzFeed generated a loss of $78.51 million. In 2019 losses decreased to $36.92 million. The company turned a modest profit of $11.16 million in 2020 and saw profits increase to 25.88 million. 

However, losses spiraled out of control in 2022, where it saw profits evaporate into thin air, clocking in at an eye watering loss of $201.33 million. These losses could be traced back in the ballooning costs and expenses at the company. In 2018, BuzzFeed wrote $378.33 million in operating costs. This figure eventually decreased to $309.19 million in 2021, only to soar again in 2021 to $422.72 million.

Operational costs skyrocketed to $620.98 million in 2022. The highest number since 2018. The numbers will fall into place when zooming in on the years 2020 and 2021. During this period, BuzzFeed made several critical errors that resulted in the financial downfall and the company’s already fragile position, which would be amplified by plagiarism scandals that climaxed in the second half of 2020.

Acquisition spree 

These errors, primarily consisting out of expensive acquisitions, would become the precursor for BuzzFeed’s imploding stock. Acquisition decisions that could be traced back directly to Peretti, ultimately leading to an increased debt load at the company. Poor acquisition and selling strategies drastically alter the course of an organization’s future, as witnessed with General Electric during the early 2000s.  

In November 2020, BuzzFeed announced it would acquire HuffPost (formerly known as The Huffington Post) from Verizon. The amount was left undisclosed, with Verizon remaining a minority stakeholder. The acquisition would add new brands to the BuzzFeed umbrella, including BuzzFeed News and Tasty, further enforcing BuzzFeed’s position in the global media space. 

In the joint statement, Peretti commented that the company was excited about the partnership with Verizon, which would allow for syndication of content across each other’s properties and spur new, innovative ad products and its commerce offering. There was also a nostalgic element embedded for Peretti, who would be once again reunited with HuffPost. CNBC commented that Verizon meanwhile had been divesting across its media properties and shifting its focus back to cellular technologies such as 5G. 

In June 2021, BuzzFeed announced it would acquire  global youth entertainment company Complex Networks for $300 million. The purchase was made possible through $200 million in cash and $100 million in BuzzFeed equity. Complex had strong appeal within the lifestyle category such as sneakers, pop culture, music and food. In the statement, BuzzFeed said the acquisition of Complex would prepare the company for its upcoming IPO. 

Gen Z hates BuzzFeed

In November 2021, The Drum got exclusive insight in a research study conducted by technology company Lucid, who examined the attitudes towards popular brands among Gen Z consumers. The study revealed that Tinder, Spirit Airlines and Buzzfeed, among others, had one of the poorest perceptions amongst this consumer cohort. Navigating this target audience is difficult for many brands, as their operations can have a direct effect on their reputation.

Founder and chief executive officer at Gen Z marketing agency Trndsttrs, Jake Bjorseth, explained to the drum that Gen Z’s brand preference is derived from two sources, being altruism and perception. Brands should display a strategy that benefits overall society, ranging from combating climate change to social justice. Bjorseth explained that brands who proactively communicate their strategies and their impact, score higher overall among this demographic.

Gen Z consumers place high value into brand perception. The purchases they make should reflect their personality. Bjorseth commented that in the past fashion brands fulfilled this role, but this has now extended to brands including technology companies like Apple and Spotify. Hence, it’s very easy for brands to fall through and create a disconnect between consumers. A prime example is Spirit Airlines, which is solely driven by profit and not purpose, hence scoring low with Gen Z consumers and becoming one of the most hated airlines in the United States.   

It’s therefore no surprise that BuzzFeed, with its sole purpose to promote poorly executed viral content and polarization, scores extremely poorly among Gen Z consumers. The revelations in the survey don’t necessarily mean a company is doomed to fail, as with seen Spirit Airlines. But, when the financial foundations of a company are crumbling, having poor brand perception can push it over the proverbial edge. 

BuzzFeed goes public

Despite all the negativity surrounding BuzzFeed, the media company announced in December 2021 that it would go public through its special purpose acquisition company (SPAC), 890 Fifth Avenue Partners. The IPO would be accompanied with the completion of the Complex Networks deal. The lead-up to the IPO however, was riddled with issues. A majority of investors already redrew from the IPO and BuzzFeed itself only raised $16 million through its SPAC deal, CNN noted. 

One might have seen the writing on the wall, as just the year prior, it was met with cases of plagiarized content. In June 2020, senior reporter for BuzzFeed, Ryan Broderick, was fired for plagiarism. In a statement, Editor-in-Chief, Mark Schoofs noted that the team had found several articles that didn’t abide by the media company’s standards and ethics guidelines. Schoofs explained that articles published by Broderick contained material previously published at other news organizations.

On top of bad publicity all around and poor public perception, staff walked out in protest during the IPO vote, with the union commenting that BuzzFeed was unwilling to address wage reparations. Executives, meanwhile, were lining their pockets. The walk-out was meant as a message to senior staff that there was no value in the company without them. 

BuzzFeed Crumbles

Going into 2022, the house of cards was starting to crumble. BuzzFeed’s cash position had become dire and in order to bring it to steadier waters, it had to take drastic measures. In March 2022, CNBC reported that several large shareholders of BuzzFeed urged Peretti to shutdown its news business unit.

BuzzFeed refused to comment to CNBC about the recommendations made by its shareholders, who preferred to remain anonymous. One shareholder told CNBC that by closing down BuzzFeed News, would add $300 million in additional market capitalization for the media company, which would allow for a stock recovery. BuzzFeed stock meanwhile kept losing value, falling to $5.27 at the time of the article published by CNBC. 

The stock was still some months away from being reduced to penny stock, but the value had dropped significantly compared to the same period a year prior, where BuzzFeed traded at around $9.93. The selling of its news department would put a massive dent in the company’s credibility, as it would shed away a Pulitzer Prize-winning segment of its business. BuzzFeed news would eventually be shut down a year later in April 2023. 

In December 2022, the media company announced it would lay-off 12 percent of its workforce in anticipation of a worsening macroeconomic climate and changes in media consumption. BuzzFeed wasn’t the only one trying to reduce costs due to changing economic conditions. AMC Networks reduced its workforce by 20 percent and CNN laid off hundreds of its workers. 

BuzzFeed’s stock implosion 

In April 2023, BuzzFeed entered a financial death spiral, with its stock losing over 95 percent of its stock value since going public in December 2021. The stock went IPO at $10, but a little over 2 years in and the stock was trading below $1. At the time of the report the stock closed at 54 cents, crawling toward penny stock status. Its valuation meanwhile, completely evaporated. Coming from a $1.2 billion valuation in 2017, to a mere $86 million. Rendering the company completely worthless in the eyes of the general public and investors.

CNBC highlighted that if a company would trade under $1 for 30 consecutive days, Nasdaq would send out a deficiency notice. When a company receives this notice, it has 180 days to improve its stock position to above $1 or else risk delisting from the stock exchange. BuzzFeed was already six days into the deadline. 

The media company could execute bookkeeping mechanisms to improve its stock position, CNBC noted. BuzzFeed could do a reverse stock split to artificially increase its value, CNBC commented. This would allow the company to remain compliant. However, this wouldn’t instill much confidence among investors nor would it solve the foundational issues plaguing the company.  

As years passed by with BuzzFeed spending hundreds of millions on operations and acquisitions, it had driven itself into a wall of debt. In January 2024, Staff writer at New York Magazine’s Intelligencer,  Kevin T. Dugan, highlighted the problematic debt accumulation at BuzzFeed, which had put a massive strain on the company’s operation results. Debt puts a constant pressure on executives to pay their dues and BuzzFeed accumulated debt with many strings attached, Dugan noted.  

BuzzFeed drew in investments through convertible bonds, including conditions that allowed bonds to be converted into shares when reaching a trading value of at least $12.50. However, BuzzFeed stock had already been reduced to mere pennies, preventing the company from generating cash flow through stock trading. The purchase of Complex added additional weight to the already bloated balance sheet at BuzzFeed. 

Deteriorating Debt-to-Equity Ratio

The poor financial health of BuzzFeed could be witnessed in its Debt-to-Equity Ratio, which had been soaring to unhealthy levels since 2020, where the ratio still sat at a comfortable 0.38. The debt to equity ratio shot up to 1.23 the following year and increased to 1.86 in the fiscal year of 2023. Debt-to-Equity Ratios that remain below 2.0, display a healthy financial outlook. But, when they exceed this mark, companies slip into a danger zone where debt can tip the company into the negative, forcing it to shed weight in order to repay its obligations.

Debt to equity ratios should be placed in the context of the company. Young companies will have a higher debt to equity ratio than more mature, financially healthy organizations. However, BuzzFeed has been around for almost two decades at the time of writing, which might serve as a warning sign. Especially because the debt ratio has been increasing sharply in recent years. If the debt ratio keeps deteriorating for BuzzFeed it might be forced into bankruptcy. 

The financial team at BuzzFeed was fully aware of its quickly worsening finances, with the executive team taking the drastic decision to sell Complex. In February 2024, BuzzFeed announced it sold its youth-culture media brand Complex to Ntwrk for $108.6 million, whilst simultaneously laying off 16 percent of its workforce to move itself into a more stable cash position. Despite these efforts, the poor financial situation at BuzzFeed might have already become irrecoverable. 

Troubles ahead

BuzzFeed started out as an internet sensation. Posting viral content to boost traffic and collect as much data as humanly possible on their visitors to generate the next viral hit. BuzzFeed pioneered a novel concept unbeknownst to traditional media outlets. By adapting and optimizing its operations, it was able to ride the waves for several years. Staying ahead of the pack with listicles, cat videos and memes. But as competitors caught on, BuzzFeed’s edge became a gimmick. A relic of a bygone internet era.

In order to stay relevant, its executive team led by Peretti, started to acquire expensive properties such as Complex and HuffPost, hoping it could generate the necessary revenue  to repay the hundreds of millions it owed to investors and to accelerate a growth path to turn a healthy profit. Meanwhile, it had to shut down BuzzFeed News, perhaps one of its most precious properties to optimize its balance sheet. Although BuzzFeed News received a hit after plagiarism cases started to surface. 

In its rearview mirror, BuzzFeed saw a deteriorating brand image. Crumbling with each new article it posted. The brand was much disliked by one of the most lucrative cohorts in advertising, young adults. Losing these audience segments is the last nail in the coffin for any company that derives most of its revenue from advertising. Even the largest platforms on the planet like Instagram, are anxiously trying to keep these users onboard to keep advertising revenue afloat. But for BuzzFeed, this boat had already passed.