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BUZZ-ING TO PROFITABILITY?
THE NEWS
After laying off 15% of its staff in January, BuzzFeed projects it will break even this year and return to profitability next year, according to The Information. 
 
SO WHAT
To meet these projections, BuzzFeed is betting on revenue growth in two relatively new areas of the business: commerce and off-platform video sales. 

Commerce, which BuzzFeed CEO Jonah Peretti called a “big part of our revenue growth” last year, is on track to bring in $65 million this year, according to The Information. (Revenue is reportedly up 70% year over year, though Bloomberg previously reported that the commerce division had $50 million in 2018 sales.) Commerce revenue is driven primarily by affiliate links (which enable readers to buy products mentioned in articles), but BuzzFeed has rolled out additional commerce offerings, such as consulting services and product workshops. These services upend the traditional process of product development: Rather than paying for only promotion, brands pay BuzzFeed both to help develop a product — ranging from a houseplants subscription service to a lip-gloss-cum-fidget-spinner toy — and to distribute advertising on the site; BuzzFeed may share a cut of sales well.

With regard to off-platform video, BuzzFeed plans to produce as many as 20 digital shows this year, with particular focus on free platforms like Facebook, Twitter, and Snapchat. This effort was kickstarted in 2017 with Buzzfeed’s Twitter show AM2DM, and recently two new Facebook Watch shows were funded by Facebook: “Did You See This?” will be a daily news show, and “That Literally Happened” will be a weekly series. 

LOOK FOR
BuzzFeed to experiment with additional revenue streams, such as events. Last month it held its first event, which featured Lil Nas X and other online stars. 

Also look for updates following the company’s recent recognition of the BuzzFeed News union. It could be a tense negotiation process if BuzzFeed looks to continue to control costs while employees look to lock in more benefits and security. (The terms of the Vox Media Union’s contract could be a baseline for negotiations; you can see the details here.) 

Finally, keep an eye on M&A buzz. Founder Jonah Peretti has talked up the advantages of merging,  although talks with Group Nine Media about a possible merger broke down a few months ago. There may be other prospects however, including murmurs of interest from the recently-created ViacomCBS.
THESE MADE US SMARTER
Nieman Lab summarizes a study that found publishers with the highest-performing subscription businesses are characterized by tighter paywalls, easy checkout processes, defined markets, and a deep understanding of churn.

This article about Glamour’s digital-first transformation explains why Glamour is still “indulging in print” and focuses intensely on Instagram.
WHAT'S NEW WITH...
SOFTWARE // Axios is planning to sell its CMS on a subscription basis to help companies create newsletters for their employees. It joins several other media companies, such as the Washington Post, Vox Media, and Vimeo, who are also selling software to diversify revenue. 
 
ACQUISITIONS PT. I // CBS and Viacom are reuniting after their 2006 split, amidst an industry-wide trend towards consolidation. Together, they will have a larger content roster to compete with the likes of Disney and Netflix, as well as a better negotiating position with third parties. This is probably only the first step in gaining scale, as their combined market capitalization (around $32 billion) is still small compared to others (Disney is at around $254 billion), as nicely summarized in this Recode infographic.

ACQUISITIONS PT. II // Verizon sold Tumblr to Automattic, the owner of publishing platform Wordpress, reportedly for less than $3 million, a sharp plummet from the $1.1 billion Yahoo paid in 2013. Automattic CEO Matt Mullenweg envisions bringing back old-school blogging as an alternative to the “democracy destroying” social media giants. Mullenweg plans to experiment with applying Wordpress's freemium model to Tumblr, which is currently unprofitable.

ACQUISITIONS PT. III // Maven acquired TheStreet, a 20-year-old financial news provider, for $16.5 million. This is its fourth acquisition of the year, which include the media operations of Sports Illustrated. Over the next twelve months, revenue from the combined company is projected to surpass $50 million.

ACQUISITIONS PT. IV // The Financial Times bought a minority stake in The Business of Fashion. Founded in 2008 as a daily newsletter, BoF has more than 35,000 paying members in 125 countries renewing at a rate above 80%. The FT hopes the deal will help solidify its position in the luxury sector. BoF will expand its membership business and coverage in adjacent industries, such as beauty, watches, and jewelry.
 
PODS // Spotify for Podcasters has come out of beta. The platform provides listener data, ranging from music taste to how long users listened to a particular episode. As the platform evolves, it could mirror parts of Spotify’s product for musicians, which allows them to publicize tour dates and sell merchandise.
 
DIGITAL ADS // Companies are effectively blocking their ads from appearing on some news sites, according to The Wall Street Journal, as blacklists make many political or hard-news stories off-limits for advertisements. The lists are becoming more extensive (some exceed 1,000 words) and are dominated by politics: The most common words blacklisted on CNN.com are: 'shooting,' 'Mueller,' 'Michael Cohen,' and 'Trump.’

VIDEO // YouTube joins Facebook in the video-subscription game by testing a members-only videos feature. This follows in the footsteps of its Membership program launched in June 2018, which sells subscriptions for individual video channels. Prior to this extension, membership perks were primarily linked to “unique badges, new emoji, [and] Members-only posts in the Community tab.” 

BLACK MEDIA // The Black News Channel is slated to launch on November 15 and is expected to reach at least 33 million homes. Starting a new cable news channel will be a challenge as the numbers of cable and satellite subscribers decline, but its founders see an opportunity in serving underserved communities and conveying news from the “inside out.”

DIGITAL SUBSCRIPTIONS // News UK, parent company of The Times and the Sunday Times, now has more than 300,000 paying, digital-only subscribers. 19% growth in digital subscribers this year is the strongest performance since the company launched digital subscriptions in 2010. News UK attributed its success to a focus on retention, including tactics such as increasing journalist interaction with readers in the comments section.

SUBSCRIBER SPOTLIGHT

James Hamilton

Director of Stanford University’s Journalism Program
@StanfordJourn

 
Can you tell me about yourself, your background, and how you became interested in news markets?

I have a PhD in economics, and in the first 10 years of my career I focused on how information affects polluter behaviors. I studied an EPA program called the Toxic Release Inventory, where the EPA each year releases data on what comes out of smokestacks and goes into rivers. I had read that there was a proposal to have a violent television report card that would report who was advertising on violent television programs. That caused me to see TV violence as a pollution problem, one of negative spillovers on society that are unintended. 

I ended up writing a book called Channeling Violence: The Economic Market for Television Violence, which took the theories of environmental policy and applied them to the market for TV violence. That experience caused me to be interviewed by a lot of journalists who were critical of the media and TV violence, and I felt there was another story to be told about stories that aren't produced in the market, but do have a positive impact on society, namely, public affairs reporting. That led me to write a book called All The News That's Fit to Sell

What was the thesis of All The News That's Fit to Sell? What were some of your findings about the positive spillovers of public affairs reporting?

We generally think of journalism as the five W's: who, what, when, where, and why. In All of The News, I argue that there are a set of five economic W's that determine what stories get told and what media organizations survive in the marketplace. Those five economic W's are: Who cares about a particular piece of information, What are people willing to pay for that or what are people willing to pay for the attention of those readers, Where else can you find these consumers, When is this profitable (that brings in the cost structure of creating information), and Why is this profitable (that brings in the property rights to information.) 

Journalists don't roll out of bed every day and say, "It's a great day to maximize profits," but those five sets of economic W's do determine whose stories get told and why. 

In All The News That's Fit to Sell, I try to lay out some economic concepts that explain markets for news, and in particular I draw on Anthony Downs. He said, we all have four information demands in our life as a consumer, as a worker, as an entertainment audience member, or as a voter. The first three markets work fairly well, because if you don't seek out the information, you don't get the benefit. But in the voter demand, the problem there is that even if you care passionately about an issue and more information would help you make a better decision, the probability that your vote determines the outcome of an election — unless you're Justice Scalia — is very tiny. As a result, Anthony Downs says most people remain rationally ignorant about the details of politics. 

I do think that there is a market for public affairs information. I think of it as duty, diversion, and drama. Some people think that they have a duty to vote and a duty to become informed. For some people, the details of politics and policy are as interesting as ESPN. That's a very tiny part of the market, that's the 1% that turns out to watch PBS NewsHour. For drama, you bring back the entertainment demand by describing politics as a horse race or a scandal. 

I think on the demand side, this notion of rational ignorance helps explain why there is a gap between what people need to know as citizens and what they want to know as consumers. The other major problem with public affairs markets you can think of as the following: Suppose you do an investigative report. You change lives and laws, but those benefits go onto many people who are not your readers or viewers. Economists call those positive spillovers or positive externalities. It means it's hard to capture the social benefits of what you're doing. That means those stories are under-provided in the marketplace. 

What’s the most interesting thing you’ve seen in media from an organization other than your own?

One thing that I really admire is ProPublica’s machine bias. They were trying to discover how Facebook’s advertising algorithms work, and people often say, that’s a black box, how could you determine that? They took a simple approach. They actually took out ads and saw what type of ads Facebook was willing to accept. I liked that because it was a very low-tech solution to the study of high tech.

This Q&A has been edited for length and clarity. Read the rest on Medium.
 

Last week, we asked whether you’ve ever donated to a nonprofit news site. 37% said you had donated to a local one, 21% said you donated to a mission or topic-driven one, 2% said you had donated to a nonprofit organization that funds news, and 40% said they had never donated to an explicitly journalistic cause. 

This week, we want to know what you generally value most before making an online purchase decision:

Product guides (e.g. BuzzFeed, Wirecutter, The Strategist)
Product descriptions on retailer websites
Reviews on retailer websites
No research

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The Idea is written by Atlantic Media's strategy research team. Send thoughts, tips, and more fidget-spinner crossbreed toy ideas to idea@atlanticmedia.com. 

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