To compensate for a “significant revenue shortfall,” BuzzFeed has announced that the company would be laying off approximately 100 employees and restructuring the organization in an effort to diversify its revenue sources away from a reliance on so-called “native advertising.
For those unfamiliar with the concept of “native advertising,” it generally means customizing advertising into what appears to be a “native” editorial – or as they say “advertorial” – format which is both time-consuming, labor-intensive, and costly to produce. As people learn to distrust advertorial content and advertisers see less of an advantage over conventional advertising, it is natural for revenues to decrease with no offset to labor costs. Hence, employee headcount must be reduced.
BuzzFeed’s IPO (Initial Public Offering) scheduled for 2018 is also being placed on hold as the company deals with the risks associated with the hyper-politicization of their content, the ongoing era of digital disruption, and the widespread availability of real-time news and coverage on social media platforms. It should come as no surprise that BuzzFeed’s President, Greg Coleman, and a number of other executives will be leaving the company. Possibly at the urging of one of BuzzFeed’s major investors, Comcast Corp.’s NBCUniversal, who reportedly ponied up $400 million out of the $500 million invested by venture capitalists.
The greatest threat facing BuzzFeed is not diminishing advertising revenue or the risk of diversification into vertical markets, but the type of libel lawsuit that destroyed Gawker, another internet media company.
BuzzFeed was the first media organization to publish the salacious and mostly unverifiable “Steele Dossier” and the attempt to create a Trump-Russia linkage. It now appears that the dossier is a product of Fusion GPS an opposition research company founded by former Wall Street Journal reporters and was paid for jointly by the Clinton campaign and the Democrat National Committee.
The dossier is the subject of a libel suit filed by Russian entrepreneur Aleksej Gubarev, the CEO of XBT Holdings and its internet hosting network Webzilla. The dossier appears to allege that Gubarev was a party to the hacking of DNC computers under the direction of the FSB, Russia’s intelligence agency. Not only did Gubarev deny the allegations, he brought lawsuits against the purported dossier’s author, the ex-British spy Christopher Steele.
BuzzFeed has asked the Department of Justice to consider the publishing of this possibly false and defamatory document and the accompanying BuzzFeed story to be within the scope of free and protected speech. The BuzzFeed claim is based on the “fair reporting privilege” because the dossier was being investigated by the FBI. It is unknown at this time whether or not BuzzFeed was compensated for publishing the dossier after a number of credible media organizations turned away from the project. The DOJ has rejected BuzzFeed’s claim for immunity on the basis that their story did not mention the FBI, the investigation, and the dossier was not a government-originated document.
It is expected that other lawsuits remain waiting to be filed once the preliminary information has been discovered and key initial rulings published.
Is the handwriting on the wall and are red flags flying for the remaining employees?