It might be Jonah Peretti’s last chance to turn BuzzFeed around
Jonah Peretti, founder and CEO of BuzzFeed, attends his company’s public debut outside the Nasdaq in Times Square in New York City, Dec. 6, 2021.
Brendan McDermid | Reuters
Corporate stories have ebbs and flows, ups and downs.
To this point, BuzzFeed‘s journey as a public company has been a bottomless pit. Co-founder and Chief Executive Jonah Peretti may be running out of time to alter his company’s trajectory.
The digital media company known for its listicles and quizzes is in crisis mode. Its stock has fallen 95% since the company went public at $10 a share in December 2021. The shares closed Friday at nearly 54 cents, giving the company a market valuation of about $86 million.
If a company trades for 30 consecutive business days below the $1 mark, Nasdaq will send a deficiency notice to the company, giving it 180 more days to top $1 or risk getting delisted. BuzzFeed has traded below $1 for six days in a row as of Friday’s close.
There are loopholes and conditions. BuzzFeed could do a reverse stock split to artificially boost its share value and stay in compliance — a move last year executed by insurance firm Hippo after it had an average closing price of less than $1 over a consecutive 30-day trading period. Hippo continues to survive as a listed company.
Peretti’s plan is to boost shares back over $1 by persuading investors he’s prepared to run a more profitable company. That’s what led him to shut down BuzzFeed’s Pulitzer-winning but money-losing newsroom last week and lay off 180 employees, or 15% of the company’s staff.
“I’m trying to set us up with a better future and align with major trends,” Peretti said in an exclusive interview with CNBC. “If I do that well, my leadership will be a success. If not, it won’t be.”
BuzzFeed reported a net loss of $201 million for 2022 (including a non-cash goodwill impairment charge of $102.3 million) after turning a $26 million profit in 2021. The company’s investor day is May 11. Peretti will try to convince shareholders his vision should be trusted.
It’s fair to question Peretti’s decision-making in not shutting down BuzzFeed News earlier, he acknowledged. CNBC reported in March last year that investors asked him to shut it down.
Still, he has no plans to step down as CEO or sell the company despite the company’s 95% loss in value, he said.
“I’d be more concerned with my leadership if I didn’t see where the market was heading,” he said.
Peretti hopes incorporating more artificial intelligence into the company’s content will both boost engagement and save the company on cost. In the past two months, BuzzFeed AI-powered quizzes have led to a 40% spike in how long a user has participated compared with human-generated quizzes, Peretti wrote in a BuzzFeed blog post Thursday.
“Formats that were developed before the AI-revolution, and many of the formats and conventions of the media industry will need to be updated and adapted, or begin to feel stale and outdated,” Peretti wrote in the post. “This is why we’ve been investing in AI-powered content and launching new formats like Infinity Quizzes and Chatbot games.”
Some of Peretti’s predictions seem counterintuitive when considering what the next version of the internet might entail. He wrote that he expects news homepages to have a resurgence as destinations as social media companies such as Facebook, TikTok and Twitter turn their back on news for more general entertainment. That’s why he’s confident in the future of BuzzFeed brand HuffPost, which surged in popularity during the mid-2000s with its creative splash headlines.
“In fact on Monday this week, HuffPost hit 16 million page views — a record high since joining BuzzFeed, Inc. — a sign this prediction is already coming true,” Peretti wrote.
Peretti said he believes BuzzFeed can operate profitably by “covering trends, making shopping more playful, creating new interactive AI formats, and helping creators connect with our audience.”
This, too, could be wishful thinking if digital audiences move beyond old methods of internet usage and toward augmented reality and gaming, where BuzzFeed has no current strategy.
A dream burst
BuzzFeed’s announcement in January that it would begin using AI to help generate quizzes gave BuzzFeed a brief surge in value, with shares jumping 120%.
But for the most part, BuzzFeed shares have been all chute and no ladder.
BuzzFeed went public via a special purpose acquisition company, or SPAC, to great fanfare on Dec. 6, 2021. For a moment on that day, shares surged from $10 to more than $14. BuzzFeed’s valuation briefly surged past $1.5 billion — more than three times the amount Disney offered to buy it a decade earlier, as described in an excerpt from a new book by former BuzzFeed News editor-in-chief Ben Smith.
In those early hours of day one trading, an entire industry began thinking about its future differently. If BuzzFeed could find a receptive audience among public investors, companies such as Vice, Vox Media, Group Nine, and Bustle Digital Group — all of whom had venture capital backers who wanted to make a return on their investment — could either go public themselves or take publicly traded equity as part of an industrywide rollup.
“I just bought a f—ton of BuzzFeed shares at $6,” Bustle Digital Group CEO Bryan Goldberg told CNBC at the end of that first week. “If it goes lower, I’ll really back up the truck.”
BuzzFeed shares did go lower. And lower. By June, shares were below $2. The advertising market started to sag as interest rates rose and company valuations suffered. Shares first fell below $1 last month. (Goldberg said he didn’t actually buy shares until they were closer to $1 and then sold them during February’s AI pop).
With their fates tied to BuzzFeed’s performance, digital media companies have abandoned the rollup dream and the go-public experiment. Vice announced this week it’s restructuring its global news operation, including laying off 100 employees. The company has been searching for a buyer for more than a year. Vox Media sold a 20% stake to privately held Penske Media in February for a $100 million capital infusion. Vox and Group Nine merged last year.
Instead of being the flag bearer for the digital media industry, BuzzFeed now looks like it’s trapped on an island, forced to publicly flail while onlookers shake their heads. When it went public, BuzzFeed promised surging revenue, estimating $654 million by the end of 2022, $833 million by the end of 2023 and $1.1 billion by the end of 2024.
BuzzFeed’s actual annual revenue for 2022 was $437 million. The predictions for 2023 and 2024 currently look like pipe dreams.
Peretti may have only one more chance to turn his company’s fate.
“This feels like an inflection point,” he said.
WATCH: CNBC’s full interview with BuzzFeed CEO Jonah Peretti in 2021 on market debut