Some of the commercial woes faced by companies like Vice and Buzzfeed may be because they started to believe their own hype, the boss of The Guardian has said, as he revealed his own company is now “out of danger”.
Speaking at the Advertising Week Europe conference in London, Guardian Media Group CEO David Pemsel was asked about the 2,500 or so media jobs cut so far this year by digital publishers including Buzzfeed and Vice.
Pemsel: The Buzzfeed viral nirvana was false and Vice’s attitude is no longer wanted
Pemsel told the audience that because venture capital investors had rushed to take stakes in the digital startups, they had started to believe they were immune to pressure faced by other publishers.
He said: “A lot of companies that have faced problems in the last six months perhaps started to believe their own hype.
“Some of their valuations were billions and billions of pounds. Perhaps a team who had strived hard, from start up to something of scale, might get complacent at that point.”
Pemsel said Buzzfeed was hit badly by Facebook’s algorithm change which reprioritised content from friends and relatives over that of publishers. And he alluded to the gonzo tone of journalism produced by Vice, which has also seen allegations of sexual harassment in its North American operation.
He said: “There still remains a huge amount of disruption. It shows this nirvana view that one company can solve everything – Buzzfeed at one point was considered to be the darling of virality, then there’s an algorithmic change from Facebook and suddenly you ask, ‘Well, will that work?’
“Or Vice, who did an extraordinary job to create a billion dollar company and then suddenly the tone and the output of their journalism perhaps does not chime quite with the times we’re in and suddenly that’s not necessarily wanted any more.”
He added: “All organisations need the ability to be self aware and to be able to adapt very quickly.”
Pemsel also discussed The Guardian’s own financial challenges, which saw the publisher cut 20% of its global workforce – more than 450 roles – in order to save $50m a year.
He said: “That is an awful experience to go through. That was a horribly difficult process.”
Saying the company is no longer on the brink of going broke, he gave the strongest indication yet that when organisation reaches the end of its UK financial year, at the end of next week, it will finally be able to report that it will no longer be loss making.
Along with job cuts, the company began asking readers to pay to support it, without putting up a paywall.
He said: “It was a three-year strategy that started in 2015 when we embarked on this incredibly brave and innovative strategy. We said we’d break even by the end of March. Given that’s a couple of weeks away, I’m sure we will get there.
“The Guardian three of four years ago was on the br… got itself into a pretty perilous state. To think a company so special and so important to so many readers around the world, in 2015 was potentially losing $100m cash, those things really can destabilise, if not permanently put you out of business.”
He added: “We are out of danger. We were in danger. We were in a spot of bother, and now you can describe us as out of danger and able to just pause for a minute.
“Kath Viner, our editor-in-chief, and I can just pause and reflect for a second, to think about how we build global growth, global impact and how we grow relationships with out readers and how readers can make a greater contribution.”
He said the company now has 650,000 recurring paying contributors every month.
However, despite The Guardian’s success in persuading readers to pay for its campaigning journalism, he was unable to offer hope regarding the decline of local and regional journalism in the western world. He said: “The structural challenges and commercial challenges for regional news has been absolutely brutal. It’s a desperate position.”
Vice declined Mumbrella’s invitation to comment.
Buzzfeed declined to comment on the specifics of Pemsel’s comments but pointed to a staff email sent by founder Jonah Peretti earlier this month.
In the email, Peretti wrote: “The first step is to make working with the big platforms financially sustainable. We are making real progress here, and so are other digital publishers. A year ago, in Q1 of 2018 we made about $500k in video platform revenue from Facebook; in Q4 of 2018 we made $3m. In January of 2017, we monetized less than 30% of views on YouTube; by November, we monetized more than 70%. Overall, revenue we generate from the biggest platforms – Facebook, Google, Amazon, and Netflix – has grown by 12 times since 2014.”
Peretti added: “In 2018 and 2019, we will generate over $200m in revenue from business lines that didn’t even exist in 2017. We are great at building new products and businesses and the products I mentioned above will likely provide our next $200m in new revenue.”