Embattled digital media business BuzzFeed saw its share price jump by over 20 percent last night as its Q2 financial results showed signs that its turnaround plans are paying off.
The company’s stock has plummeted over the last few years, as it’s been hit hard by a tough ad market and falling traffic referrals from social platforms, which has led to falling ad revenues. At a glance, BuzzFeed’s latest results show this is still the case: total Q2 revenues sat at $46.9 million, down 24 percent year-on-year, while ad revenues were down to $23.8 million, a 19 percent year-on-year fall.
But within the numbers, green shoots from BuzzFeed’s ambitious turnaround plan were visible. Programmatic ad revenues, which are a bigger strategic focus for the company and now make up the majority of total ad revenues, rose three percent year-on-year to $16 million. Affiliate commerce revenues, another strategic focus, grew nine percent.
The standout part of BuzzFeed’s turnaround plan is undoubtedly its heavy investment in AI content and tools, and CEO Jonah Peretti said this too is bearing fruit, leading to deeper audience engagement (which in turn is growing programmatic revenues).
BuzzFeed expects this improvement to accelerate over the next quarter, when it is projecting overall revenues of $58 million to $63 million. If it hits the top end of that range, that would represent five percent year-on-year revenue growth.
Weaning off Facebook
Publishers of all types have spent years fighting for ad investment under heavy competition from the big tech and social platforms, while also grappling with an often tough ad market since the pandemic. Many have also complained in recent quarters of falling traffic from the likes of Facebook, Instagram, and Google, as each tweaks their algorithms, and the former two in particular deprioritise news content.
But BuzzFeed has been hit harder by this latter issue than most. To many, BuzzFeed is the archetypal social publisher – having built both its audience and reputation on clickable content shared over social apps. As social referrals have dried up, BuzzFeed’s traffic has suffered. YouTube’s prioritisation of short-form content has also had a big impact. While BuzzFeed’s videos used to regularly pick up millions or tens of millions of views, most recent videos have fewer than 100,000.
In light of this, the major challenge for BuzzFeed has been to grow audience engagement through its owned and operated channels. In Q2, 90 percent of audience time spent with BuzzFeed was on its owned and operated properties, and direct traffic referrals is now the company’s largest source of traffic.
To grow traffic and deepen engagement further, BuzzFeed is betting on AI. CEO Peretti has said he wants to build BuzzFeed into “the defining company of the AI era”, using AI to personalise content and create new types of content. Early AI content experiments have included AI-based quizzes and games, articles featuring AI-generated images, and AI assistant tools hosted on the BuzzFeed site.
And Peretti says this AI investment is already having the desired effect, bringing in more traffic and keeping audiences coming back to BuzzFeed.
Audience time spent with BuzzFeed’s content was up five percent in Q2 compared with Q1, according to data from Comscore. BuzzFeed says it is the only digital media company within its competitive set to grow over this period. The number of logged-on users also grew compared with Q1, and the number of loyal users (people who visit BuzzFeed more than once per week) has grown by a double-digit percentage since Q4 last year.
Peretti said these improvements have helped drive the growth in programmatic ad revenues and affiliate revenues which BuzzFeed has seen year-on-year. And these improvements are expected to continue, hence the projected strength of Q3.
