There was little joy in Newsville on Friday as several major media operations announced massive layoffs. Digital-native darling BuzzFeed knocked off 15% of its staff, or around 250 jobs, while Verizon cut 7% of its media unit–800 souls from HuffPost, Yahoo and AOL.
Reporters and editors took to Twitter in droves to lament they no longer had homes. Soon followed countless analyses suggesting that—once again—the digital media world is doomed. Alas, the Duopoly of Facebook and Google (little mention of the Troika—why isn’t Amazon getting more attention as its slice of the pie steadily expands?) continues to suck all the blood out of the industry…
However, these layoffs need some context rather than just a howl of, “Damn you, Duopoly!” While drastic, they’re not quite signs to give up all hope on digital media; both Verizon’s media properties and BuzzFeed point to further fallout from previous missteps.
Merger Mishaps
Let’s start with Verizon: it was well-known the acquisitions of Yahoo and AOL were more about the ad tech capabilities than the media offerings. The attempt to merge the diverse operations under the Verizon umbrella—as well as set up a larger integration with Verizon that might take advantage of the telecom’s stores of data—appears to have been a bust.
The Oath age ended with a whimper—following CEO Tim Armstrong’s departure, these layoffs seemed inevitable. It’s the timeless tale of poor post-merger integration.
The real question is whether Verizon’s media bloodletting is an omen for AT&T’s full vertical stack dreams via the AppNexus and Time Warner acquisitions. Well, Time Warner is a very different content beast than Yahoo and Aol’s offerings with linear television roots, premium long-form digital video, and streaming options galore. While Verizon’s digital media hardships certainly increase skepticism about a telecom rival to the Duopoly (Troika!), AT&T’s vision should not be discounted.
The Dark Side of Investment
Possibly the most nauseating aspect of the BuzzFeed layoffs is the fact that the company hit its revenue goals last year after a period of disappointment. However, CEO Jonah Peretti commented in his letter to staff that the growth rate was not “enough to be successful in the long run.”
That’s code for “The investors want more money faster.”
A dark cloud has long has followed digital media companies that soaked up venture capital and investments. Particularly those who witnessed venture capital’s heyday and MAYDAY! in ad tech have been waiting for the other shoe to drop—and it may still be dropping as I type.
BuzzFeed is a special case—it bet heavily on its native content product and (proudly) eschewed other revenue channels like programmatic. That native product in turn leaned heavily on engagement from social platforms (cough, Facebook), so when algorithms were re-jiggered, BuzzFeed’s revenue took a major hit. It’s only in the last year or so that BuzzFeed has been seriously diversifying its revenue streams.
Should we soon expect the fall of other investment-backed digital media darlings? Late last year, Vice Media announced a hiring freeze as well as a plan to reduce staff by 15%. But the picture appears rosier for Vox Media, which has a revenue-diversification strategy—including the Concert creative shop and media alliance—that seems to be paying off. Vanity Fair reported that Vox Media’s revenue was up 15%-18%.
Local Woes
There was another major media company that announced layoffs last week, and this one might be the most troubling. Gannett trimmed staff from many of its regional publications. This is where the Duopoly’s dominance has long been the biggest source of pain—grabbing small-and-medium business spend that used to go to regional print publications.
Many smaller and regional businesses fail to see the use of digital advertising beyond Facebook and Google. They aren’t big enough to garner the hand-holding they’d need for direct buys (including branded content campaigns and targeted private marketplaces) with major media companies.
Gannett/USA Today Network has its own creative development and media strategizing shop for SMBs, but it’s going to be quite a battle for premium publishers to earn these dollars away from the Duopoly. Fortunately, tools like programmatic direct (or guaranteed, depending on whom you ask) are helping put them in a position to strike.
And there would seem to be an opportunity here for savvy small agencies and consultants that focus on regional SMBs. I think this is a prime time to catch up with StreetFight.com.
Programmatic Angle
There is one more revenue aspect to these layoffs I couldn’t help thinking about—the amount of non-Ads.txt inventory still being bought on programmatic markets. Why oh why would you ever buy something from a site without an Ads.txt file? Well, if you were trying to keep average CPMs or eCPMs low, you might cynically purchase low-cost non-ads.txt inventory, not caring whether your creative is served to a spoofed domain or a bot.
It’s a trifecta of crappiness: you’re screwing over your client by purchasing fraudulent inventory, enriching scam artists, and cheating worthy publishers of revenue, potentially endangering the jobs of their hard-working employees.
This is going to be a weird year for programmatic, perhaps one of serious maturation. AdExchanger wisely pointed out one of the chief allures of private marketplaces is diminished as the programmatic space gets better lit. But a cleaner market also makes for accurate pricing, and whaddayaknow—programmatic inventory on premium sites is costly.
Buyers need to come to terms with this, and knock off their price-manipulation games. Ads.txt inventory or bust—platforms would be wise to exclude anything else, no matter how that might affect their bottom lines.
And buyers could consider spend diversification themselves. Just saying: programmatic direct isn’t just for SMB advertisers.
Past the Crest?
Last week was pretty damn depressing for digital media and journalism in particular, but don’t think the sky is falling. I was heartened at how many journalism outlets, including The Washington Post, were hiring. Not all the thousand laid off are going to immediately grab new positions but I think these layoffs represent the end of a wave of pain. We’re at least past the crest.