Axios Pro Exclusive Content

BuzzFeed has cooling effect on digital media SPACs

Mar 23, 2022
Illustration of a blank check in an ice cube.

Illustration: Aïda Amer/Axios

BuzzFeed's public listing continues to be a cautionary tale for digital media startups seeking new funding and looking to go public.

Why it matters: The public market potential for news businesses looked strong in 2020, but the market has since cooled. Now, investor pressure has motivated dramatic cuts to BuzzFeed's Pulitzer Prize-winning news division.

Driving the news: BuzzFeed's first earnings report fell well short of what it promised SPAC investors. The company posted $398 million in revenue and $26 million in profit for 2021 — far lower than the $521 million in revenue and $57 million in profit it had initially projected.

  • CEO Jonah Peretti announced executives' departures and voluntary buyouts for its news division as he no longer plans to subsidize the unprofitable venture with money from other departments.
  • The Guardian reported in May 2020, amid earlier BuzzFeed layoffs, that Peretti said he was "investing heavily" in news. He estimated losing $10 million on it in 2020 and $6 million in 2021.
  • But several large shareholders had since urged Peretti to shut down the news division, CNBC reported Tuesday.
  • In Tuesday's conference call, Peretti also announced layoffs for 1.7% of BuzzFeed's total workforce — or about 25 jobs — affecting BuzzFeed video and Complex's editorial staff.

State of play: Digital media companies that were considering SPAC deals had been watching BuzzFeed's stock market debut, as Axios' Sara Fischer wrote in November. Most of them have since delayed any plans.

  • BDG paused its plans, founder and CEO Bryan Goldberg told Axios last month.
  • Vox Media is focused on growing as a private company, sources also told Axios last month.
  • Group Nine Media formed a SPAC last year but has yet to take a company public with it. Vox Media has since acquired Group Nine, and the SPAC has until January 2023 to make a move.
  • Vice Media raised more private funding after months of SPAC talks.
  • Forbes is still planning its SPAC merger, however, and is days away from its deadline.

Yes, but: Some media entrepreneurs still see opportunity. Ben Smith, who built BuzzFeed’s newsroom in 2012 as its first EIC and left for the New York Times in 2020, is fundraising for his new media startup, Semafor. Other news companies have gone the nonprofit route.

The bottom line: The fears media owners had about the public market — especially when it's as volatile as 2022 — impacting their business decisions have proven to be true.

Go deeper