This year hasn’t been kind to stocks overall; however, digital media company BuzzFeed has been struggling particularly hard, and it appears BuzzFeed’s pain is reverberating through the rest of the digital media landscape.
BuzzFeed stock hemorrhaged 66% since shares opened at $10.95 on Dec. 6 and closed at $3.69 on Monday. After the company’s first-quarter financial results released Monday afternoon, shares nosedived 10% in after-hours trading. And if the stock opens at the after-hours levels, it will be barely above $3 per share.
The digital media company’s revenue grew 26% from last year, but losses widened significantly to $45 million, from $11 million in 2021. BuzzFeed saw content revenue rise, while user engagement and commerce revenue declined.
Some may say it’s bad timing, and others may say the market just doesn’t have an appetite for a pure-play digital media company. Either way, things really aren’t going the way CEO Jonah Peretti thought they would.
BuzzFeed emerged as a public company after a merger with special purpose acquisition company — or SPAC — 890 Fifth Ave. A SPAC is also known as a “blank-check company” and is used to raise money through an IPO with the goal of either acquiring or merging with another company.
There were 613 U.S. listed SPAC IPOs in 2021 and 248 in 2020, according to financial analytics platform Dealogic. If there was ever a time to go public through a SPAC, it was 2021, and Peretti jumped on that opportunity to take BuzzFeed public just before the new year.
However, not only has there been a serious slowdown in SPAC mania, but the macroeconomic environment is tough, to say the least. So tough in fact that even a company like Google’s YouTube reported a serious deceleration in revenue during Q1. If digital advertising behemoths such as YouTube are having trouble, companies like BuzzFeed are definitely feeling the heat.
On top of all that, geopolitical risks caused by a war in Ukraine, sky-high inflation and supply-chain woes have injected a serious amount of uncertainty in the business world. And when there’s that much uncertainty, companies tighten their belts and spend less on things like advertising.
Many other digital media companies, including Vox Media and Vice Media, were looking to BuzzFeed’s public debut as a sign of whether there was a real appetite among investors for digital media. Following BuzzFeed’s poor post-debut performance, other media companies seem to have decided that sticking to consolidating and gaining scale privately was the better move.
Both Vox and Vice scrapped their own IPO plans. Instead, Vox completed a merger with Group Nine Media in February, and it was reported earlier this month Vice was planning to put itself up for sale. Meanwhile, The New York Times paid a cool $550 million to buy up The Athletic, and more recently, G/O Media bought business journalism site Quartz in April.
It’s tough out there to be a digital media company. As we’ve learned with both Vice and BuzzFeed, private valuations have been too inflated, especially as competing with digital advertising giants like Google, Meta and Amazon get harder and pressure mounts from investors to turn a profit.
Consolidation and diversification appear to be the only way to survive, but BuzzFeed stock’s slow and steady depreciation is less than encouraging, leaving a cloud of uncertainty over the entire digital media space.