BuzzFeed is closing its news division – the latest piece of evidence that it is hard to make ad-funded quality journalism. It also demonstrates that digital media companies haven’t really been able to change the news and quality journalism market. Furthermore, this raises a larger question of whether the early years of the internet created the illusion that we can get quality for free. Is this illusion starting to finally fade? And is it the same with software too?
BuzzFeed’s background was a digital tech company that then wanted to offer its own content. It wanted to utilize social media and especially target younger generations. BuzzFeed News won a Pulitzer award a few years ago. It has published significant investigative journalism and respected analysis, and has broken several important exclusive stories.
But some analysts have concluded that ad funding forced Buzzfeed to target high volumes, which means they must commoditize their content and also find enough content that is attractive to large masses. At the same time, the social media context is also changing – e.g. the TikTok model has become more powerful than traditional social media.
We have also seen significant changes in ad-based revenue models. It has been a long journey from the late 1990s, when news and content went online and were offered for free. In the late 2000s, ad funding was seen as the main business model. Now, most of the quality news media services and content are behind a paywall.
Media is about content, not distribution
We’ve seen disruptions in many markets that have created opportunities for new actors to win market share while traditional players have struggled. For example, in the retail market, many traditional retailers have collapsed. Yet in the media market, traditional newspapers are still important even though the market has gone from print to digital. Why?
We can evaluate some possible explanations:
- The distribution method is not a key factor in media – it’s much more about the quality of content and journalism. When we look at disruption in a business, it is really important to understand what is the core thing the customer wants.
- Ad-based funding forces you to target really high volumes. But in the end, to really engage people, you need to offer top-quality content for targeted interest areas. When your service is too generic, it’s hard to be really important to anyone. The same has happened with influencers – global mega-stars and authentic influencers in niche communities matter, while generic small stars are fading.
- Online ad prices are low, and advertisers have also started to focus more on the impact of ads than views. Context matters for advertisers too – you want your ads placed with high-quality content that people are ready to pay for.
- People respect brands in news and journalism. People want to trust their news and article sources. Brands become even more important when there are a lot of choices and people find it difficult to navigate between them.
- While many traditional media companies have failed since digital services came, they are often mid-size generic news services. Larger or more targeted publications (e.g. The New York Times, The Times, BBC, Financial Times, Wall Street Journal) and many small niche publications have been able to keep their important role.
Not just media: SaaS and software too
Digital services often have focused on high volumes. This is natural when in principle you can distribute your content or service globally at reasonable cost. For some services, high volumes matter, especially when the product itself is a commodity. But now that it has been almost 30 years since the first internet browsers and internet services appeared, we can now see many areas where quality is more important than quantity.
For example, we’ve seen how high-quality content is really important in the streaming business. At the same time, many content industries are still struggling with sustainable business models. They want to offer top-level content, but they are not willing to pay for content creators. This probably illustrates that digital disruption in the media market is still in its early phase. We don’t know yet what will be the long-term sustainable business models.
And this is not the case only for media content. Many SaaS businesses have found that it’s not easy to build a sustainable business, especially when well-VC-funded companies dump prices to win market share. Nor is it easy to build a sustainable business on open source.
When the VC money runs out …
It seems to be extremely difficult to combine the internet advertising business model with high-quality services. If you want quality, you need to pay for it. It’s also a question of time investment. People have no time to go through all the pop-up ads and pre-roll videos they have to wade through to get to the content they want. More people have realized that their time and attention have a price.
The early days of the internet have taught us to think you can get all kinds of things for free or at a very low price. But it seems like the development of digital media, SaaS companies and open source actually demonstrate that you cannot get quality for free, not even with advertising, very high volumes and chargeable add-ons.
The bottom line is: if you want quality journalism, content, software and services, you need to pay for it. Companies that have amassed a lot of VC funding have tried to avoid this reality (and also cheat customers) for years. But sooner or later the investors’ money runs out, and the company must ask customers to pay. That’s when the customers also learn the hard way that quality comes with a price.