BuzzFeed on the brink, Jonah Peretti attempting to show issues round

Jonah Peretti, Founder and CEO of BuzzFeed, attends his company’s public debut in front of Nasdaq in Times Square on December 6, 2021 in New York City.

Brendan McDermid | Reuters

Business stories have ups and downs, ups and downs.

Until here, BuzzFeedThe journey of as a public company was a bottomless pit. Co-founder and Chief Executive Jonah Peretti may be running out of time to change the course of his company.

The digital media company known for its listicles and quizzes is in crisis mode. The stock is down 95% since the company went public at $10 a share in December 2021. The stock closed at nearly 54 cents on Friday, giving the company a market valuation of about $86 million.

If a company trades below $1 for 30 consecutive business days, Nasdaq sends the company a deficiency notice, giving it 180 more days to surpass $1 or risk being delisted to become. BuzzFeed has traded below $1 for six consecutive days since the close on Friday.

There are loopholes and conditions. BuzzFeed could perform a reverse stock split to artificially boost stock value and comply with regulations — a move made by an insurance company last year hippo after having an average closing price of less than $1 over a consecutive 30-day trading period. Hippo continues to survive as a public company.

Peretti’s plan is to push shares back above $1 by convincing investors that he’s ready to run a more profitable company. That prompted him last week to shut down BuzzFeed’s Pulitzer-winning but money-losing newsroom and lay off 180 employees, or 15% of the company’s workforce.

“I’m trying to prepare for a brighter future and align with the big trends,” Peretti said in an exclusive interview with CNBC. “If I do this well, my lead will be a success. If not, then not.”

BuzzFeed reported a net loss of $201 million (including a $102.3 million non-cash goodwill impairment) for 2022 after posting a profit of $26 million in 2021. The company’s investor day is May 11th. Peretti will try to convince shareholders of his vision Trustworthy.

It’s fair to question Peretti’s decision-making not to shut down BuzzFeed News sooner, he acknowledged. CNBC reported in March last year that investors had asked it to shut it down.

Still, he has no plans to step down as CEO or sell the company, despite the company’s 95 percent drop in value, he said.

“I would be more worried about my leadership if I didn’t know where the market was going,” he said.

Peretti’s strategy

Peretti hopes that incorporating more artificial intelligence into the company’s content will both increase engagement and save costs for the company. In the past two months, BuzzFeed’s AI-powered quizzes have resulted in a 40 percent increase in a user’s participation time compared to human-made quizzes, Peretti wrote in a BuzzFeed blog post Thursday.

“Formats that predated the AI ​​revolution and many of the media industry’s formats and conventions need to be updated and adjusted, or feel dowdy and outdated,” Peretti wrote in the post. “That’s why we’ve invested in AI-powered content and introduced new formats like infinity quizzes and chatbot games.”

Some of Peretti’s predictions seem counterintuitive given what the next version of the internet could entail. He wrote that he expects news homepages to resurge as targets as social media companies like Facebook, TikTok, and Twitter ditch news for broader entertainment. That’s why he’s confident in the future of BuzzFeed’s HuffPost brand, which rose to popularity in the mid-2000s with its creative Splash headlines.

“In fact, HuffPost hit 16 million page views this Monday — a record high since joining BuzzFeed, Inc. — a sign that prediction is already coming true,” Peretti wrote.

Peretti said he believes BuzzFeed can be profitable by “covering trends, making shopping more playful, developing new interactive AI formats, and helping developers connect with our audience.”

Again, this could be wishful thinking as digital audiences move beyond the old ways of using the internet towards augmented reality and gaming, where BuzzFeed has no current strategy.

A dream shattered

BuzzFeed’s January announcement that it would start using AI to generate quizzes gave BuzzFeed a brief boost in value, with shares soaring 120%.

But for the most part, BuzzFeed stock has been chutes, not ladders.

BuzzFeed went public on December 6, 2021 via a Special Purpose Acquisition Company (SPAC). For a moment, shares went from $10 to over $14 that day. BuzzFeed’s valuation briefly soared to over $1.5 billion — more than triple the amount Disney had offered for sale a decade earlier, according to an excerpt from a new book by former BuzzFeed News editor-in-chief Ben Smith , described.

In those early hours of the first day of trading, an entire industry began to think differently about its future. If BuzzFeed could find a receptive audience among public investors, companies like Vice, Vox Media, Group Nine, and Bustle Digital Group — all of which have had venture capitalists looking for a return on their investment — could either go public themselves or take public shares traded as part of an industry-wide rollup.

Then the market turned. BuzzFeed ended the day down 11%. The next day, stocks fell again. By the end of BuzzFeed’s first week of trading, shares were down 39%.

“I just bought a f—ton of BuzzFeed stock for $6,” Bustle Digital Group CEO Bryan Goldberg told CNBC at the end of that first week. “If it goes deeper, I will really support the truck.”

BuzzFeed shares fell. And lower. Shares were below $2 in June. The advertising market began to collapse as interest rates rose and company valuations suffered. Shares fell below $1 for the first time last month. (Goldberg said he didn’t buy stocks until they were closer to $1, then sold them during the AI ​​pop in February).

With their fate tied to BuzzFeed’s performance, digital media companies have abandoned the rollup dream and go-public experiment. Vice announced this week that it will restructure its global news operations, including laying off 100 employees. The company has been looking for a buyer for more than a year. Vox Media sold a 20 percent stake in privately held Penske Media in February for a $100 million capital injection. Vox and Group Nine merged last year.

Instead of being the standard-bearer for the digital media industry, BuzzFeed now looks like it’s trapped on an island and forced to flap its arms publicly while viewers shake their heads. When it went public, BuzzFeed promised increasing earnings, estimating $654 million by the end of 2022, $833 million by the end of 2023, and $1.1 billion by the end of 2024.

BuzzFeed’s actual annual revenue for 2022 was $437 million. The forecasts for 2023 and 2024 currently look like pipe dreams.

Peretti may only have one more chance to turn the tide of his company.

“This feels like a turning point,” he said.

WATCH: CNBC’s full 2021 interview with BuzzFeed CEO Jonah Peretti on market debut

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