BuzzFeed is buying HuffPost to better compete for digital ad dollars

The combined company will benefit from greater scale, but HuffPost has been loss-making for years.

AaronP/Bauer-Griffin/GC Images/Getty Images

BuzzFeed announced today that it will buy HuffPost from its current owner Verizon, the Wall Street Journal reports. The two digital media players will benefit from greater scale as they compete for advertising dollars being sucked up by Facebook and Google. At least, that's the stated plan. The acquisition follows a wave of consolidation in digital media as companies accept that years of rapid growth were unsustainable and try to find other ways to not just survive, but thrive.

RIP good times — HuffPost was founded in 2005 as a news and culture site covering a range of topics from a liberal-leaning perspective. The site mastered Google search rankings early on, and utilized unpaid contributors and low-paid staff to pump out content — similar to the model of other sites that became big in the early '00s, like Bleacher Report, which eventually sold to Turner for $200 million. BuzzFeed, launched in 2008, grew by exploiting Facebook's algorithm with share-worthy headlines and quizzes that could quickly go viral.

Off the back of its rapid growth, BuzzFeed managed to raise $500 million in funding on the premise that it could function like a tech company, using proprietary tools to sell "native" quizzes and listicles to advertisers and then boost them on social media. It also started a news division to attract more upscale audiences.

Unfortunately, years of excitement around fast-growing digital media brands subsided as Facebook changed its algorithm to downrank news and prioritize posts from friends. Many digital media sites including BuzzFeed and HuffPost saw their growth suddenly slow to a crawl while at the same time, ever more advertising dollars were being sucked up by Facebook and Google.

The platform companies have massive scale and precise targeting data that makes it far more efficient for brands to spend their marketing dollars there. Publishers complain they deserve more of that money because they supply content that brings people to the platforms. Google recently agreed to give a cut of revenue to publishers in France, but only under duress.

Scale or premium — By consolidating into fewer but larger brands, digital media companies hope they can better compete for advertising dollars that are moving from traditional media over to the web. Advertisers don't want to work with many small publishers — they'd rather work with one or two. Other media companies that have consolidated of late include Vice, which acquired Refinery29, and Vox Media, which acquired New York Magazine. Bustle, the parent company of Input, has acquired several publications over the years and CEO Bryan Goldberg has said the company may acquire more as the pandemic squeezes smaller sites.

Some brands have chosen to abandon scale in favor of being small but charging for subscriptions. Large advertising-based brands like BuzzFeed argue they're a good place for advertisers to spend money because their sites aren't filled with the disinformation and hate speech found on Facebook.

It was reported back in September that Verizon was looking to offload HuffPost as it's been unprofitable for years. An anonymous source told the New York Post that while the site brings in $45 million to $50 million a year in revenue, its annual expenses exceed $60 million to $70 million. Investors in digital media sites including HuffPost have had to write off the valuations they initially hoped for and accept that producing quality content is expensive, advertising revenue is hard to secure, and the years of rapid, abundant growth might be over.

BuzzFeed was also unprofitable in recent years, losing an estimated $50 million annually. But thanks to recent cost cuts and layoffs, CEO Jonah Peretti has said the company will be slightly profitable this year. He told the Wall Street Journal that he will review HuffPost's business before making any moves like layoffs.