Exclusive: Jonah Peretti explains why he sold BuzzFeed | Decoder

We did get paid millions of dollars by Mark Zuckerberg. So the prediction that they would pay for content was accurate. It just was short-lived.

Thanks for having me.

Yeah. So, we were looking at a few possible deals that were transformative for the company, and I'm very excited we ended up with Byron. He is, you know, a force of nature, an incredible media mogul. He owns all kinds of different assets. His skills are very complementary to mine. I mean, he's in the mix with advertisers and with partners and with sources of capital in a way that I, you know, never really have been. And so it's super exciting to have him come in. It also provides liquidity for the company and resources. And then the thing that I've been most excited about working on is really trying to reimagine what should a company operate like in a world where these new AI technologies have gotten so much more advanced. And so I'm going to have the opportunity to spend more time on that, which is the thing that I'm most passionate about. So it's been a really great week, and we're happy we were able to close this deal, and it's going to be transformative for the company.

I mean, it was frustrating. We had a going concern statement, which means, essentially, it's a technical accounting term, meaning that we didn't have enough capital to cover our expenses for the year, which obviously is a serious thing that we wanted to and needed to disclose to investors. But simultaneously, we had a lot of inbound interest in our assets and in partnerships, and you know, we're talking to creditors, we're talking to all the people you would imagine about injection of capital and things that could be really transformative for the company. But of course, you can't talk about things that aren't signed, that aren't done. And so during that period, it was quite frustrating because I saw a lot of exciting prospects that we had, and this deal with Byron is one of those. And it's really exciting to be able to move forward with more swagger and more confidence and be able to start to reimagine the company and really do a more wholesome turnaround to create a business model and approach that is for the next five years instead of an earlier era of digital media.

I mean, to me, what was most exciting is that he's a better media executive than I am, and he could be a media executive, and that could allow me to be more of a tech executive. And so that's always what I've loved the most, the intersection of tech and media. And so really being able to think about what do these new technologies enable us to do in the future that wasn't possible. That plus the capital to actually fund a turnaround and to restructure and reimagine the company. So those two things together were very enticing, and his ability to bring things to the company that we just were lacking was a huge part of it.

I mean, I think we're in an era right now where deals really matter a lot, and so deal-focused executives are having a lot more success than trying to just build organically. The connections with advertisers and the connections with partners and marketers, and being able to see from their perspective and sell them things that they get excited about and inspired about is really important. I think, you know, in the kind of peak growth period of BuzzFeed, kind of 2013, 2014, you know, in that era, really understanding the technology was the key to being able to build a good media company because the technology was changing so quickly with the rise of social and social platforms that, you know, you really needed to be deep on the tech side, and there was tons of organic growth available. Like the platforms were very open in a way that allowed you to drive tons of organic growth. I think today, you know, if you look around the landscape, it's a lot more about deals and partnerships and business development and things like that, and that can be really transformative for a company. Whereas the kind of organic growth on the big platforms is really just, you know, quite anemic, and there's not as much there in terms of sending traffic to publishers and platforms and content.

Well, I think if you look at sort of pre-social media and what media was about, there was newspapers, magazines, broadcast. None of it was really social. You know, you'd watch a TV show, maybe there'd be some word of mouth where you'd talk about it with your friends. You'd read a newspaper article or magazine article, but you really couldn't share content. And I think the world didn't quite realize that once everyone was connected together by these social platforms, and once you could connect, where you could use media as a way of connecting with other people and sharing with other people, that the kind of media that would thrive and succeed would change. And we saw that really early, and that was what allowed us to grow so rapidly and build such a big brand. And so I think the technology drives a change in the medium. And so social media became a new medium that wasn't possible before. And I would say there was also the convergence of social and mobile. So it was mobile was the perfect personal device that was also a social device, plus the social media, and those trends converging really changed what media became. And so I think we're seeing the beginnings of a similar shift now where AI is going to start to create a new medium for content that wasn't really possible before. And so there's part of the media industry now where understanding tech is really important, and that's the part that I'm most excited to focus on.

Yeah. So, I mean, first, just as a factual matter, we did get paid millions of dollars by Mark Zuckerberg. So the prediction that they would pay for content was accurate. It just was short-lived. So we got paid for that exploding watermelon. I mean, we were paid for...

Oh, there absolutely was. We got paid rev share for video on Facebook. So, you know, Tasty, the short Tasty videos that initially blew up, there was no payment for that. But then when Facebook realized they needed to make longer content so they could put midroll ads, you know, there were programs that generated millions of dollars for our company where we were making longer form video for Facebook and we were getting rev share payments on that, millions of dollars from YouTube. It's not that it didn't happen. It did happen. The News tab was another example of it. We got paid millions of dollars for putting news on Facebook. So I think what you're saying is accurate in the sense that it went from free distribution and sending traffic to our site to hosting content on their platform and getting paid for it and a rev share for it, to then an explosion of creators which made the value of content and the platform's willingness to pay much lower. And so it was happening and it was working and it was exciting, and I actually believe that it was a mistake for Facebook and Mark Zuckerberg to not continue with the News tab, to not continue to pay professional content creators. I think having a diversity of content, having creators, having professional entertainment, having professional news, you know, these platforms have tons of resources and could have spent a couple billion dollars a year on that, sustained a vibrant media ecosystem, really owned media in a way that would have been incredibly powerful for them and given them charisma and relevance and authority that they just don't have today. Like now, most of the, you know, you look at the lawsuits about addictive behavior, you look at all the kinds of toxic content on the platforms, like they didn't have to do that. They could have just continued to pay and even ramping up the amount they paid to professional content and to news content, and they would have owned the world. It was actually a mistake that they didn't continue it. They did it and they should have continued it. And the fact that they didn't, I think, shows just a huge blind spot that the tech industry has. Like having a small percentage of your revenue going to underwriting a robust, diverse, trusted ecosystem for content and news and other things would have been a great decision for them and would have long-term been much better. And so I think there is some parallel universe where they don't get this wrong. They started on a good path. They were paying content creators. It was expanding, and then it was like, let's get rid of the News tab, let's stop doing rev share, or let's show vertical video where we don't have rev share instead of longer form video where we do. And over time, you know, really messed up the digital media ecosystem in a serious way and led to the world we have now, which, although I love a lot of creator content, you know, the sort of battle to get into the feed and being the most extreme and saying things that are just completely false and outrageous or whatever has been a huge missed opportunity for those platforms.

Yeah, I mean, I'm certainly not arguing that they didn't have tremendous financial success, and maybe a couple billion extra in profits is worth it to them. But I think that being an influential company with real relevance and more charisma and cultural muscle is something that a big tech monopoly could certainly afford. And I think ultimately it would have been better for them in a bunch of different ways. And I think the biggest risk of the big platforms right now is essentially a PR risk: the public turning against tech, the public thinking tech is making the world worse, the feeling that any new technology is suspect because look what happened in the last round of technology. And so I don't think it's good for them, even if they're maybe a little bit more profitable. I think being marginally less profitable and having a buffer against this major backlash that is brewing, where, you know, kids are trying to get off their phones and delete their apps and things like that and feel like it's an addictive product that they're trying to battle with. I mean, I think they could have avoided a lot of that just by operating differently.

So they have won. I'm not arguing that. But I think that they could have won in a deeper sense if they had continued that basic process of helping to underwrite quality content and news and information and entertainment, which they certainly could have done. I'm only sitting on this because honestly, how many other people have lived through all the twists and turns and have made the decisions, and it's been a real journey, and I guess I'm looking at it now with a little bit of distance talking to you.

If you look at the cable industry, you know, and now, you know, Byron Allen owns the Weather Channel, and, you know, The Weather Channel was part of this amazing history of cable, where companies were, these media companies like The Weather Channel were paying for carriage. They were like, I'll pay you a dollar per subscriber so I can get The Weather Channel in homes when cable was new. And the cable operators, I think, at a certain point realized if they're all paying us a dollar to reach the home, they're going to have a really bad business and they won't be able to invest in content, and then people aren't going to sign up for cable. So they're like, why don't we switch it? Why don't we pay you a dollar? Now, they didn't have to do that. They could have just said, we're only going to carry channels that pay us. But instead they said, why don't we pay you a dollar per customer and make your programming better? And when you make your programming better, more people will be like, oh, I really want to watch cable. And so The Weather Channel switched from paying a dollar to getting paid a dollar. And that wasn't because the cable operators didn't have leverage. They were the only way they could even get into the home. They did have leverage. They just saw on a deeper level that having better content would in the long run be good for everyone. And then the whole pie grew because of it. And so I think that the answer isn't did individual content companies have the leverage to dictate terms to Facebook or to YouTube. We certainly never did. The question was, are there leaders who have enough market power and concentration to see that it's in everyone's interest, it's in society's interest, it's in their interest to grow the pie and pay for content, to have different kinds of content. And you know, I think early on talking to those, you know, the tech leaders, they didn't really even understand or think about the cost of producing content. So I would say like, hey, you know, news costs a lot more, doing fact-checking, calling people up, doing interviews. So if every piece of content is competing against every other piece of content, there's no incentive to ever make any news. You should just make, you know, the cheapest, most popular types of clickbait content or something like that. Like, that's not good. That's a race to the bottom. That makes your platform worse. And I think they started to get it. Like, oh, let's add a news tab, or let's do some, you know, programs to make sure that there can be, you know, different kinds of content. So I think it was less about having the power to dictate terms and more about, you know, looking at the history of media and saying, you know, there's ways that the pie can be grown for everyone, and the economics needs to work for everyone, and the incentives need to be right for everyone. And when that's the case, the whole market gets bigger. And that's something that I think, you know, they kind of wanted to do at some point, but ultimately, you know, when things got tough, they decided to just sort of focus on their own profit growth and not necessarily...

Yeah. I mean, but the, you know, you look at Instagram and there's good content. I consume content on Instagram, but you know, you kind of feel like you're just, you're watching the actual editorial content is ads where creators are promoting themselves or products they're selling, and then in between that you have ads. And you know, so you're kind of like having, you know, a billion plus people just hanging out on an ad network all day. And I think there's a better vision for media than that that we could have all built together. But, you know, now since that didn't happen, we have pivoted really hard to direct traffic. I mean, I'm so happy that HuffPost has so many people coming direct to HuffPost's front page every day and getting the news from an independent source that tells it like it is is like, you know, something that people are really hungry for. More of, you know, the majority of BuzzFeed's traffic now is direct. And so we're really realizing you can't, you know, you can't have someone between you and your customer. And that's a huge thing that Byron Allen also, you know, one of his rules of business is like, don't let anyone get between you and the customer. And that's part of the reason I think he was interested in BuzzFeed. It gives them a way to, you know, to go direct to audiences. And for all of the ambitious things we want to do in the future, we want to have that ability to go to tens of millions of people directly from our platform.

I mean, we're still a public company. It used to be we were a public company that I controlled through super voting stock, and now we're a public company that Byron controls through the 52% ownership.

Yes.

No, we're issuing new shares.

I just am converting my shares to just be low vote shares or normal common stock.

I mean, I think infinite runway is, you know, the plan. I mean, if you look at our cash burn, it's been, you know, pretty insignificant. And I think we also announced on our earnings that we plan to do a restructure. And so I think, you know, setting the company up to operate profitably and to do that for the long term and then have a strong foundation that we can build on top of, so new initiatives are coming on top of that profitable platform for our core businesses.

No. No. This was about bringing capital into the company so that we can, you know, have a stronger balance sheet and be able to start going on offense again.

Well, I think it means a few things. It means like looking at our strategy and where we're headed in the future. And so some of it is around understanding how we're going to operate with new technologies that can change the way the company operates. I think some of it is about just making sure that we have enough buffer to weather ups and downs in this industry. And so being profitable enough so that, you know, if traffic goes down 20% or if revenue or ad markets, you know, shift or change, that we're in a strong position so that we can continue to operate.

Part of it is how do we use AI across the business as a whole? And I can share some things but not everything. But part of what I think AI is really good for is it's almost can be like a nervous system that is able to understand and detect, you know, what's working and what's not working and how content is being shared and engaged with. And some of the early stuff that BuzzFeed did about social content, I think you could do on this whole another level when AI is able to actually understand the content and then push challenges to creative employees to make new things, but they're making new things with a lot more information about how people are engaged with the content. So just to put it in more simple terms, using AI to help our core business and help our people be more creative. So that's one part of it. Another part of it is building entirely new apps. And so Branch Office is an incubator that creates new apps. We just today launched BF Island, which is a new kind of messaging app that allows you to play and message and talk with your friends using Gen AI. So it's kind of like an inside joke engine. We found that, you know, making AI content and posting it on Instagram or TikTok just kind of feels like slop. But making funny things with your friends that are about the, you know, specific things that you're joking about and talking about is just a lot more fun. And so we built BF Island for that use case. And then we also launched an app called Conjure, which is a camera app where you get a challenge every day to take a picture and kind of discover a mystery every day. You can, for example, take pictures to see if there might be UFOs hiding in the sky near where you live or get messages or fortunes or other things on Conjure. So I think when you think about BuzzFeed AI, it's a combination of things that integrate across the entire company and help our teams do their jobs better. And then it's also new apps and new experiments that allow us to test AI as a new medium that could potentially lead to new businesses or new apps that break out.

So I think one thing that is pretty exciting about working with Byron is that there are more assets and more resources and more capabilities to do things that we just couldn't do on our own. And I don't want to give away too much, but there's, you know, he's doing a lot of things in, you know, in these wholly owned businesses that he has where he is in the home with Local Now, a connected TV app. He's doing a huge amount of production with his studios of making content. There are conversations and deals and partnerships and things that he's able to access. And so I think what that means, you'll have to wait and see, but putting together pieces and combining that with new technology and making something that doesn't exist is why I'm so excited about this deal. And so, you know, what would YouTube be if it started today? What would YouTube be if it was, you know, something that was created in the world of Gen AI? I think it would be pretty different. It might not be what, you know, every listener is imagining. It's certainly not just making a bunch of AI slop videos or something like that, which I think is the thing that people jump to. But there's different ways that creators could make and play and share. And, you know, we have a lot of stuff to work out and a lot of stuff to build, but I'm excited about, you know, combining a lot of new capacity that we didn't have before to build things that seemed out of reach in the past.

I think you'll have to wait and see. I don't want to, you know, Neal probably listens to this podcast, so I don't want to... Hey, Neal, if you're listening, you know, let's go to a Warriors game next year and we can share notes. We can compare notes, you know.