JV Last has an interesting disquisition on the demise of Buzzfeed news. I’m pretty sure he’s right about this.
Yesterday BuzzFeed announced that it was killing its News division. This is bad for readers, because BuzzFeed News was very good. But it’s also instructive. Because the story of BuzzFeed isn’t really about BuzzFeed. It’s not even really about journalism. It’s about aggregation, monopsony, and the power of platforms.
To explain it, we’re going to have to talk about Wal-Mart. And pickles.
So buckle up and take a journey with me.
Two weeks ago we talked about what the slow-motion decline of Twitter meant to the news business. The death of BuzzFeed News is another part of that story.
The advent of social media seemed like a boon for for journalism because it introduced a new pathway for readers to discover news stories. The big mover here was Facebook, obviously, and the premise was that social could deliver more eyeballs to an individual piece than your publication ever could have gotten, as an institution, on its own. The theory was that these eyeballs would lead to revenue.
The idea at the bottom of us this was that news stories should be unbundled from their publications, both as a matter of distribution and revenue generation. Instead of having 10,000 people subscribing to the South Saginaw Gazette so that they could read the pieces it published, the Gazette would publish a piece on the internet and Facebook (and to a much lesser extent Twitter and Instagram) would deliver 5 million readers to it.
These new readers would never read the Gazette again. Hell, they wouldn’t even know that they had read it. The Gazette’s piece was just another glob of content sliding down their feed.
But 5,000,000 >>> 10,000.
And there were ad dollars attached to those page views. So publishers put aside their subscription businesses and chased the social media spigot.
Unlike legacy news organizations, BuzzFeed was designed specifically for the social media spigot. In fact, they pioneered a new form of advertising: house-written sponsored content. For a while, the joke about BuzzFeed was that it was the only ad agency in America with a news division.¹
Yet from where I sat during this period in the business, the entire social-media model for the news looked like a terrible mistake.
It reminded me of The Wal-Mart Effect.
2. Pickles
If you haven’t read Charles Fishman’s book, The Wal-Mart Effect, you should. Like, right now. It’s an incredibly powerful story not just about the specific power of Wal-Mart, but about the general power of aggregation in networks.
The basic precis is this:
If you are a company that sells pickles, and Wal-Mart comes to you and offers to sell your pickle jars, that seems very good for your business.
Wal-Mart is the biggest retailer in America. Ovenight the total number of pickle jars you can sell annually increases by a very large factor. With this new revenue you can hire more workers and build more pickle factories, which should increase your economies of scale and therefore increase your profits.
The problem is that Wal-Mart is an activist retailer—they are constantly pressuring their suppliers to lower prices. Sometimes their demands of suppliers lead to helpful innovations: As Fishman reported in his book, the reason deodorant no longer comes in a cardboard box is because Wal-Mart told deodorant makers to stop putting the sticks in boxes so they could save money and lower the price. This also lowered paper consumption and was good for the environment.
But sometimes Wal-Mart’s demands are catastrophic for suppliers. Fishman has a number of case studies in the book: companies which make lawn mowers, or orange juice, or pickels, who were pushed into extinction because Wal-Mart demanded that they cut costs so often that their businesses became unsustainable.
Why did these suppliers go along with Wal-Mart’s demands? Because Wal-Mart was such a large portion of their sales that they had no choice. Once your product is being sold in Wal-Mart, you cannot afford for it not to be sold in Wal-Mart. If you walk away from Wal-Mart, there is no alternate retail pathway on which to unload the excess volume you now make.
And from Wal-Mart’s perspective, even if your pickle company goes bankrupt trying to meet their pricing demands, that’s fine. Because there are 20 other pickle companies who will jump at the chance to 10x their sales when they’re summoned to Arkansas.
As one CEO told Fishman for his book, the experience of agreeing to let Wal-Mart sell his company’s product was like getting in bed with the mafia. He got squeezed and squeezed until his business died. And then Wal-Mart moved on to the next supplier.
As an economic matter, Wal-Mart and Facebook are the same. Both are aggregators. Wal-Mart of retail products; Facebook of content. Both have such massive scale that they have the power to supercharge any supplier who gains access to their platform. If you sold pickles at Wal-Mart, your business grew. If you published articles that succeeded on Facebook, your business grew.
But neither Wal-Mart nor Facebook have any economic interest in the health of their suppliers. They need suppliers in the aggregate—they need goods on the shelves and articles in the feed. But if any specific supplier (your pickle company, BuzzFeed News) goes out of business—that doesn’t matter to them. Because there are a million others waiting to take their place.
And that is the story of the social media age of news.
Media companies became so beholden to the massive power of social platforms that they had to optimize their content for them. Even if optimizing content for social was bad for your core business. Once you got on the social media crack pipe, there was no getting off.
This dynamic was replayed thousands of times over the last 15 years in American media, from the South Saginaw Gazette to BuzzFeed News.
One of the things these media outlets learned over the last decade is that while they evolved so that they needed Facebook in order to survive, Facebook didn’t need them. At all.
Just like Wal-Mart.
3. You Are a Platform
I have always resisted getting in bed with aggregators. In my days running digital for The Weekly Standard, I liked everyone I met at Facebook and thought that they were very smart. But their interests clearly did not align with my interests. And I wasn’t going to let my publication’s survival get tethered to an aggregator.
At one point circa 2012 Facebook offered to give the Standard a very large amount of money to help us pivot to video. I declined because it was clear to me, even at the time, that “pivot to video” would eventually become a macabre joke.
The fundamental problem with aggregators in the news business is that the publications themselves are supposed to be the aggregator.
What is the New York Times, or the Atlantic, or The Bulwark, but an aggregation of news content? Once you, as a publication, disaggregate your content so that other platforms can aggregate it along with content from everywhere else, then you have begun to give away your economic power.
There is an absolute version of this: Imagine a print publication that never appears online. This is the ultimate moat against disaggregation. And while such an arrangement is still possible in a networked world, it’s not ideal.
The goal for media companies is to titrate the optimal point where your institution allows enough disaggregation of content to seed wider interest in the whole—but not so much that it gives away the greatest part of its economic power.
The key concept is that every media organization should see itself as a platform. Which means prioritizing a direct relationship with the audience over everything else.
That’s the future of the media business. Period.²
We’re already underway in this shift.
That’s what over-the-top streaming services are. Disney owns its relationship with you through Disney+ in a way it never could when the Disney Channel was part of your cable bundle.
That’s what podcasts are.³ People tend to think about podcasting as an alternate form of radio, but that’s not right. A podcast is a direct feed from creator to listener that prevents the station manager or the network executive from aggregating the creator’s work with others’.
That’s what the New York Times and the Atlantic have done by prioritizing their subscription audiences and getting away from Facebook.
And that’s what Substack and the newsletter revolution is.⁴
And that’s what blogs like this are too.
