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Hello and welcome to The Coder. I'm the LAPETEL editor and chief of the Verge and decoder is my show about big ideas and other problems. Today I'm talking to Jonah Peretti, who is technically still the CEO of Buzzfeed. Although that will be coming to an end very soon.
Just days before we spoke, Jonah agreed to sell 52% of Buzzfeed for a total of $120 million to buy her an Allen food on the weather channel, a number of broadcast stations and several other websites. Deal is a bit of a life raft from Buzzfeed. The company has once valued at $1.6 billion. With just last quarter, the company told investors, as long as it risks with running out of cash.
Now there's a new lease on life and new leadership. This part of the deal, Jonah himself, is stepping down as CEO and taking on a new role as president of Buzzfeed AI. Byron Allen himself will become the new CEO of Buzzfeed. It's obviously a huge structural and organizational change and a really big decision.
This is prime, the code of it. And of course, I've always been very interested in what digital media companies are doing to adapt and survive in an information landscape dominated by algorithmic social platforms. After all, I've been saying for a long time that the original sin of digital media was Jonah and Buzzfeed betting they could so consistently go viral. That platforms like Facebook would pay them for content, just like cable companies paid carriage fees for channels like SPM.
This was the big bet for a lot of companies, all chasing Buzzfeed's influence and valuation. And it has all come crashing down. Most of those companies don't exist anymore. And Buzzfeed just faced the brink.
So I really wanted to know if Jonah had reflected on that bet and how he saw the work of building audiences and influence now. I also really wanted to talk to Jonah about his new role leading AI Buzzfeed. In the press release announcing the sale, Byron Allen says Buzzfeed will now compete with YouTube through the power of AI. That's quite an ambition.
And I was very curious to find out exactly what it means. Jonah is also making lots of games and apps with AI. And we talked about something. Including his new hybrid of a mean generator and social network called BFI.
Of course, we also talked about moments where things might have gone differently, including Jonah's decision to take Buzzfeed public and his decision not to sell the company to Disney. There's a lot going on with this one. And Jonah was pretty open about it all. He's still not sure I understand what's going on with YouTube.
You tell me. Okay, Jonah, pray. Still, where the moment. CEO of Buzzfeed.
Here we go. Jonah Brady, the co-founder and as of today, still technically the CEO of Buzzfeed. Welcome to the coder. Thanks for having me.
I'm excited to talk to you. It feels like Buzzfeed and Vaxxvide and the verge of all come up and weather all kinds of storms together in digital media. And I say that you are still as of today the CEO of Buzzfeed. Because just a few days before we're speaking here, you announced a huge deal to sell 52% of Buzzfeed to Byron Allen.
And you are going to take a new role as president of Buzzfeed AI. Explain what's going on there. 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 a force of nature, incredible media mogul. He owns all kinds of different assets. His skills are very complimentary to mine. I mean, he's in the mix with advertisers and with partners and with search of the capital.
And in a way that I never really have been. And so it's super exciting to have him come in. He also provides liquidity for the company and resources. And 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. One of the reasons that I originally scheduled this interview with you was because there were some quarterly earnings.
There were some statements in your financials about Buzzfeed's ability to continue operating. Whether or not you have enough cash, there's some speculation that the company was pretty close to bankruptcy. But the brand is strong. I mean, Buzzfeed is one of the most famous brands in digital media, not all of media.
Did you have incoming suitors after that last set of financials or was this something you were talking about for a long time? I mean, it was frustrating. We had a going concern statement, which means essentially the 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 need it to disclose to investors. But simultaneously, we had a lot of inbound interest in our assets and in partnerships.
And we were 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 fulsome turnaround to create a business model and approach that is for the next five years instead of an earlier era of digital media. Second side, Byron's pitch. Was it, I'm just going to give you money, you can do what you want. Is it I have a plan to reboot the entire company compared to the other folks you're talking to, what made his pitch seem like the winner?
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 love the most, the intersection of tech and media. And so, and really being able to think about what are these new technologies and evil us to do in the future that wasn't possible.
That plus the capital to actually fund a turnaround and to restructure and read, you know, imagine the company. So those two things together were very enticing. His ability to bring things to the company that we just were lacking was a huge part of it. I've done a lot of media executives.
You've done a lot of media executives. You've just evaluated two of them. You've said you're not a good media executive and he's a good media executive. What in 2026 separates a good media executive from that one?
I mean, I think we're in the 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 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.
When you say the technology at that time, 2013, 2014, 15, what you mean is social media platforms were growing, they were aggregating a bunch of users and then they would send traffic out. What specifically was the technology that you needed to understand at that time and made BuzzFeed successful? 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'd watch a TV show, maybe there'd be some word of mouth where you talk about it with your friends.
You 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, 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 media.
And so social media became a new medium that wasn't possible for. And I would say there was also the convergence of social and mobile. So it was not just 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. There's the new thing you're going to build. I want to talk about that.
I do want to talk about the structure. I just want to stay focused on the 2013-14 era for one more turn here. Because I think a lot of media companies have made all the same mistake. And Bessie does like the vanguard of making this day.
And I have often described the original sin of digital media as you, John Aperetti betting that you could go so viral so often that Facebook would pay you money that the social platforms would pay for the programming. And in particular, Bessie was great at programming the social networks of that era. I will never forget watching people put rubber bands around a watermelon with like 90 million other people. Right?
There's something about your understanding of the dynamics of those platforms at that time that made a lot of people bet that Mark Zuckerberg would pay you with carriage fee the way that the cable networks paid ESPN a carriage fee, that your content would make their platforms compelling such that they owe you money. At some point, I think they all woke up and realized there was an army of teenagers who would work for free. And if they could get the same dynamics without paying any money and then all of our business changed, and Bessie's business changed maybe the most dramatically at that specific moment. What was that experience like for you?
When you went from top of the world where we think we have enough leverage to get Mark Zuckerberg to pay us money to, oh no, there's an army of teenagers who will work for free. 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... But those are all those pilot programs like Stand Up Your Facebook Live Team.
We'll give you the seed funding to buy cameras. There was actually payment for content. There was no ongoing revenue relationship. Oh, there absolutely was.
We got paid rev share for video on Facebook. So short-tasty videos that initially blew up. There was no payment for that. But then when Facebook realized they needed to make longer contents like the mid-roll ads, there were programs that generated millions of dollars for a 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 a site to hosting content on their platform and getting paid for it and 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 and to not continue with the news tab to not continue to pay professional content creators.
I think having the diversity of content, have creators, have professional entertainment, have professional news, 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 talks of content on the platforms, like they didn't have to do that. They could have just continued to pay and even ramping up ramping up the amount they paid to professional content and to news content and they would own 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, oh, let's get rid of the news tab.
Let's, you know, stop doing rev share or, you know, 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, just, 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, you know, false and outrageous or whatever has has been a huge missed opportunity for those platforms. It's not that I don't agree with you, but they won anyway, right? They stopped investing in news.
They pitaled away, however many billions of dollars on VR headsets. And they are, in fact, now the gatekeepers to all of media. It didn't matter whether or not they paid for news. And a bunch of congress people yelling at them has had no meaningful impact on their business whatsoever.
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 and more charisma and cultural muscle is something that a big tech monopoly could certainly afford. And and I think ultimately 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, so I don't think it's good for them, even if, you know, there may be a little bit more profitable. I think being marginally less profitable and having a having a buffer against this major backlash that is brewing where, you know, like 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 just by operating differently. So they have one, I'm not arguing that, but I think that they could have they could have won in a deeper sense if they had if they had continued that 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 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.
And I'm so like nuclear opposed to being dependent on the platforms like the Verge has always wanted to be its own thing, especially because we cover these companies and you just have a different perspective. And I think my response to all this is like, should you build a business on these handful of billion dollars will make people like us more in the long term? Or was there ever a point where you felt like you actually had the leverage to make the social platforms pay real money in a sustainable way? If you look at the cable industry, and now I ran Allen on the Weather Channel and 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 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 cable. So 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 would 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, individual content companies have the leverage to dictate terms to Facebook or YouTube. We certainly never did. The question was, is there a, are there leaders who have enough market power and concentration to see that it's in everyone's interests, it's in society's interests, and their interests to grow the pie and pay for content to have different kinds of content.
And I think early on talking to the tech leaders, they didn't really understand or think about the cost of producing content. So I would say like, hey, 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 the cheapest, most popular types of clickbait content or something like that.
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, it's out of a news tab. Or let's do some programs to make sure that there can be different kinds of content. So I think it was less about having the power to dictate terms and more about looking at the history of media and saying 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 they kind of wanted to do at some point. But ultimately, when things got tough, they decided to just sort of focus on their own profit growth and not necessarily. They're paying less and less for content today.
I mean, TikTok pays nothing, effectively. The creators have to become little ad agencies themselves, which is not that you pioneer the idea of the branded content studio that you would distribute advertising on these platforms in a way that went viral. Even that got sort of outsourced to an army of influencers and creators who are now all standing up businesses with the same kind of dependencies that you experienced. Yeah, I mean, but you look at Instagram and there's good content, I consume content on Instagram, but you kind of feel like you're watching the actual editorial content is ads where creators are promoting themselves or products are selling.
And then in between that, you have ads. And you know, so you're kind of like having like, 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 to react 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 I run out on.
Also, you know, one of these rules of business is like, don't let anyone get between your you and the customer. And that's part of the reason I think he was interested in BuzzFeed. It gives you gives him 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. We have to take a quick break.
We'll be right back. Today, nice travels. Welcome back from talking with BuzzFeed's John of Brady about his decision to sell 52% of BuzzFeed and set aside CEO. Under the terms announced by Allen through his company, Allen Family Digital, they're going to acquire 40 million shares of BuzzFeed for a total purchase price of 120 million.
They're going to lead them to owning 52% of the company's outstanding shares and it's 20 million at closing and 100 million that's going to be due five years from closing. How does that work structurally? At the end of all that, how is BuzzFeed going to be structured? You were still a public company.
It used to be we were a public company that I controlled through super hooding stock. And now we're a public company that I rent controls through the 52% ownership. So you've given up your super voting stock in this? Yes.
That was actually my next question. Where are the 40 million shares coming from? They're coming from you? No, we're issuing new shares.
Okay. And then but you're dissolving your super voting shares? I just am converting my shares to just be, you know, low vote shares or normal comm stock. Great.
And then of the 20 million, you said this is going to give you some operating cash. How much runway do you get out of 20 million? 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, not pretty, 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 some new initiatives are coming on top of that profitable platform for our core businesses. So you're issuing your stock or any of your existing investors or employees who are not getting paid out of sort of steel? No, no, this was about breaking capital into the company so that we can, you know, have a stronger balance sheet and be able to start going on offense.
You've mentioned a restructure. I noticed there's a restructure in the press materials. This is, you know, we're asking everybody out structure. What does a restructure mean for about speed after the steel?
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, you know, continue to operate.
Be more specific, new technologies, you have a new title at President of BuzzFeed AI is there's something called branch office which was your app skunk works inspired by Nintendo. I think it's what you told me your times is that going to get set up and more capitalized and become less of a skunk works. How do you see this working? 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 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 that with the content. So just to put 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 EFI land which is a new kind of messaging app that allows you to play a message and talk with your friends. They, you know, using 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 the EFI land 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 you apps hiding in the sky near where you live or get messages or fortunes or other things on conjure. So I think what you think about the 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. There's what you're saying here. And then there's this quote from Byron Allen about what Buzzfeed is going to be. I'm just going to read it to you can explain to me how this work.
Here's Byron Allen describing why he's buying Buzzfeed. As of this moment with the power of AI, Buzzfeed is officially chasing YouTube to become another premier free video streaming service. How are you going to do that? 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 these wholly owned businesses that he has where he is in the home with local now Connect2D 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, we'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 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 combining a lot of new capacity that we didn't have before to build things that seemed not to reach in the past. You know, the folks at YouTube, I know the folks at YouTube, my own complaints about YouTube, they've heard them all endlessly.
But if I had to put myself in the shoes of Neil Mohan that got here on YouTube, I would read this and say, good luck. It's very hard to chase YouTube. TikTok had to spend like a billion dollars a minute on Facebook ads to get a few users to chase YouTube. I understand that you can't give it all away.
I'm just saying with the power of AI BuzzFeed is officially chasing YouTube is a pretty big ambition. And I'm curious what the power of AI means there. Is it just operating leverage? Like you can do more with less.
Is it you can vibe code a YouTube app? Like how does that work? I think you'll have to wait and see. I don't want Neil probably listens to this podcast.
I don't want to hate you. You're listening. You're listening. You know, let's go to where's game next year and we can share notes.
We can compare notes, you know. Like there's a distribution challenge that all these platforms have, which is somewhat driven by consumption, right? Vertical short form video became a dominant way people wanted to consume. So then Instagram turned into TikTok and then YouTube turned into TikTok.
And then maybe a bunch of people on YouTube didn't want YouTube shorts. Now you have the option to turn YouTube shorts off and what they really want is long form creator video and economics are better there. I'm just saying, what is the opening that you see that this market needs a new competitor in this way? It's going to be a lot easier to put your your content more places more easily and to have content take different forms and different shapes because of these AI tools.
And so, you know, a simple example would be if you have a video, you know, having that turn into a BuzzFeed shaped object that could live on our platform and be optimized for our platform feels like something that would have been a lot of work and challenging a few years ago, but it's kind of trivial now. And so I think that opens up some some possibilities, you know, in the beginning. My wife reads BuzzFeed every night. It's like, I watch her wind down by reading BuzzFeed roundups of social media posts.
That to me right now is the BuzzFeed shaped object. Look at what these people are saying on Reddit. Look at what these people are saying on Twitter. There's some value there.
I think curation and taste and being able to see the trends and bring them out together in some kind of synthesis value. Is that how she played word chain? I think so, but there are so many word games going around her house at once that it's hard to determine which ones are in development. Yeah, it's pretty.
I mean, the BuzzFeed games have really exploded recently. And that's another great example of the fact that writers can buy code games. So instead of, you know, the New York Times launches one game every every year. And you know, we've done hundreds of games this year with with creative people who are writers and not programmers having a toolkit that allows them to build in that space.
And we had a bunch of breakouts. You know, it's become a big percentage of, you know, big percentage growth in time spent and the comments on the, you know, from the audience are just like that they love them and it allows us to iterate and evolve them more quickly and change them more quickly. So, that's another example of a sort of AI acceleration of, you know, what, what, what is creating new BuzzFeed shaped objects. And so I think that level of being able to iterate more quickly and mutate in a ball content, I think it's something that allows us to play in new spaces, whether that's, that's, you know, user generated video or interactive games or new post format things like that.
The challenge there is always distribution. I mean, this is where we started talking with Facebook and other platforms. How are you going to get new users to consume the stuff you make? And, you know, 10 years ago, 15 years ago, it was we're going to put up links on the open web and they're going to drive a bunch of traffic to links and eventually we're going to do a llama in the dress in the same 48 hours span and that's the future of media.
And that was great. And then, you know, the open web has collapsed, you know, there are bigger publishers every day. And then Roger Lynch literally today is saying Google zero is there for Condi Nast and they're just betting that there's no Google search traffic anymore. Roger should give me credit for that phrase, by the way, but it will come to that in a different episode.
They do all listen. The question I have for you is you can invest more in thing, Buzzfeed shaped objects on Buzzfeed. Where do you get new readers, new game players from? Because that seems like the hardest problem now for digital media.
Yeah, I mean, we have a majority direct audience now. So, you know, some of that is because of declines in other audiences, you know, but, but tens of millions of people, you know, every month, you can look at our comms scores, you don't have to trust me on it. It's like, we're the biggest publisher in our competitive set, you know, we're bigger than people. We have a lot of people coming and when we see new formats, like, for example, these, these Buzzfeed games that we have been creating, they come back more frequently.
They spend more time. They engage more. They send the games using iMessage to friends. So, you have this new kind of social that's more personal, that's more private.
And so, we have distribution that, like, if someone was creating a new company and trying to do any of these things, it'd be very hard to achieve. You know, we haven't really started promoting our branch office apps, these new AI apps, but soon, Conjure will be all across Buzzfeed and the F Island will be all across Buzzfeed to market it and let people play it. So, you know, we built a lot of distribution in a different era and we have millions of people consuming our content and that is the distribution that can help launch these new things and help us grow and launch, you know, something that could be a competitor to YouTube or a competitor to some of the other big platforms. For people who are getting sick of these big platforms and want smaller places that feel more at home that they can go directly to and spend their time on.
So, you know, back to our earlier part of the conversation about was it a mistake for Facebook or YouTube or other sort of pay less for content? I think that it did result in a lot more people going direct to other platforms and smaller platforms that they probably never would have if they could have gotten quality news on Facebook or Instagram or other places. But now people do go to those places and, you know, it hurt to have a lot of that referral traffic taken away, but now we have the direct traffic and that direct traffic is people wanting something different that the platforms aren't giving and that's a big opportunity to build on top of and that's a new kind of distribution. It's more fragmented.
It's not everyone on the internet. It's not the dress, but it's millions of people who really truly value the content coming directly saying, I get my news every day from going to the front page of the host and they're not like trying to kiss up to the Trump administration and like, you know, worrying about mergers or whatever. They're just reporting the crazy stuff that's going on in the world and I go directly to bus. We didn't know what's going on across social media because, you know, as your wife has realized, it's a lot more satisfying to see roundups of what's happening across social media on BuzzFeed than to be in these toxic environments for hours, scrolling, you know, doom scrolling through the sort of raw sludge that's on these platforms.
You were always really against display ads, programmatic ads, banners and boxes. I always thought you were correct about that. I disliked them. I think the vast majority of the audience dislikes them.
But that's how you monetize a bunch of web pages to this day. It's still the thing you do. You have a bunch of direct traffic. It's growing.
You think you can create more direct traffic. You think there's opportunity there. But the monetization was lagging such that, you know, less quarter you were saying there's substantial doubt about your ability to continue and you need to take investment. How are you going to monetize all that traffic in the future in a way that's sustainable?
I think a combination. I mean, I think that there's sort of a floor which is driven by programmatic advertising. Then there's transactional types of revenue. So transactional revenue, I kind of mean that abstractly.
So it might mean commerce where people are spending hundreds of millions of dollars from on BuzzFeed shopping where they click through and discover products and buy them and we're getting an affiliate fee. So we can actually show that we're driving direct value. And then there's the other transactional which is paying to be a member. Subscribing.
HuffPost has a membership program that has been growing really nicely. I think that there's a lot of headroom there where we can grow more with reader revenue and direct revenue. The branch office apps are really natural for freemium models where you can have fun on the apps to a point. But if you want to go deeper and you want to with Conjur, if you want to start exploring and photographing more weird things in the world, you got to become a paid member or transact with us.
So I think that's a good combination. Good to pause here for a quick break. We'll be back in just a minute. I'm Phoebe Judge, host of the podcast Criminal.
Usually I'm telling stories about other people. But this fall, I'm headed out on the road with a brand new show, Stories About Me and The People I Love. It's called Don't Worry. I hope you'll come out and see it.
We'll be in cities like Boston, Chicago, Philadelphia, New York, and lots more. Get your tickets at thisiscriminal.com Flash Live. Welcome back. I'm talking about Speed's current CEO.
Do you want to put a company's future? It's a social media product. We were playing with BuzzFeed Island today. I generated a bunch of pictures, our producers put a clam nose on me that was delightful.
I think it just occurred to me that I could burn enough tokens to make my use of the app unprofitable today. I could just sit here and generate images all day until I had definitely cost you some meaningful amount of money. How does that work before you monetize it? Who are your model providers?
What's your rate of spend on letting people use the app versus when you think that will return in any kind of monetization? Yeah. I mean, I think this is pretty established. The freemium model for these kinds of apps is pretty natural.
People have shown a willingness to pay for AI services. Wait, have you ever? I mean, Chatshita has 100 million users and very, very few of them pay anything. I mean, how much revenue is Chatshita generating from subscribers?
I mean, it depends on the computer bills, I would say. But there are a lot of smaller freemium apps and a lot of companies that have 5 million, 10 million in revenue and are profitable. You might not hear about those because they're not big venture-backed companies. But I do think that these kind of mid-sized or smaller types of apps could be really good businesses.
In some ways, it's a little bit like a new kind of media business. The economics might be more similar to a YouTube show or a series or a podcast where the cost of the talent in the show is a hurdle that the advertising or the subscription needs to clear. But I think there's a lot of examples of that that I've seen talking to other founders and getting this sense of that market. So I feel like there's a bunch of different ways to monetize.
It's also reminiscent a little bit of the earlier era when you had Moore's Law making everything cheaper. You could have a product that lost a little bit of money. But if you wait a year, the processing is cheaper, the cost are cheaper. And AI is progressing incredibly quickly.
So anytime we use a new model six months later, the cost of it is like a tenth of what it was. And so if we could lock in a bunch of users to an experience that's not about creating the most beautiful images, it's about joking with your friends, getting ideas for what to make. And it's a bit of an idea engine where there's all these cool contacts and things that you might not have thought of that you can then use to delight your friends or play. The cost of that is making those images is going to and has been going down a lot.
And so even a break even subscriber six months later is a very profitable subscriber. Is there any ads there? Are you just hoping for free people are going to pay a lot of different prompts and whatnot? I think there could be some pretty interesting native advertising solutions there.
But we're just very early and we're just opening this up to the public now. So we want to get real people using it and then iterating and changing and evolving the app very quickly. And so I mean, this is I think the other thing is that AI enables, which is the ability to iterate and change a product is just so much easier. And so getting to product markets fit becomes a different endeavor if you can get data more quickly and analyze it and understand it and modify and test features much more quickly.
And that applies to the monetization as well. Yeah, it starts me in this conversation. We're going to compete with YouTube with the Power of AI and then playing a plus for the island. This thing is a social network.
You make images, you share with your friends, there's incentives to invite your friends. And after all of this time, what Jonah Paretti wants most of all is to just run the damn social networks. Like that's what this looks like to me is you're building social products as the ones you were relying on screwed you over so badly. Yeah, there's a little bit of that for sure that I feel like I gave them advice from the perspective of someone who cared about content and culture and news, but also spoke their language in terms of tech and social platforms.
And they took it for a while, but then they kind of went on this other other other direction and so building really good community, building really good social platforms, building really good content networks where people can share content with each other and consume content and have great things to talk about. I think there's openings to do that and probably they're smaller in some way, smaller businesses. So we might only be a tenth the size of YouTube. Maybe you're right that we can't get to 100% side.
Neil's taking in his boots. I don't get to 10%. So he can still have 90% of the market. The turn of the modern social network is creators.
That's the other kind of theme that's been showing up in this conversation over and over again. There was professional content, there was an idea that maybe pay for it. The creators showed up and they upended the content economy in a million different ways. Buzzfeed in many ways was also at the vanguard of that problem, that situation.
The why I left Buzzfeed video launched a million YouTube careers. You just sold Hot Ones. You wish you'd purchased them and you sold. There's something about Buzzfeed's relationship to the creator economy that at different times was really rich and rewarding, really complicated.
And for many at the end, it really poisoned us. What have you learned from that? If you're going to stand up new social networks, how do you bring new creators along with you? And was there ever a time when you could have salvaged the creator relationships you had at Buzzfeed?
Yeah, I mean, when you think about Buzzfeed video, it was really awesome for the team that was there because they had all these collaborators. They a lot of them came in as interns or fellows. The Try Guys came in that way. A bunch of the talent came in.
Really, almost like interns that got fellowships and then became junior producers and then worked their way up. The challenge, I think, when the platforms really started to disaggregate the media companies, essentially having individual creators create their own channels without media companies, it meant that the very top creators could make more money if they left. And it started to break the cycle of development because essentially, almost every media company that you look over the last 100 years, there's some stars and they get paid the most, but they get paid twice as much or something, or three times as much, but they're producing 10 times as much value. And then you have a lot of new talent coming in and they're learning and maybe they're working their way up, but they're getting subsidized by the bigger talent.
And so it creates this natural tension in these businesses where the whole process of having a community and an organization and professional development and new talent coming in and all of that breaks if the top talent is like, we'll just do a sub stack or we'll just do a podcast that we own and take 90% of the profits from it or we'll just make our own YouTube's channel, then the process breaks where you no longer have that redistribution that helps the next generation learn, the young reporter or the new video producer or whatever. And so I think early BuzzFeed was trying to build essentially a collective in an organization. And at a certain point, some of the talent was like, I'm making too much money. I mean, I'm not making enough money.
I'm going to go create my own thing. And that worked for some of them. A lot of them found that it really sucked to try to be a YouTube creator and having to call in friends and favors and not having resources and not having collaborators and the loneliness of it and the burnout. And YouTube and TikTok love to give the trending designation to new talent, but then a year or two later, it's like they don't get that anymore.
And so it really is kind of broken for a lot of the talent that was frustrated and laughed like it didn't work out that well. But for some talent, it works great. And so I think that's one of the core challenges I think with media companies and the sort of platforms that are trying to just completely completely blow up the media companies. It's one thing if your news organization, with a union, it's one thing if the top talent is stuck to that news organization.
It's another thing if you collectively bargain and the people who want to make the most money just go to sub-stack. That's the most sub-stack is probably the biggest union busting of development that exists, even though that's not their intention. But there's this contract of the top talent, only capturing part of the value to help support the now up and coming talent. And I think that is poorly understood and is one of the reasons why the media environment has gotten then somewhat impoverished because you have a lot of creators who have gotten big and podcasters who have gotten big, but never came up through a system where they had smart peers and editors and people who could help them get better at their job.
They just came up through a system where they're trying to game the algorithm to get attention and get big enough that they can then capture that value for themselves. You run Hupfos. Hupfos has this problem and has this dynamic. You're talking about AI.
Are you going to start to publish AI journalism on Hupfos to solve this problem? No, we're not. The reason people come to Hupfos is because they can get trusted content that they can't get on platforms that are full of AI slop. So Hupfos is a place where talented human journalists who actually do have a sense of collective endeavor and who believe in the mission of Hupfos, they work together and they make content that the audience knows is trusted.
Are they receptive to using AI in the news gathering process? Is that something that you want them to start doing? You're taking on new rules, president AI. This is the conversation in journalism.
Yeah, I think that there's things that AI can do in journalism. I think it's the example of being able to provide code and create new games and new formats is one example. I don't think Hupfos journalist would... Remember back when Snowfall was this big story?
There were tons of Snowfalls on the verge. Yes, and they're being complicated layouts. We love them. Yeah.
That kind of thing is trivial to do now. You can design interfaces that are trivial from a technical standpoint. You don't necessarily need an engineer to do that. You need someone who has a good sense of design and good vision or whatever.
You need that journalism to be good and the story to be good. I think a lot of it depends. It's like, how can you use AI to elevate journalism, to promote it better, to connect people to it, to research and find... Like crawling the web is something that how many times have journalists spent three days going around to websites or whatever.
Now with Cloud Code, you can basically say, I need this data source. I need this data source. I need this data source. I want them all in folders.
I want to cross-reference them. The fact gathering and things like that that you can do is something that could help elevate journalism and make journalism better. But having AI right journalism is just would undermine the core trust that is the main reason that people are coming directly off those to get their news every day. Yeah.
I guess I'm just curious how much of the talent business you still want to be in in this new world. Where you're apparently going to run a thing that competes with YouTube. I assume that means user-generated content. The BuzzFeed island is about user-generated content.
But the BuzzFeed-shaped object today, a round-ups of user-generated content on other platforms, how much of the talent business do you want to be in in the future? Well, I think what's kind of amazing about YouTube and some of these other platforms is that they're not really in the talent business. Specifically, what I'm asking, do you want to run platforms? Yeah, BuzzFeed was in the talent business providing health care and benefits and professional development and a context and real estate and all these things.
And yeah, when creators would leave to just go directly to YouTube, they got a rev share. And so some of what we will do in the future will be more user-generated, like where you look at users making quizzes and things like that and creating things for themselves. And you're played with the island. That's something where the user creating is actually the entertainment.
They're creating content not as the joy of creation. And so I think we'll have a lot. There's a lot more things like that that are possible. But then when we do have talent that work for us, I think it's important to find people who want to be part of a collective, who want to be part of something that they're doing together, who want the professional development, who want the resources, who want the peers, who want the health insurance, who want all of those things.
And so it just depends on the business. But I think if you look at HuffPost, it makes a lot of sense to have journalists who work together in some cases for over a decade, who really know what they're doing and are in our professionals. And that shows in the work that they're doing. The same is true with BuzzFeed and figuring out how to do even more to elevate the talented writers and creators and people making things with BuzzFeed, I think is part of what I want to do with my increased focus on AI.
Yeah. You're at the end of what one kind of road here, you're stepping away from being CEO, you're going to become president of BuzzFeed, either Byron's with the new CEO, even again, in this conversation, it strikes me as you were the right CEO for what you would call the open distribution era. And he might be the right CEO for what you're calling the deals era where you got to show up and you have to negotiate rights and maybe AI companies are going to pay you for stuff. And there's a lot of deals to be made in a way that honestly, it feels better for me.
Like the open web era is also where I came up and I feel very strongly about that thing in a lot of different ways. At the end of this road, you're taking on your role, there's no new CEO. There's two moments I want to ask you about that could have been previous endpoints. One, in 2013, Disney offered to buy BuzzFeed for what Ben Smith has reported to be $650 million.
Do you think you should have sold back then? So, I mean, from a financial standpoint, it's hard to say that that wouldn't have been a good deal to take. It was, I think, 450 with an earnout that could get to that 650 number. And we were just hiring Mark Schuves to build our investigative team.
We were just starting with BuzzFeed video and that whole cultural phenomenon of BuzzFeed video was kind of just about to take off. There were a bunch of things that I'm really glad we got to do as an independent company and I wouldn't really trade those years where we were able to build and explode and hack culture and influence the internet in a massive way. And I think it would have been harder to do that inside of Disney. I think it would have been a great financial deal and I do wish that my partners and investors and others had been able to have that financial windfall, which was unfortunate that we weren't able to live up to that.
The other thing I would say is that I don't think selling the company at that moment would have been the maximization of value. I think selling it two years later would have been. And there was a lot of interest that people don't know about in those subsequent years. And so, the Disney deal was the first time someone came and I think Iger was ahead of the curve and saw that there was a lot of growth and excitement there.
But I think we could have done a transaction for more than that even if we, two years later. There was a weird thing that there was this view from the board that the fact that I turned down that Disney deal meant that I would never sell for any price or whatever. And so, that also partly led to never really exploring any of those other types of deals. But in retrospect, if you had perfect hindsight, there's probably some kind of deal we could have made in 2015 or 2016 that would have also given us the right partner and resources to fare the next challenging time.
You're stepping down and I've tried to ask about the future, but it feels important to check on these moments in the past. Especially now in Disney in particular, Justin Marl, the UCO is saying Disney Plus is going to be an everything app in that very much price. You should enter into it in a totally different way. And it feels like those things would have been aligned.
The other moment I want to ask about, you went public in 2021, that was a SPAC, it was very fashionable at the time. Do you feel like that was a missed? Do you think that that was the right decision? Well, I think the biggest issue was we missed the window.
So, again, if you had perfect hindsight, you could do it over again, I think we would have gone public via SPAC and we would have done it without buying complex and we would have just done it right away. Because the market was super hot, we could have gotten a lot of capital into the business and we didn't need complex like our business, we were bigger with complex, but our business was probably better, our numbers were probably better without complex than we would. And so, we could have just done the deal more quickly and had more cash on the balance sheet. And then we would have been able to have a lot more leeway and latitude to reinvent the company when the market got really tough.
The problem is when we started to explore this complex acquisition, it slowed down our ability to complete the SPAC transaction because we needed to agree with on a sale and agree on all these terms and negotiate with Hearst and Verizon who co-owned it. And then we needed to then, once we went public, figure out how to integrate and work with cultures that were not really well suited to each other, the complex culture was just very different than the buzzfeed culture. And so, in retrospect, I think hitting this back market while it was hot, bringing in a bunch of capital, doing it with just buzzfeed and then using that to reinvent the company as a public company, we would have been in a really exciting position and we would have capital to do acquisitions and things like that. Instead, we missed that window.
The SPAC market got ice cold. We were already kind of far along on the complex deal. And so, we ended up with debt instead of cash. And so, the debt to buy complex basically has been a burden that we've slowly been able to alleviate first by selling complex and by selling first-week fees and now with this partnership with Byron Allen and that investment.
But it's taken a bunch of time to get back to where we have the balance sheet we need to innovate and operate in a way that's more confident and more deliberate. Why did you buy complex if you didn't think it was the right choice? I mean, at the time, the strategy was let's consolidate the digital media industry. Let's give advertisers something for every demographic.
So, we were stronger with female audiences and there were stronger with male audiences. And they had a lot of great properties. And so, we thought this would be a one-stop shop for advertisers. What ended up happening was both the value of digital media and the traffic that we've been talking about was challenging.
But in addition, advertisers started to spend more and more of the platforms directly and the programmatic buying became a bigger and bigger thing. Complex just doesn't have that much distribution. They were premium but smaller audiences. And when more shifted to programmatic, that really helped buzzfeed and HuffPost.
But it meant that complex was really dependent on this direct sales channel which was becoming weaker for all digital media companies. And so, I think that things didn't go the way we had hoped with complex. But we were excited at the time. And that's partly why.
And then it was one of those things we were like, okay, we now have to take on this debt to buy them. But if things go well, the debt won't be an issue. But when things went, things were tougher than expected. The debt burden really was challenging.
And it's one of the reasons why I think people don't realize that the underlying buzzfeed assets are better than people think. Because they look at the whole thing. And it's like, but you start backing out pre-COVID real estate and you start backing out the debt burden. And you start backing out some restructuring costs.
And you look at what is the actual business and how the pieces of that, I think it's doing better than people think. And I'm glad that Byron was able to see that. And some others were able to see that. So we had an opportunity to do a job that makes a big difference and allows us to unlock that value and not have it just be captured by our current structure.
Yeah. Buzzfeed's greatest strength. I'll call it the millennial era of digital media was that it was a cultural phenomenon in millennial digital media. But I think that's the best way to describe it.
There were all those posts about why I left Buzzfeed. But before that, I will never forget the letter to the editor at the All where it was just the poor digital journalist was like, I don't work at Buzzfeed and it kills me every day. And like, I'm just rock it around. I think Corey Seeker wrote back to them.
It was like a great digital media moment that I will never forget. It had totemic power in the media ecosystem at that time. There's a reason to buy it. You're talking a lot about AI.
I think my last question for you how do you get back to that cultural relevance when I look at the polling from Gen Z in particular and they dislike AI? If AI is an accelerant, you back in relevance, but the younger demographic dislikes it so much, how do you connect those dots and solve that problem? Yeah. I mean, I think that a lot of what we do does not read or appear as AI.
I think people don't like certain things about AI. If you just ask them in general, what do you think of AI? There's a lot of pretty negative responses. I think people love playing word chain.
And I don't think they mind that AI coding tools were used in creating word chain. And so I think the human agency and human intention is in the product. The person who designed the game was obsessed with making a really fun game. The creator of the game is in the comments talking to them.
And they're like, when are you going to make the next one? And I love this. And so I just think that saying do you love AI, it's kind of like saying back in the day, do you love mobile? You know, or like, do you know what I mean?
Well, say yes. My career is based on do you love mobile? Like the answer is millions of people being like, yeah, I want a whole website about that. Yeah, I mean, there were industry people who like mobile, but I think most people were like, they like the things they could do with it.
And they like the way they use it. Or, you know, it was like, do you like micro computers? Like, well, no, I like that I can do spreadsheets now. And I don't have to have, you know, like, I think if you think of AI as a computing platform, it's the question is what are the apps built on top of that computing platform that Gen Z will like?
And there already are many of them. And you know, it's, it's, you know, whether it's using them to do their homework or help them, help them, you know, solve problems that they have with, you know, personal challenges they have and talking to the chat, GPT or cloud or whatever. Like, I think there is a lot of love for AI and a lot of hate for AI. And I think we just live in a world where like everything is super polarized and everything is kind of love and hate.
And so I think fighting for a new way of using AI and a new way of thinking of AI that puts people first, that is creative, that it magnifies people's agency that is not about feeding everyone the same slot, but is about like helping people have a more personalized and connected experience and connect with their friends. Like, I think that's going to be something that you will have to fight for, because there'll be all kinds of dystopian uses of AI. But I think we can build something that is special that makes people see the power of this new computing platform, but not through the platform itself, but through the applications and through the fun things that they can do with it and the fun ways they can connect their friends. Yeah, I'm excited to see how that all plays out.
When does the deal close? What's the timeline? You know, hopefully we'll get it closed by the end of the month. All right.
And then you're inviting enough to come back and you have to show me this AI power YouTube that's going to make Google. Yeah, you'll have more fun talking to him than me. So I've talked to him before. He is quite a character.
I'm honestly curious. You've described some big products and some big vision. And I'm eager to see them come to fruition. You have to come back soon.
Jenna, thank you so much for being on the show. All right. Thanks for having me. I like to thank you for taking time to join me here on the Coder and thank you for listening.
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