So now we have another gutting, this time at the HuffPost, and omertà reigns.
By Wolf Richter for WOLF STREET.
This kind of thing – news publications with lots of traffic gutting their staff because they’ve been losing tons of money – has been happening for years, and these publishers and the media outlets that report on it are under some kind of omertà, and aren’t talking about what is actually causing the losses that trigger the gutting. So now we have another gutting, this time at the HuffPost, and omertà reigns.
BuzzFeed – which acquired the HuffPost last November from Verizon, which had acquired it as part of its 2015 acquisition of AOL, which had acquired the Huffington Post, as it was called then, in 2011 – announced on Tuesday that it has laid off 45 HuffPost reporters, editors, and producers, and that HuffPost Canada will be shut down entirely. In addition, two executive editors resigned over the deal. So 47 people gone.
BuzzFeed CEO Jonah Peretti, one of the cofounders of the Huffington Post in 2005, told employees at the virtual meeting where the gutting was announced that HuffPost’s “losses last year exceeded $20 million, and would be similar this year without intervention. Though BuzzFeed is a profitable company, we don’t have the resources to support another two years of losses.”
So some hypothetical math: Let’s assume that these 47 HuffPost employees cost the company on average, benefits and taxes included, $150,000 each a year. This is probably way high since publishers are not known to pay rich salaries and offer huge benefits, but stay with me for a minute. Shedding these 47 employees would then save the company $7 million a year. That leaves another $13 million to cut to reach break-even.
But wait… these people produced news content that generated pageviews that produced revenues from ads, and if you cut these people out, content is going to drop, pageviews are going to drop, revenues are going to drop, and you’re chasing a moving target.
BuzzFeed knew about these losses last year when it did its due diligence before it acquired HuffPost. BuzzFeed itself has undergone waves of layoffs in order to shrink itself to profitability.
Not once did BuzzFeed mention the reasons why the HuffPost lost money last year, and the reasons why BuzzFeed itself had engaged in waves of layoffs of its own people. Omertà.
Other news publications have filed for bankruptcy without ever specifying the real reason for the losses. Big publishers like the New York Times and the Wall Street Journal have gutted their staff without specifying the real reason – the company that is the real reason.
But separately, the bad boy of news publishing, Rupert Murdoch’s News Corp, which owns the Wall Street Journal among many other publications, officially broke the omertà about the existential issue for publishers: Google’s total dominance in multiple layers at the core and all over internet advertising. And its abuse of power in that arena.
Last year, it was reported that News Corp complained to antitrust authorities in the US and other countries that Google was abusing its power and sucking revenues out of the stream that should be going to publishers. And I see what Google is doing to publishers every day on my own site.
The US Justice Department filed an antitrust lawsuit against Google in October last year, a decade behind the curve, after much of the damage had already been done.
The New Media Alliance, which advocates for news publishers, repeated some industry data – a bitter but well-known dose of reality for publishers – in its latest missive of February 21, concerning the antitrust lawsuit:
“News publisher ad revenues have plummeted dramatically over the last two decades; between 2005 and 2018, news organizations saw their ad revenue fall by 70 percent. During that same period, Google’s ad revenue increased from approximately $6 billion to $116 billion, and Google’s market capitalization increased from approximately $100 billion to $1 trillion.”
Since the endpoint of this data in 2018, the situation has continued on the same trajectory: Google siphoning out more money that should have gone to publishers, more publishers collapsing, more publishers losing more money and laying off more people, and Google’s advertising revenues rising 26% to $147 billion, and its market cap rising another 40% to $1.4 trillion.
I have seen this for years on my own site: Every year, ad revenues per million Google ads served declined. Via the Google empire, you need to get more and more traffic and serve more and more Google ads, and overall revenues from Google ads might still decline.
Google and the entire industry of “Ad Tech” have inserted themselves in multiple opaque layers between the advertiser (such as Macy’s) and publications (such as WOLF STREET), and extract by now most of the money out of the huge pile that advertisers spend, leaving less and less for publishers.
Before the internet, the advertiser would use an ad agency, and the publisher might also use an ad agency, and each agency might take a cut of 15%. But other than one or two ad agencies, there was nothing between an advertiser and a publisher. The publisher got 70% to 85% of the money the advertiser spent. The publisher controlled the ads. And the advertiser could audit the publisher’s ad placements. There were plenty of games being played in the industry, but there were tools in place to deal with the games. And publishers were able to fund their operations.
Under the Google ad system, everything changed, and publishers no longer control anything. They no longer know what ads are running on their sites, and they don’t know how much they’re going to get paid for those ads, if anything, and they’re at the complete mercy of multiple opaque layers of Ad Tech dominated by Google.
Sure, publishers can make their own private deals with advertisers, and I do too, and those are the best deals for both sides, where both parties know what they’re going to get and the dollars involved. But those deals are not common.
Beyond private deals, publishers can no longer get around Google because Google owns and operates much of the infrastructure of internet advertising, controlling about 90% of search ads, running the largest ad exchange and the largest ad server, dominating the browsers with its Chrome, and dominating mobile devices with its Android operating system. It also owns data centers and a big part of the cloud, where much of the advertising dynamics take place. It also owns fiberoptic cables, and on and on…
The HuffPost is the latest example of a publisher with a big successful site that is getting gutted because it lost $20 million last year, and not a soul pointed at Google as the reason why ad revenues were so low that it lost $20 million. Huffpost and BuzzFeed both are successful online publications with lots of visitors. It’s not that they cannot get readers. But their advertising revenues per ads served aren’t enough.
The regulatory action against Google in Europe, Australia, and elsewhere has focused on other aspects of how Google is abusing its power, not directly related to what Google is doing to publishers via its advertising machinations.
The publishing industry has turned to subscriptions and paywalls to deal with the problem. Subscription revenues at the Wall Street Journal, the New York Times, and others have risen last year, some of them sharply, and traffic has risen, but ad revenues have plunged.
But publishers like the HuffPost, BuzzFeed, and many others, including WOLF STREET, that want to offer their content to all readers and not block some or all of it behind a paywall, face Google’s machinations all day every day – and for me personally, that’s the most galling part of my work. And you know what? It fits seamlessly into the immense concentration of power at a small number of corporate giants with practically unlimited resources.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.