RIP BuzzFeed News

Whoever had bought into the company at the absurd valuation it once was trading hands at -- private equity firms or a pack of martians -- would have eventually suffered the same fate. The company never actually earned anything. There is no magical "solution" to a business model that loses money. So in that regard, you are saying that the "journalism business model puzzle" is one in which Buzzfeed should have never even existed in the first place. The only reason it did exist was a zero interest rate environment that created trillions of dollars of malinvestment. ... and drove valuations of companies with a story (but no earnings) into the stratosphere in a speculative bubble frenzy.

Predictably, when that artificial "free money" environment was pulled away because consumer price inflation put a crimp in the fantasy, the company lost more than 90 percent of its value pretty quickly. I was posting about this on here quite a bit, while the silliness was going on. Right before the pandemic (when they turned the monetary spigots back on to reinflate the bubble temporarily) Buzzfeed was already floundering.

This was eventually going to be Buzzfeed's fate. It was a matter of when, not if. It continually lost money.

 

Buzzfeed had a peak valuation of somewhere between $1.5 and $2 billion. That is insane for a company that never earned much of anything. The news division actually was losing money, but you also need to look at this in a different way. There are billions of dollars of investment that went into this thing. ... only to create those losses. If you don't spend a lot of money trying to build a business and incur losses, it's one thing. When you spend a lot of money to build something and it loses money, it typically requires that much more investment to keep the money-losing operation propped up and operating. And finding that investment is an impossibility in the more sober environment we're in.

To me, the fascinating thing is how timing is everything in bubble environments. Buzzfeed as a private company actually was able to ride the monetary bubble for a long time and raise an enormous amount of money -- most of it from some big media companies that were working with borrowed money (when funding costs were making it free to borrow). The smart companies like this understood that it wasn't their genius that was fueling their growth, it was that money being created out of thin air was sloshing around trying to find a home, and people could speculate on dog poop and earn huge returns by flipping "investments." The game -- whether they realized it or not -- was to not be the one left holding the bag. It's the greater fool theory. I am not calling Jonah Peretti a fool, but unfortunately he waited too long to try to personlly cash out. The SPAC craze happened in 2020 into 2021 on the back of all of the money the Fed unleashed into markets with the pandemic as the excuse for one last blast of stupidity. That was the time for him to move. He waited just a smidge too long, and by the time they tried to pull their SPAC together, the valuation he could pitch had dropped to only about $240 million. Then. ... the bubble started to pop all at once as the Fed started raising rates and letting it's balance sheet decline, and all of those SPAC investors pulled their money before the offering. The offering netted the company only about $16 million. This was a company that NBCUniversal had bought into at a valuation in the hundreds of millions of dollars. $16 million was a long way down, and it is evidence that the only thing making the company even remotely viable was the ability to keep raising a ton of money in perpetuity. When that ended. ... the operations had to end. It's wasn't that it isn't profitable enough. It's that its business model isn't viable.