Creating A Buzz: Verizon sells HuffPost to BuzzFeed
November 21, 2020
3 min read
What's going on here?
Digital media company BuzzFeed has acquired HuffPost from Verizon Media in an all-stock deal.
What does this mean?
Verizon Media, a division of the telecoms giant Verizon Communications, has sold its subsidiary company HuffPost to BuzzFeed, a digital media company. In return, Verizon Media has acquired a minority stake in BuzzFeed, making this an acquisition entirely transacted in stocks. Both companies have been keen to consolidate their businesses in light of falling profits which have led to recurrent layoffs of hundreds of staff in recent years. BuzzFeed has been keen to grow its user base, website traffic and time spent on page visits, while HuffPost has struggled financially in an increasingly competitive advertising and publishing arena.
What's the big picture effect?
The deal is another example of consolidation between individual publishers in the digital media industry, spurred by increased costs and falling ad revenue. It follows the acquisitions in 2019 of New York Media by Vox Media and Refinery29 by Vice Media. The reduction in ad revenue is largely due to Facebook and Google increasing their shares of online advertising. Their technological prowess, which involves tweaking their algorithms to offer more targeted advertising, is highly valued by marketers. This has made consolidation an attractive business proposition for online publishers; combining their revenues and technologies for targeted advertising creates a synergy which, in turn, lowers costs.
Consolidation is also important for increasing their advertising revenue since a stronger business and brand makes for a stronger sales pitch to advertisers. HuffPost gradually lost its standing in advertiser circles as Verizon took over its sales pitches. Under BuzzFeed, HuffPost will again be pitched as a distinct news website. BuzzFeed, meanwhile, will hope to add credibility to its own news arm, Buzzfeed News, by folding it under the more distinct HuffPost brand. The small overlap between readers of both websites, estimated at only 15-20%, will also appeal to advertisers. These changes are likely to be met favourably by advertisers since news consumption increased in 2020 and social media websites have become infamous for the spread of misinformation (to see our article on that, click here).
The deal is likely to raise issues of employees’ rights. Generally, employees have no right under US law to have their employment transferred under a merger; similarly, they have no rights to be consulted unless layoffs are ‘en masse’. However, HuffPost has an internal trade union, and under US law, unions must be involved in any negotiations on issues affecting employees’ terms of employment. Furthermore, a business successor, such as BuzzFeed, is likely to inherit any duty to bargain with a union, as long as the union is supported by a majority of employees that it represents (Howard Johnson Co v Detroit LJEB, 417 US 249 (1974)). In any event, HuffPost employees will continue to enjoy their rights gained under a collective bargaining agreement (CBA). The CBA was originally made with HuffPost, but contains a clause stating it will remain in place under new owners, so BuzzFeed will have to comply with it.
There will likely be significant negotiations between HuffPost’s union and BuzzFeed. Employees will be mostly concerned about redundancies. In 2019, 200 staff from BuzzFeed (15% of the workforce) and 800 staff from Verizon (7% of the workforce) were made redundant. Other issues likely to be raised are diversity and equal pay. HuffPost employees have long been frustrated with Verizon’s lack of transparency, who have failed to answer the union’s calls for data on equal pay. Verizon has been more transparent about diversity by releasing demographic data and conducting racial equity training. Nevertheless, the union has complained that these steps are too rudimentary and well behind those of competitors. NBCUniversal, for example, has publicly committed to a 50% female and BAME workforce. So, BuzzFeed can probably expect more scrutiny of its equality and diversity goals in these negotiations.
Verizon’s decision to sell HuffPost, yet retain a minority stake, in a deal that will increase its marketability to advertisers, displays faith in the online news industry. But the deal isn’t done yet, and BuzzFeed is likely to be met with strong demands from its target’s trade union.
Report written by Arun Allen
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