When I first met Bustle Digital Group’s Jason Wagenheim, New York City was just beginning to go into lockdown. The BDG offices were empty thanks to the company’s newly instituted work-from-home policy, but it still seemed reasonable to meet in-person to learn more about BDG’s broader vision.
At the time, Wagenheim — a former Fusion and Condé Nast executive who joined BDG as chief revenue officer before becoming president in February — acknowledged that we were entering a period of uncertainty, but he sounded a note of cautious optimism for the year ahead.
Since then, of course, things have been pretty rough for the digital media industry (along with the rest of the world), with a rapid reduction in ad spending leading to layoffs, furloughs and pay cuts. BDG (which owns properties like Elite Daily, Input, Inverse, Nylon and Bustle itself) had to make its share of cuts, laying off two dozen employees, including the entire staff of The Outline.
And indeed, when I checked back in with Wagenheim, he told me that he’s anticipating a 35% decline in ad revenue for this quarter. And where he’d once hoped BDG would reach $120 or $125 million in ad revenue this year, he’s now trying to figure out “what does our company look like at $75 or $90 million?”
At the same time, he insisted that executives were determined not to completely dismantle the businesses they’d built, and to be prepared whenever advertising does come back.
We also discussed how Wagenheim handled the layoffs, how the company is reinventing its events sponsorship business and the trends he’s seeing in the ad spending that remains. You can read an edited and condensed version of our conversation below.
TechCrunch: We should probably just start with the elephant in the room, which is that you guys had to make some cuts recently. You were hardly the only ones, but do you want to talk about the thought process behind them?
Jason Wagenheim: Yeah, we ended up having to say goodbye to about 7% of our team, and we had salary reductions to the tune of 18% company-wide for those that made over $70,000. And then we had 30% pay cuts for executives.
You’ve read about all this, I’m sure. It was a really, really hard decision. We spent two weeks in planning, dozens of spreadsheets, negotiating with our investors on a plan that would keep the company moving forward, but [had to] be very sober to the reality of what was happening around us. But also most importantly for us, for our executive team, we weren’t about to disassemble the company that we spent the last 12 to 18 months building.
So we came up with a plan that, with a combination of layoffs and salary reductions, it allowed us to mitigate having to lay off a lot more people. And that allowed us to really keep the company intact.
And you know what I’m most proud about, Anthony? You can really bungle these things with your internal and external comms. We handled it really, really well. We had no grumbling from our team. And in fact, we had a lot of gratitude — acting decisively, we were able to get the company and everybody working more purposefully, to move forward rather than coming in every day and expecting [the worst].
I think it’s safe to say that there’s going to be more news like this in the weeks to come. Are there things that you’ve learned from this, that you think other people going through a similar process can learn from?
This has really tested me personally as an executive. The last four to five weeks have been the biggest test of my entire career. And I think many executives and many people at all levels of companies would say the same thing. There’s never been anything like this. I’m finding qualities of compassion and wanting to motivate our team to thrive more than I ever knew existed within me.
I think the priority on having a team that is thriving and balanced and grateful has never been more paramount or punctuated for me than it is right now. So what I’m most proud of, as I mentioned, was we acted decisively. We were one of the first companies to roll out a cost reduction plan that would carry our company through the crisis.
And then we focused on the employees that we did have remaining, which is obviously the majority of our company. The things that we can do, from daily and weekly Zoom meditation and yoga sessions and workout sessions, to starting every single stand-up [meeting] with gratitude exercises to offering mental health [personal time off] that we weren’t offering before. It’s really important for us that … we can’t run the company unless our people in our company are thriving.
One last question on this: You’re having to make these difficult decisions, and you’re not in an office, no one else is in an office. So how can you manage a process like this humanely? We’ve heard these horror stories of people logging into a Zoom call and finding out that they’re fired. How do you do that virtually in a way that’s still humane?
I mean, we wrestled with it. It was so hard. We did it over the phone. We did it all individually, of course, we didn’t call people into a mass conference room or anything like that. And we had very difficult conversations with a few dozen of our employees over the phone that are never fun. And, unfortunately, it’s the least human way to do it — we were as compassionate as we could be, given the circumstance. The universe forced us to handle a very challenging situation in a difficult way.
You mentioned that part of the goal here is to set up BDG so that you still can grow and continue to thrive. How has that larger strategy evolved?
It’s a few things. First and foremost, we stabilized the business within the first 72 hours. We had, you know, roughly $8 to $10 million [of advertising] canceled right away, Q2 down easily 35% or more. I think the entire industry will say the same thing. And if they’re not, they’re lying. We’re kind of at that point right now, there’s not cash flying out the door, there’s RFPs that are still trickling in, we’re servicing business as best we can.
Now that we’re in this stabilization period, we’re starting to think about rebuilding. Of course, we want to capture anybody that wants to spend money with us, we want that money to come to us. We’re thinking about the second half [of 2020] so that when things do bounce back, we have the people, the programs and the ad product in place.
And then lastly, it’s thinking about the long term. We were going to be a $120, $125 million business this year; I think it’s pretty safe to say that we’re not going to be. So what does our company look like at $75 or $90 million? Let’s go back a year, when we were at that level, and really look at the things that were working when we were a $90 million business, and start to think about the things that we should put back in place from that time machine that we have the luxury of looking back at.
When this first started, there was this hope that it’d be a very brief, intense downturn and then maybe bounce back to where it was before. There are other scenarios where it lasts for a much more extended period of time. How do you plan when there’s that much uncertainty?
We have different scenarios. We have a best-case, a medium-case and a worst-case scenario that we’re operating under. And we’re looking at it carefully, literally every single week to see how revenue is tracking.
As I mentioned, you know, we’re five weeks into this right now and we’re only now just starting to feel like not just the revenue story has stabilized, but the people situation has stabilized. Our team is getting used to working this way and working virtually and being successful, and finding the balance that they need to find between working from home and also living at home.
What I do know is that we have enough capital, that we have the right people in place, that we have a plan that gets us through the next year without having to make any other significant adjustments. Because we have a lot of other levers that we can pull, if things don’t materialize as we hope they do.
And when you talk about next year, is that through 2020, or a year-long period from now?
All we can see right now is through the end of this year, and barely even there. Right now, we’re thinking about the next six months, which puts us squarely at the beginning of Q4.
I would say that, by my best estimation, and just talking to a lot of my friends in the business, I think we start to see things start to trickle back in and get to some normalcy by early-to-mid Q3 sometime, mid-to-late summer. And then by Q4, we have a regular stream of RFPs, and advertisers across categories are back, the travel category starts to bounce back by then — we’ve taken a big hit there, obviously.
But we’re making sure that we preserve every single asset that we have right now and strengthen it where we can, so that when 2020 does look more like a full rebound, we’re ready for it.
Talk a little bit more about what you’ve been hearing from advertisers. It’s been a little shocking, just how quickly it seems like everything pulled back. Do you see that changing anytime soon?
We’re already starting to see it change. There’s really been two types of advertisers. There’s been the retail advertisers and the travel advertisers whose business was just so immediately impacted, because consumers literally couldn’t transact with them — people can’t stay in hotels, they can’t go into stores, they can’t get on airplanes. So that business instantly canceled and pulled back.
The other school of advertisers — actually, there’s three, the other school of advertisers are folks who have the capital to continue to spend through this. And they will. They’re the ones that every single recession and depression case shows are the ones who always thrive coming through. You look at all the advertisers like Coke and Kellogg’s and others who persevered through great depressions and world wars, they always came out ahead because they spent through [the crisis]. So we’re seeing from folks like Unilever and P&G and Walmart and Amazon continuing to spend consistently. The entertainment guys, streaming services like Hulu and Netflix, are continuing to spend.
The challenge that we’re having in forecasting our business is the middle. There’s a lot of folks who simply hit the pause button, because they just weren’t sure what to do. There was a bit of paralysis, everything’s on pause, they’re not sure when it’s going to restart, we can’t forecast their business for them. And we’re not sure whether they’re going to come back or not.
We have opportunities and options for every single one of those cases to try and keep the business moving forward.
Thinking about the business model a bit more, one of the things that’s been striking to me has been all these publishers that say we have record traffic and yet our business — especially if we’re an ad-driven business — is tanking. Is that the dichotomy you’re seeing too? That the properties are doing well, but the ads just aren’t there?
We’re definitely having record traffic. Our week-over-week content on channels like entertainment, beauty, style, fashion, home and wellness are through the roof, our coronavirus-specific content where we’re talking about the pandemic and the crisis is marginally up week-over-week. So there’s definitely something to be said for consumers want something different than coronavirus coverage they can find on CNN or The New York Times.
Programmatic [advertising] is down over 30%, our Q2 will be down over 35%. There is definitely that challenge of, we have a lot of inventory and not a lot of business for it to serve right now. We’re trying to use some unused inventory for good, we’re prioritizing the Ad Council’s creative [about] COVID and stay-at-home, just as one thing that we can do in the short term to make good use of that.
Obviously, most large digital media publications are primarily ad-driven businesses, but there has been some experimentation with other business models. When we talked about this previously, you were saying that the ad business makes sense for [BDG]. Have the last few weeks changed your perspective on that?
Gosh, I haven’t thought about that, Anthony. That’s a really good question. I mean, right now, we’re so focused on stabilizing our business and continuing to service our brand partners.
I’ll tell you one part of our business that we’ve done a nice job pivoting on, we have a great live events and experiential business. That is things like Coachella or events and concerts we are planning for Nylon. We’ve now pivoted and are doing a bunch of virtual events.
So there’s one major vitamin advertiser in May who had a big campaign with us that revolved around having yoga retreats and yoga exercises. And for that particular vitamin advertiser, we’ve turned what were going to be live events into a virtual series of yoga events sponsored by them. We’re doing things like trivia nights and cooking classes, and we’re getting some nice traction from our brand partners on you thinking differently about the experiential business for sure.
One other thing that was announced as part of the cuts was laying off the staff of The Outline, but the company says it’s not permanently shut down. Is there any update on what’s going to happen there?
No, there’s not. And I think that’s in [Outline founder] Josh Topolsky’s hands right now, to try and sort out alternative paths that we can take for The Outline.
That really was a hard decision that we labored over very much, as we were considering what kind substantive changes that we could make to help the short-term health of the company. There’s no immediate plans for The Outline. It’s still being serviced as far as — we’re hosting it and all the content’s not going anywhere, but I think we’ll take a look at that once we get through the crisis and figure out what the longer-term path is there.
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