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Newsweek in ‘disarray’ as top sales executive resigns

The Newsweek Media Group is reeling.

Ed Hannigan, the company's head of sales, resigned on Tuesday. His departure came after several senior journalists cut ties with the company amid allegations of ad fraud, a raid by the Manhattan district attorney’s office and the firing of top editors at the publication who had been investigating the company.

The turmoil is taking a toll on the company's business side. The Newsweek Media Group, which owns Newsweek as well as the International Business Times, has lost hundreds of thousands of dollars in ad commitments since reports emerged that it bought traffic in order to hit business goals, a senior advertising executive who has worked with the magazine told NBC News. The Manhattan district attorney is reportedly investigating the finances of the Newsweek Media Group, which is privately held.

The ad executive, who lacked authorization to speak publicly on the matter and spoke on the condition of anonymity, said news of the inflated traffic claims was “shattering to us” and had reverberated with clients.

“Newsweek is in disarray,” the executive said. “We have pulled back on some buys. There is no one to speak to there anymore."

Nativo, an online advertising company, is also suspending part of its business with Newsweek.

“We have been monitoring the situation,” John Haake, senior vice president of marketing at Nativo, wrote in an email. “Newsweek continues to utilize our tech to power their direct ad sales.”

Other ad networks are sticking with Newsweek, including AppNexus.

News of the advertiser pullback comes two days after the company fired two of its top editors and a reporter, all of whom had been involved in articles about their own employer. They had worked with colleagues to report on the magazine's finances and figure out why the Manhattan DA had raided their offices and taken away servers.

The district attorney's office declined to comment.

On Tuesday, investigative journalist David Sirota announced that he had parted ways with the company. Journalist Kurt Eichenwald, who has not written for Newsweek since April 2017, also voiced his displeasure with the recent news.

Rachel Brody, deputy opinion editor, also resigned.

Newsweek, once a venerated weekly newsmagazine, has endured a turbulent decade. IBT Media bought it in 2013. The company later hired Peter Goodman, an award-winning journalist with The New York Times and the Huffington Post, to lead IBT. Since then, the company has gone through several rounds of layoffs, and Goodman resigned in 2016 to return to The New York Times.

In recent months, Newsweek employees have been under pressure to increase traffic to its website at a phenomenal rate, according to current and former staffers who spoke on the condition of anonymity. One former staff member referred to the operation as “a click-bait farm.”

Newsweek’s problems were compounded when a BuzzFeed report alleged that the company had purchased traffic and committed ad fraud. Newsweek admitted to buying traffic but denied the fraud.

Mark Lappin, director of communications for Newsweek Media Group, said in a statement, “Newsweek does not comment on its advertisers.”

But the damage of the BuzzFeed report is only starting to become apparent.

"We were not happy with the things we were hearing," the ad executive said, adding that allegations of fake news and fake traffic were sensitive topics with clients and undermined the entire digital content business.

"It calls into question our entire industry. We don't need this."

CORRECTION (Feb. 8, 2018, 11:55 a.m. ET): An earlier version of this article misstated the nature of Peter Goodman's departure from the International Business Times. He resigned; he was not "let go." The article has also been updated to note that Kurt Eichenwald, who resigned on Tuesday, has not written for Newsweek since April 2017.

CORRECTION (Feb. 7, 2018, 5:20 p.m. ET): An earlier version of this article misstated the day that Ed Hannigan resigned as the Newsweek Media Group's head of sales. It was Tuesday, not Wednesday.