Justin B Smith, the chief executive of news start-up Semafor, has said the publication is on course to experience its first profitable month and “might even” see a profitable quarter in year one.
But he told Press Gazette that full-year profitability is “another story” and that the outlet, which launched in October 2022, is planning to spend money “very cautiously” as it seeks sustainability, rather than scale and reach, as its number one commercial priority.
Reaching for the top of the pyramid
Promoting Semafor months before launch, editor-in-chief Ben Smith told The New York Times that his then-unnamed news outlet would target the “200 million people who are college educated [and] read in English”.
To some extent that still holds true. When asked how he would pitch the brand today, Justin B Smith told Press Gazette’s Future of Media Explained podcast: “Semafor is a modern, 21st century, highly, highly intelligent, global news and intelligence service for smart, educated people all around the world.”
But later in the interview Smith, who was previously chief executive of Bloomberg Media and president of The Atlantic, also described Semafor as “a very premium, in many ways sort of a luxury brand”.
The start-up has not given up on those 200 million graduates, according to Smith, but “you have to superimpose onto any original, bold, long-term vision an intelligent architecture around sequencing”.
Pursuing its hoped-for mass audience out of the gate “would drain the coffers of Semafor in about a day and a half”, he said. So the strategy at present is, instead, to target what Smith called “the top of the pyramid: opinion leaders, C-suite, influentials”.
Despite its global ambitions, the strategy is also to entrench in the US, where Smith said Semafor has allocated nearly 90% of its resources.
“The US is 60% of the global premium news marketplace, from an advertising and subscription perspective,” Smith explained. “And so we recognise that and realise that if you want to build a global, quality news brand for the 21st century, you have to have a strong US presence.”
The rest of Semafor’s resources are currently allocated to Semafor Africa, which launched alongside the main publication in October. Smith said they chose the continent as their first overseas focus “because it represents one of the great horizons – probably the biggest horizon – of opportunity across global English language news media.
“[There are] 1.4 billion Africans – the demographic growth of the next ten, 20 years is going to be explosive. And most importantly for us, [there’s] not a lot of competition from the existing global English language news legacy players” – among whom he name-checked “esteemed places” like The New York Times, Washington Post, Wall Street Journal and the Financial Times.
Balancing chasing scale with sustainability
Rather than chasing scale and trying to leverage that into profit, Smith said at present Semafor is “really focusing on building a sustainable business model as quickly as possible, and then scaling from there”.
The New York Times reported in May that Semafor had booked $10m in revenue in 2023. Smith told Press Gazette approximately half of that money had come from advertising and half from events – although he did not think that ratio would necessarily persist.
“What’s important about that number is actually the relative size of the events business for us versus our competition,” he said. “I think any mature global news competitor with an events business generally would have – if they’re good and aggressive about the events opportunity – I’d say maximum 20% of their revenue tied to events.
“Obviously, we’re smaller, so it’s going to be a larger piece. But most importantly, it’s just a bigger priority for us than it is for other news publishers.
“We see the live journalism space as one of the most exciting – also one of the most profitable, and that’s really important to say – lines of journalism available to a publisher these days.”
Some of Semafor’s events, he said, had reached margins of around 75%. “I oftentimes say it’s the highest profit margin business you can be in [that’s] adjacent to quality journalism.”
Publisher-run events are a speciality of Smith’s. Working for the International Herald Tribune out of Hong Kong in his early-20s – when large news publisher-sponsored events were not as common as they are today – Smith pitched and then organised a “China Summit” that was hosted by the paper, bringing together 500 CEOs and Chinese politicians.
Semafor has thrown some 30 events over the past year, varying in topic from the grandiose – in April it hosted a “World Economy Summit” – to the granular, like one last month about permitting reform.
On the advertising front, Smith said Semafor was, for now at least, eschewing programmatic ads. He said the site currently pulls in approximately 100,000 unique visitors a day (“and it’s growing very rapidly”) with “about two, maybe three million uniques off-site” through partnerships, making for a total monthly audience of four to five million.
But the two million people visiting the site directly each month are too few to justify programmatic ads, and Smith said they compromise the experience of using the website too much to be worth the fuss: “There’s a downside to polluting the product with too much advertising that’s not in line with the brand position or the user experience.”
Overall, Smith said Semafor is “certainly going to see a profitable month in this year, and we might even see a profitable quarter in our first year.
“But full-year is a different story. We’re not gonna be ‘chasing the dragon’, if you will, by getting closer and closer to profitability then investing more and more chasing scale, chasing more areas. We’ve got quite a significant portfolio of products now, a very, very powerful audience and lots of inventory and opportunity to monetise.”
Semafor finds silver lining to higher interest rates
In May, Semafor announced it had raised $19m in new fundraising, bringing the total to $34m. The extra funding round was prompted by the downfall of Sam Bankman-Fried, who had provided $10m of the start-up’s original $25m seed capital.
Smith said Semafor “didn’t originally intend to raise more than the amount required to buy back Sam Bankman-Fried. We’d gone out into the market to reopen our original seed round investment to deal with this unusual and unfortunate situation.
“And it turns out we were able to raise basically double what we set out to raise, and from some of the best, highest integrity and most professional investors in the world.”
Those new investors included pollster Gallup, Yahoo co-founder Jerry Yang and KKR co-executive chairman Henry R Kravis. (Original investors besides Bankman-Fried included former The Atlantic proprietor David Bradley and The Information founder Jessica Lessin.)
Asked what plans the publisher had for the bonus cash, Smith said: “Well, put it in the bank and earn high interest – that’s one of the silver linings of this high-interest rate environment – and spend it very cautiously.”
He said that “the key is not to let it go to one’s head and act irrationally, but rather to double down on the cautious and responsible approach and keep the money in the bank and really bear down on building this sustainable model”.
Paywall ‘probably not in medium-term roadmap’
The Columbia Journalism Review reported in November that advertising and events would provide all of Semafor’s revenue “for twelve to fifteen months” following launch, after which it would move to a subscriber-funded model.
But Smith indicated to Press Gazette the deployment of any paywall had been delayed.
“You know, I’d say it’s not in the short-term, or even probably medium-term product roadmap…
“We felt that there’s another path – which is not anti-subscription, but rather it’s more about, again, sequencing – where we could focus on very premium, high-value advertising, mostly focused [on] the corporate reputation, corporate brand space, which lends itself very, very organically and naturally to the convening-of-leaders business.”
Those high-value advertisers have thus far included Mastercard and Indian multinational Tata – as well as oil giant Chevron, something which prompted the publication’s first climate editor to quit the month after launch.
Smith said he had “no doubt that at some point” Semafor would roll out a paid subscription product. But that would come “when our brand’s more established, our journalism’s more evolved, and the product market fit – to use a terrible piece of jargon – is more complete”.
Semafor chose the colour of Chinese emperors and joy
Smith also explained to Press Gazette what may be Semafor’s most immediately distinguishing feature: the pale-yellow colour that characterises its website and newsletters.
“It was an early conversation with Ben Smith and myself – I think we were at my apartment in New York in Soho,” he said. “And it was really just a general conversation around differentiation… It just occurred to us both that you could immediately be different if you chose and owned a colour.
“We did a mock-up – we looked at the ten-leading quality, global, journalism-based news brands in the world. And we had ten images of phones with the apps open to the homepage – and you just squint your eyes a little bit, and you cannot tell the difference. It’s just sort of, black and white; the New York Times, Washington Post, I mean, everything looks the same. It’s white, white, white!”
“Of course, the FT stands out for its salmon or pink – and that seemed like just a very sensible, easy and powerful way to zig when everyone else was zagging.
“And then yellow – it’s got all sorts of great, positive connotations as a colour throughout world history.
“It’s the colour of the Chinese emperors. It’s the colour of happiness and joy and all sorts of other great associations. So Semafor yellow was one of the best decisions we ever made.”
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