Acquisition of the 10-year-old Quartz business news brand by G/O Media last month was yet another example of a digital media pioneer seemingly failing to live up to its founding ambitions.
Quartz was launched in 2012 by Atlantic Media Group, publisher of The Atlantic magazine. It was the brainchild of the group’s President, Jay Lauf (one of the most thoughtful people I’ve met in media) and former Wall Street Journal managing editor Kevin J. Delaney. Together, they articulated a clear vision of what Quartz wanted to be, and how it wanted to do it.
Quartz would, in effect, be the digitally-native version of The Economist: A premium brand aimed at high-value professionals, but one that understood the rhythms of digital publishing, not least the shift to mobile devices.
Its newsletter strategy in particular was viewed as a model for other publishers. Hundreds of thousands of readers signed up for its Daily Brief updates, which provided a prime piece of sponsorship real estate.
There was even a principle of writing for the web named after the outlet. The “Quartz curve” dictated that the traditional sweet spot for print news – 500-800 words – was a turnoff for online readers, who would only really engage either with much shorter or much longer articles. (The theory has since been repeatedly challenged. But it did, at the very least, focus the minds of an industry still largely just replicating print formats on the web.)
There was also a forward-looking focus on India and Africa with dedicated site launches, and a message-based mobile app that appeared to represent the bleeding edge of changes in how news content should and could be delivered. The company even managed to hit a year of profitability in 2016, with an audience of more than 20m and revenues of more than $30m.
But things started to slide after that, with revenues dipping in 2017. Other publications had learned from Quartz, not least on the business side where others began offering the sort of slick native advertising that Quartz had once led on, and which was, in any case, difficult to scale up. At the same time, the industry was waking up to the fact that no matter how good you were at making content that could travel around the web gobbling up eyeballs, you were always at the mercy of those controlling the pipes over which it traveled.
Still, Quartz looked like a business that remained at the top of the digital game, and a track record of adapting suggested that a downward trajectory was far from fixed.
In 2018, as Atlantic Media owner David Bradely was gradually getting his family out of the media business, it was announced that Quartz too would be sold, to Japanese company Uzabase, whose primary product was a subscription news service. The price was some $85-110m.
The deal in some ways looked a little like the digital equivalent of Nikkei buying the Financial Times; but there were, of course, huge differences. While the markets are very different, Nikkei was and is a newspaper in the same way the FT is. But Uzabase was far closer to a subscription information product than a publisher of informative and pleasing content.
The Uzabase acquisition never really paid off for either party. A paid membership programme was launched in 2018, followed by a paywall in 2019. At one point, that paywall was bringing in almost $120,000 a month in subscriptions, but it was not enough to stop the company reporting a $18.4m loss off the back of $26.9m in revenue.
It’s easy to see why a Quartz paywall made sense to a company like Uzabase. It was a business model they knew, and one that seemed suited to a business publication like Quartz. Yet that, to my mind, was a fundamental misunderstanding of what Quartz was and is.
Quartz was, at heart, a way of framing, explaining and presenting the world and the economics that underpin it. All things that are quite well suited to a membership model. But it was not delivering breaking news, or indeed, much in the way of inside information, things that for many publications, are key to making a paywall work.
Comparing Quartz to business Business Insider, another digitally-native, business-focused publication. BI has doubled down on a paywall for much of its core business content, but has done so with a focus on news – much of it exclusive – as well as exclusive interviews and content such as investor slide decks, which aren’t easily available elsewhere, all the while building out a big programmatic business with other subject and content areas outside the paywall. The broad subject matter is the same, but the approach to covering it, and thus the proposition for subscribers, is very different.
In 2019, Uzabase decided to cut its losses and Quartz was taken private by one of the original founding team Zach Seward as CEO and Katherine Bell as editor-in-chief, replacing Lauf and Delaney who had run Quartz as publisher and editor-in-chief respectively, and later co-CEOs, since launch. In mid 2020, as the pandemic was making an already difficult advertising market even worse for publishers, the company laid off half its staff.
Though Seward and Bell always seemed genuinely intent on running Quartz as a standalone business, the acquisition by G/O is no big surprise as the digital media market consolidates.
The question is: will it work out for both parties?
G/O is built primarily from another former digital media darling Gawker, along with satirical news site The Onion, owned by private equity firm Great Hill Ventures. Those had been acquired in early 2019 from mostly Spanish-language media network Univision, which itself picked up most of the assets following the Peter Thiel-fuelled lawsuit by Hulk Hogan that sent the Gawker family sites into bankruptcy.
At Univision, the sites were bleeding money, racking up quarterly losses of tens of millions. Under G/O ownership, the group now says it is profitable, and claims revenue is rapidly bouncing back from the hits taken during the pandemic. It also claims that profits will be up another 30-40% this year despite taking on Quartz, which lost almost $7m last year.
The aim appears to be to blend the best of both businesses. Quartz will add a business audience of 4.6m to G/O’s programmatic pool, a not inconsiderable number in a world so dependent on scale, and one which is expected to grow following the decision to drop its paywall earlier this year. There may even be scope to apply some of G/O’s expertise in e-commerce to Quartz, though that will require some innovative thinking to adapt a business built primarily around product recommendations.
In the other direction, Quartz’s expertise in newsletters is inevitably something G/O wants to propagate across the rest of its company and, while paywalls look unlikely to form much of G/O’s future across its other sites, the membership model Quartz adopted prior to metered chargin (and still runs for various perks and specific content such as Quartz Africa) could, in theory, work for the dedicated niche audiences that get their car culture fix from Jalopnik or their tech news from Gizmodo.
A big challenge – as with most deals of this type – is making the cultures fit. In one sense, Quartz and the G/O sites have a lot in common. They are both digital trailblazers built on an understanding of how very differently people consume media on the web. But, while Quartz’s innovation was primarily about seeing online content as a product and honing that product through data and design, the Gawker sites have always been about tone, subject and style. In theory, those two traditions could deliver a strong combination. But getting them to play nicely together will be no mean feat. Just watch.