Its been another week to remind us of the follies of erstwhile news pioneers BuzzFeed and Vice which are both hoping to sell once-vital subsidiaries, Tasty and Refinery29 respectively, in their latest lifesaving endeavors. We don’t need to be reminded of the hundreds of millions of lost investment or the billions of sometime valuations on the back of flaky platform traffic and “virality”. But, beyond the platform euphoria (once shared, of course, by wiser heads than Jonah Peretti and Shane Smith) we might note that the two burned-out companies consistently lacked a coherent business model. In a ‘Field of Dreams” way, they were piling up an audience in the expectation that monetisation would come.
That’s why we can be captivated by an ambitious digital news startup which is on course to be profitable in 2024 – only its second full year. The company, plausibly, aims to compete with the New York Times, The Guardian and the Financial Times to become a global news source, ultimately, for the estimated 200mn college educated, English-speaking readers (or at least the most influential and successful of them). It’s becoming an increasingly serious player after having so far spent perhaps just 30% of its $34mn startup funding. (Less, of course, than the $50mn burned in less than a year by another news startup The Messenger which closed this week).
That’s the pitch for Semafor, launched in October 2022 by former Bloomberg CEO Justin Smith and journalist Ben Smith, former executive of BuzzFeed, Politico and the New York Times. It aims to provide audiences with “an unparalleled level of journalistic transparency through innovative new forms, cutting through the noise of the news cycle with smart, distilled views and exploring competing perspectives across borders for a curious, new global audience.”
In practice, that means clarifying the difference between facts and opinions, quoting and linking to a wide variety of sources, and taking a global perspective rather than an American one. Semafor seeks to be an antidote to polarised news coverage with its “Semaform” sections on: The News, The Reporter’s View, Room for Disagreement, and Notable, some of the best other writing on the subject. So, its analysis yesterday of The Messenger debacle was followed by a link to an insightful piece in the New York Times.
But this is not some kind of news digest and Semafor has published a series of exclusives during its first year, including the first report of Microsoft’s $10bn agreement to acquire ChatGPT last January.
Its been an encouraging first 15 months, to say the least. Just ask the diverse group of venture investors, philanthropists and media owners including: KKR founder Henry Kravis, Charles Koch, Jerry Yang (co-founder of Yahoo), David Rubenstein (Carlyle Group), David Bradley (Atlantic Media), Ric Elias (Red Ventures), Gallup, and Jessica Lessin (The Information). They are described as having “a shared sense of responsibility to support quality, independent global news”.
The CEO’s lofty objective is “to build the world’s most influential, quality, independent news brand/platform for the 21st century global leader. We started 15 months ago in the US and sub-Saharan Africa (based in Nigeria) and will be expanding across the rest of the world in 2024 and beyond.”
Explaining the first geographical steps, he has said: “The US is 60% of the global premium news marketplace, from an advertising and subscription perspective. And so we recognise that and realise that if you want to build a global, quality news brand for the 21st century, you must have a strong US presence. There are 1.4bn Africans – the demographic growth of the next 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”
Next, Semafor says, will come (in an undisclosed order) Europe, the Middle East, Asia, and Latin America. It currently has staff in the UK as well as the US and Africa.
It produces nine newsletters, including the Flagship daily briefing “on the world’s most important stories”, Principals, a daily insider’s guide to Washington DC and verticals on Media, Technology, Business, Politics, Net Zero, Africa and Security. It has 500k newsletter signups (with a claimed 60% average open rate), 3-5mn total browsers and (according to SimilarWeb) 1.1mn monthly uniques in the last quarter of 2023. Some 72% of the newsletter audience is US-based, followed by the UK, Canada, South Africa, Kenya, and Nigeria.
But the real magic of Semafor may lie in the fact that, behind the news service (staffed by a relatively small number of experienced journalists with premium recruits from Reuters, New York Times, Wall Street Journal, Bloomberg and Quartz) is the architecture of a B2B media company.
That’s the only way to explain a news publisher for which events (described as “live journalism”) are clearly as important – to its influence, reach and potential profitability – as the newsletters and web site. From the start, it has been an events and newsletter company not a publisher with events. You get the distinction.
Justin Smith spent eight years as CEO of Bloomberg Media after having weaved through The Economist, International Herald Tribune, The Week, The Atlantic and Quartz. That experience in B2B, specialist media and also global operations has strongly influenced Semafor’s strategic belief in three ways:
- Events can be an influential – and highly profitable – partner for journalism
- Large digital audiences can be built by aggregating specialist verticals
- Small, expert teams can be more cost-effective
Distinctively (and very B2B) the conferences and summits are at the heart of Semafor rather than the ancillary of almost every other news company: “In 2023, we put on 50 different events with over 3,000 attendees. We are looking to build on that momentum in 2024 with an even broader scope of events.”
Key events include: The World at Work Summit, The Middle East Global Summit, The Semafor Africa Summit, and Made in America. But what best illustrates their growth is the Semafor World Economy Summit, smartly organised in Washington DC alongside the annual IMF and World Bank meetings. The debut event in 2023 had 60 speakers and 500 attendees. This year, it wll feature 200 speakers on three stages with 1,500 invitation-only delegates paid for by corporate sponsors.
Semafor has been described as “Axios for FT readers” which at least removes any kind of comparison with the likes of BuzzFeed and Vice. To emphasise the digital startup with a difference, it achieved breakeven in April and was profitable in September and October, just one year after launch. Its events which generated at least $6mn revenue (40% of the total) are said to have made a profit – principally through sponsorships – of at least $1mn in 2023.
It all reflects the CEO’s determination – as rapidly as possible – to achieve “a sustainable business model for our journalistic mission”. But it had once seemed so difficult. Smith & Smith started fundraising late in 2021 when interest rates were rock bottom, there was an excess of venture capital – and before Russia invaded Ukraine. Ultimately, the founders raised more funding than originally anticipated after having to replace $10mn provided by the crypto bankrupt Sam Bankman-Fried.
But the worsening economic climate pushed Semafor to reduce their headcount plans by 40% three months before launch. That was just the start of the challenge. By contrast with almost every other startup – let alone the super-funded BuzzFeed and Vice – Semafor launched with (more or less) its current 70-75 staff (including contributors and “super stringers”) and has resisted the temptation to add anything more than a handful of self-funding sales and events people. The “stay tight” discipline has been encouraged by hyper-experienced shareholders who have counselled the CEO: “Don’t hire another person for as long as you possibly can. Just play a game with yourself. Don’t hire anyone, just see how much you can push this company with the 70 to 75 that you have and impose that self discipline.”
This learn-as-you-go strategy – and unexpectedly strong events revenue – has also driven the decision to defer any move towards the paid subscriptions on which it had once been thought Semafor’s profitability would depend. Much discussed plans for a paywall seem to have been postponed for the foreseeable future. But my guess is that the company will still test the potential to diversify revenues by launching paid-for digital research reports, possibly linked to events. Why not start with the Semafor World Economy Summit in November?
That’s something for the future.
But the business was said to be “almost” breakeven in the last quarter of 2023 and is expected to be profitable in this, its second full year. While the following 2024 estimate of $4mn EBITDA and 20% margin is my own, the 2023 figures are based on disparate comments variously made by the company’s founders. The 2024 estimates are on a like-for-like basis and, therefore, do not include non-recurring startup costs and the likely launch of the next geographical edition(s), expected later this year:
| Semafore Inc $mn Flashes & Flames estimates SnapShot | 2024 | 2023 |
| Revenue | 20 | 15 |
| % from events | 50% | 40% |
| EBITDA | 4 | (3) |
| Headcount | 75 | 70 |
Much of the revenue comes from 40 major sponsors and some gilt-edged corporates including Tata, Genesis, Mastercard, and Chevron – with no cut-price programmatic ads. The impressive first-year financials show Semafor has succeeded in building a distinctive brand that is starting to compete with the longstanding leaders of global journalism – and with a current cost base of some $15-20mn.
Justin Smith says: “Semafor aims to become the leading quality, independent news and intelligence brand for world leaders. After just 15 months, we have rapidly established ourselves in the US and sub-Saharan African markets with 500k subscriptions and 5m readers, and will be expanding across the rest of the world soon. We are laser-focused on the leadership audience across the global private and public sectors. We provide our subscribers with original breaking news, real-time distillation and curation of other intelligent sources, and high-level virtual and in-person convenings, discussions and conversations.”
He is teasing about the planned launch later this year of the next “continent”, although last week’s launch of Semafor’s Asia Morning newsletter may be a clue. But, while it is clear that the events will provide rising profitability in the US, the same may not be true of all other regions where Semafor will face increased competition in media but also in events, not least from the Financial Times, The Economist and Bloomberg whose conferences have so inspired the founders.
That battle to establish a second major (and profitable) operation may be key to a strategy which, inevitably, depends on the news brand’s international position. That identification as a global (and not a US) operator is a clear priority.
That’s also the next big test for Semafor.
After building a latently profitable operation so speedily in the US, will it be able to do the same in other parts of the world – and with anywhere near the same net investment cost? The fact is that the high-level ambition may necessitate some acquisitions, partnerships or alliances with local operators around the world. More risk and more cost.
As the stakes (and its own value) rise, might Semafor itself be acquired – sooner rather than later – by one of its would-be rivals? Will Nikkei (owner of the FT) come calling? Or the New York Times which, arguably, needs a non-US brand to maximise its own international strategy? Or Axel Springer, owner of the US-based Business Insider, Politico and Morning Brew, with its eyes on global news media?
For Semafor, the biggest challenges in its race for that mythical 200mn global audience are yet to come. But, meanwhile, Smith & Smith are showing legacy media how to do it.
