When two of the best-known figures in American journalism announced in January that they were leaving their prestigious jobs to launch a new media company, the pair were met with curiosity and some skepticism.
Justin Smith, the former Bloomberg media executive, and Ben Smith, the former New York Times media columnist, are betting on overcoming the obstacles that have stymied a group of new journalism companies launched over the past two decades
Seven months later, the first outlines of the new company are beginning to emerge ahead of an October launch. After securing $25 million in funding from several wealthy individuals, the start-up, called Semafor, is hiring more journalists.
Liz Hoffman, a Wall Street Journal reporter known for her financial news, has joined politics and technology reporters from BuzzFeed and the Washington Post, respectively. The Smiths, who are not related, plan to double Semafor’s staff to 60 in editorial and commercial by October.
In addition to assembling a team of journalists in the US, Semafor plans to open local offices, starting in Africa. The company has hired Yinka Adegoke, a Nigerian-trained journalist and former Africa editor of Quartz, to lead the team.
“Our major competitors who dominate world news were created in the 20th century. [They are] exporting news from London or Atlanta or New York,” Ben Smith said in a recent interview. “We’re trying to build a much more connected way for a totally different time.”
Douglas McCabe, senior analyst at Enders Analysis, said the news business “desperately needs and wants more innovation”.
“Today’s media seems identical to the media of 1990. The format of the news is the same, the [big] the brands are the same,” McCabe added, noting the struggles experienced by start-ups launched in the 2000s like BuzzFeed that tried to shake up the industry.
However, as the company begins to take shape, the Smiths face a more challenging macroeconomic environment than when they left their old jobs, with inflation still rising and more economists predicting a recession.
The darkening picture has pressured the shares of companies that rely on advertising. Vox Media, owner of New York magazine, laid off 39 employees last week.
At launch, Semafor will offer a news website and mobile app. The first year will be free to read and will rely on advertising and live events for revenue. After a year or two, the company hopes to move behind a paywall.
The company made its public debut on July 7 with its first event. But the conference, billed as a series of interviews about trust and polarization, drew criticism after Ben Smith interviewed right-wing Fox News host Tucker Carlson.
Some reporters said Carlson, who dialed the video call from a closet, had “rolled” Smith. Others argued that it was inappropriate to give a platform to Carlson, who has suggested that the January 6, 2021 attack on the US Capitol was secretly carried out by the US government.
The Smiths have avoided taking money from Silicon Valley venture capitalists who provided funding to companies like BuzzFeed and Vice, which failed to live up to expectations after being heralded as the future of journalism.
Instead, they’ve raised cash from wealthy investors who, in theory, will be more likely to stick with the company if macroeconomic headwinds result in a rough business start.
Among its financial backers is Jorge Paulo Lemann, the founder of 3G capital and the richest person in Brazil. “A truly global, premium media company that can serve the needs of today’s news audience through excellent and reliable information. . . it’s really compelling,” he said.
Other Semafor investors include crypto-billionaire Sam Bankman-Fried, former Goldman Sachs banker John Thornton and David Bradley, the former owner of The Atlantic.
The success of news brands such as the New York Times, the Wall Street Journal and the Financial Times has given investors renewed confidence in the industry, McCabe said. “Over the last three or four years, those businesses seem to have turned a corner. . . . Media has become investable again.”
But the Smiths are still entering a tough digital news market beset by failure. Many upbeat online news startups have struggled financially, resulting in repeated rounds of layoffs and scaled back ambitions.
The Athletic, a sports news site that has more than 1 million paying subscribers, lost $55 million on $65 million in revenue last year. Earlier this year, the New York Times bought it for $550 million. Semafor declined to disclose its financial targets or valuation.
Semafor’s goal is to take on the giants of general interest news—the New York Times, the Washington Post, the BBC and CNN—that the Smiths believe are too focused on national readers and are not trusted by the public. .
“There’s just this blindingly obvious dissatisfaction of consumers with the news business,” said Ben Smith.
He said that Semafor would focus on the first landings. He also plans to continue writing about the media business in a format that would resemble his old column.
He plans to promote reader trust by breaking Semafor stories into separate sections, separating the news from the reporter’s analysis. There will also be a section that will offer an opposing view, and a view from another region of the world.
After Africa, the Smiths aim to expand market by market with an emphasis on the Middle East, India, Japan and Europe. The strategy resembles Netflix’s approach to producing television in local markets, rather than forcing Hollywood tastes into homes in India, France and Brazil. “It’s definitely more Netflix than Disney,” said Ben Smith.
With a workforce of 60 at launch, Semafor is small compared to the companies it aims to compete with. The New York Times has more than 1,700 journalists, while the BBC has more than 2,000. Even after the acquisition of The Athletic this year, the New York Times has nearly $500 million in cash on its balance sheet.
“Trying to be a generalist with 60 reporters is tough,” McCabe said of Enders. “How would this newsroom have coped if it was the third day [after launching] Had Putin started the war in Europe? Big news brands have big advantages because tomorrow they can helicopter journalists in.”
Jessica Lessin, the founder of news site The Information and another Semafor investor, is more optimistic. “The BuzzFeed era generated a lot of change and threw it into the news to drive traffic, that wasn’t sustainable,” he said. “What absolutely works is to drive the conversation through primaries.”
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