When two of the best-known figures in US journalism announced in January they were quitting their prestigious jobs to launch a new media venture, the pair were met with curiosity and some scepticism.
Justin Smith, the former Bloomberg media chief executive, and Ben Smith, the ex-New York Times media columnist, are betting they can overcome the obstacles that have hobbled a clutch of journalism start-ups launched over the past two decades.
Seven months later, the early contours of the new venture are starting to emerge ahead of a launch planned for October. Having secured $25mn in funding from various wealthy individuals, the start-up, called Semafor, is hiring more journalists.
Liz Hoffman, a Wall Street Journal reporter known for landing finance scoops has joined alongside politics and technology journalists from BuzzFeed and the Washington Post, respectively. The Smiths, who are unrelated, plan to double Semafor’s staff to 60 across editorial and commercial by October.
In addition to assembling a team of reporters in the US, Semafor plans to open local bureaus, starting with Africa. The company has hired Yinka Adegoke, a Nigerian-educated journalist and former Africa editor of Quartz, to lead the team
“Our big competitors that dominate global news were created back in the 20th century. [They are] exporting news from London or from Atlanta or from New York,” Ben Smith said in a recent interview. “We’re trying to build a much more networked way for a totally different moment.”
Douglas McCabe, senior analyst at Enders Analysis, said the news business “desperately needs and wants more innovation”.
“The news media today looks identical to the news media in 1990. The news format looks the same, the [big] brands are the same”, McCabe added, pointing to the struggles experienced by start-ups launched in the 2000s such as BuzzFeed that tried to shake up the industry.
However, as the company starts to take shape, the Smiths are contending with a more challenging macroeconomic background than when they left their former jobs, with inflation continuing to soar and more economists predicting a recession.
The darkening picture has put pressure on shares of companies that rely on advertising. Vox Media, which owns New York magazine, last week laid off 39 employees.
At its launch, Semafor will offer a news website and mobile app. In the first year it will be free-to-read, relying on advertising and live events for revenue. After one to two years, the venture 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 polarisation — drew criticism after Ben Smith interviewed rightwing Fox News host Tucker Carlson.
Some journalists said Carlson, who dialled in to the video call from a closet, had “steamrolled” Smith. Others argued 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 venture capitalists in Silicon Valley who provided funding for companies such as BuzzFeed and Vice, which failed to live up to expectations after being heralded as the future of journalism.
Instead they have raised cash from wealthy investors who in theory will be more likely to stick by the company should macroeconomic headwinds result in a rocky commercial start.
Among its financial backers is Jorge Paulo Lemann, the founder of 3G capital and Brazil’s richest person. “A premium and authentically global media company that can address the needs of news audiences today through great, reliable information . . . is truly 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 sector, McCabe said. “Over the last three or four years, those businesses look like they turned a corner . . . media has become investable again.”
But the Smiths are still entering a tough digital news market beset by failure. Many optimistic online news start-ups have struggled financially, resulting in repeated rounds of redundancies and scaled-back ambitions.
The Athletic, a sports news site that has signed up more than 1mn paying subscribers, lost $55mn on $65mn in revenue last year. Earlier this year, it was bought by the New York Times for $550mn. 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, Washington Post, BBC and CNN — which the Smiths think are too focused on domestic readers and are not trusted by the public.
“There are just these blindingly obvious consumer discontents with the news business,” said Ben Smith.
He said Semafor would focus on landing scoops. He also plans to continue writing on the media business in a format that would resemble his old column.
He plans to promote reader trust by splitting Semafor stories into separate sections, breaking apart the news from the reporter’s analysis. There will also be a section offering an opposing view, and a view from another region in 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 focus on producing television in local markets, rather than forcing Hollywood tastes into homes in India, France and Brazil. “It’s definitely Netflix rather than Disney,” Ben Smith said.
With a staff of 60 at launch, Semafor is a minnow compared to the companies it intends 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 $500mn in cash on its balance sheet.
“Trying to be a generalist with 60 journalists is difficult,” McCabe of Enders said. “How would this newsroom have coped if on day three [after launching] Putin had started war in Europe? The big news brands have big advantages because they can helicopter journalists there tomorrow.”
Jessica Lessin, the founder of The Information news site and another investor in Semafor, is more optimistic. “The era of BuzzFeed raising a huge chunk of change and throwing it at news to drive traffic, that wasn’t sustainable,” she said. “What absolutely works is driving the conversation through scoops.”