When two of America’s best-known journalists announced in January that they were quitting their high-profile jobs to start a new media venture, they were met with curiosity and some skepticism.
Justin Smith, the former chief media officer of Bloomberg, and Ben Smith, the former media columnist of The New York Times, are betting they can overcome the obstacles that have plagued a group of journalism start-ups launched over the of the last two decades.
Seven months later, the first outlines of the new company are beginning to take shape before a launch scheduled for October. After securing $25 million in funding from various wealthy individuals, the start-up, called Semafor, is hiring more journalists.
Liz Hoffman, a Wall Street Journal reporter known for her financial exclusives, joined political and tech reporters from BuzzFeed and The Washington Post, respectively. The Smiths, who are unrelated, plan to double Semafor’s headcount to 60 people in editorial and sales by October.
In addition to building a team of reporters in the United States, Semafor plans to open local offices, starting with Africa. The company has hired Yinka Adegoke, a Nigerian-trained journalist and former Africa editor of Quartz, to lead the team
“Our great competitors who dominate world news were created in the 20th century. [They are] export news from London or Atlanta or New York,” Ben Smith said in a recent interview. “We’re trying to build a much more networked way for a totally different time.”
Douglas McCabe, principal analyst at Enders Analysis, said the news industry “desperately needs and wants more innovation”.
“The news media of today looks identical to the news media of 1990. The news format is the same, the [big] the brands are the same,” McCabe added, pointing to the struggles faced by start-ups launched in the 2000s such as BuzzFeed that tried to shake up the industry.
However, as the business begins to take shape, the Smiths face a tougher macroeconomic backdrop than when they left their old job, with inflation continuing to soar and more economists predicting a recession.
The darkening picture put pressure on stocks of companies that rely on advertising. Vox Media, owner of New York magazine, laid off 39 employees last week.
When it is launched, Semafor will offer an information site and a mobile application. In the first year it will be free to read, relying on advertising and live events to generate revenue. After one to two years, 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 logged into the video call from a closet, “steam-rolled” Smith. Others argued that it was inappropriate to give a platform to Carlson, who 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 have funded companies such as BuzzFeed and Vice, which have failed to live up to expectations after being heralded as the future of journalism.
Instead, they raised money from wealthy investors who, in theory, would be more likely to stick with the company if macroeconomic headwinds led to a tough business start.
Among its backers is Jorge Paulo Lemann, the founder of 3G capital and the richest person in Brazil. “A premium, truly global media company that can meet the needs of today’s news audiences with reliable, quality 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, Wall Street Journal and Financial Times has restored investor confidence in the sector, McCabe said. “Over the past three or four years, these companies seem to have turned a corner. . . the media have become investable again.
But the Smiths are still entering a difficult digital information market that is plagued with failure. Many optimistic online news start-ups have struggled financially, leading to repeated rounds of layoffs and diminished ambitions.
The Athletic, a sports news site with more than one million paying subscribers, lost $55 million of $65 million in revenue last year. Earlier this year it was bought by The New York Times for $550 million. Semafor declined to disclose its financial targets or valuation.
Semafor’s goal is to take on the mainstream news giants – the New York Times, Washington Post, BBC and CNN – which the Smiths say are too focused on domestic readers and n don’t have the public’s trust.
“There’s just this blindly obvious consumer dissatisfaction with the news industry,” Ben Smith said.
He said Semafor would focus on landing scoops. He also plans to continue writing about the media industry in a format similar to his old column.
It plans to promote reader confidence by dividing Semafor stories into separate sections, separating news from journalist analysis. There will also be a section offering an opposite view, and a view from another region of the world.
After Africa, the Smiths aim to grow market by market with a focus on the Middle East, India, Japan and Europe. The strategy resembles Netflix’s focus on producing TV in local markets, rather than forcing Hollywood likes into homes in India, France and Brazil. “It’s definitely Netflix rather than Disney,” Ben Smith said.
With a workforce of 60 people at launch, Semafor is a minnow compared to the companies it intends to compete with. The New York Times has over 1,700 reporters, while the BBC has over 2,000. Even after acquiring 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 on the third day [after launching] Putin had started the war in Europe? Big news brands have big advantages because they can helicopter journalists there tomorrow.
Jessica Lessin, founder of news site The Information and another investor in Semafor, is more optimistic. “The era of BuzzFeed lifting a huge chunk of change and dumping it on the news to drive traffic, that wasn’t sustainable,” she said. “What absolutely works is driving the conversation through scoops.”