Today’s conversation: Semafor CEO Justin Smith joined me to discuss its $30 million funding round and how it plans to scale its events-heavy business model.
Semafor’s funding round valuing the company at $330 million with $40 million in revenue and $2 million in EBITDA was a needed vote of confidence in the media sector, Troy Young pointed out on People vs Algorithms. 165x EBITDA aside – Recall how Politico was reported to have just $2 million in profits in 2018; Axel Springer paid $1 billion for Politico in 2021 – the financing indicates Semafor’s events-led business model is working. I expect we’ll see a continued pivot to events, particularly any publisher that can convene elite audiences. Below, I get into the big bets Semafor is making for what a post-scale media company is.
Couple other things:
The Rebooting now has a YouTube channel. We shot an Innovators Unscripted panel at CES in collaboration with Index Exchange. Index CEO Andrew Casale and Dentsu chief trading officer Ant McDonagh joined me to discuss the gap between the promise and near-term reality of agentic advertising, which could remaking digital advertising, only nobody seems sure on what time line and in what ways. See the full conversation, shot at the Index Exchange suite at the Cosmopolitan.
On PvA, Troy and I gave our version of a curtain raiser on the year ahead in media. We discussed why events are so critical to media businesses now, YouTube’s dominance as the media marketplace, why investigative journalism is the next creator frontier, legibility vs attention, the busy year ahead for media glue factories, prediction markets and sports gambling as the next moral panic, and the coming battle between the Pope and MAGA. Listen to PvA.
Why TIME’s email engagement is soaring
TIME’s newsletters reach millions of readers every week. But until recently, they were stuck with clunky workflows, limited insights, and flat engagement. After migrating 13 newsletters and millions of subscribers to beehiiv (with zero downtime) things changed fast. Open rates on “Inside TIME” jumped 63.8%. Click through rates across their portfolio increased to 11.7%. Editors now publish faster, with better tools and real-time insights. TIME proves that even the most established media brands can evolve and thrive when they own their email strategy.
Semafor’s post-scale media formula
Much of the chatter about Semafor’s $30 million funding round focused on its valuation: $330 million. This is a healthy 165x the $2 million in EBITDA Semafor says it generated on $40 million in revenue last year. Valuations, of course, are based on a future scenario that may or may not pan out. After all, Vice Media was once valued at $5.7 billion.
More interesting is the model Semafor is building. It has many echoes of a typical B2B business: a focus on specific, high-value professional segments; an events-heavy business model; a focus on direct connections via email vs scaled pageview models.
It is also highly ambitious. It identifies The Economist (founded 1843) and The Financial Times (1888) as its rivals. That is aspirational. News brands take time to build credibility and reputation. Semafor has yet to have that kind of impact consistently in its key power areas of politics, business and tech. The new cash will help it expand and deepen its coverage.
It has established enough cachet to attract heavies to its events. It boasts over 200 CEOs attended its Semafor World Economy event last year. It expects 400 this year. The co-chairs of last year’s were Citadel’s Ken Griffin and Carlyle’s David Rubenstein, who is also an investor.
“We are just not in the business of delivering large numbers of eyeballs that may or may not be relevant,” Justin told me in a conversation on The Rebooting Show.
It has made a few big bets:
Elite beats mass.
The core of the Semafor thesis is that elite, influential audiences will only grow in value. That means taking a “sniper” approach rather than the cookie carpet bombing of the scale era.
Justin’s description of how it focuses on specific professional types is very reminiscent of B2B models. The assignment in B2B and these influence models is to get the right people in the room. That’s based on relational capital, not ComScore uniques from randoms and bots.
“We are just not in the business of delivering large numbers of eyeballs that may or may not be relevant or that represent a very large ambiguous community.”
Corporate affairs will continue to grow in importance.
The growing intersection of business and government means that more resources will be expended on influencing regulators, politicians and other key stakeholders. (Semafor prefers the term stakeholder media.)
Corporate affairs is one of the last attractive advertising categories because the big tech companies are not your competitors and often your customers. It is a crowded market with Politico, Axios, Puck, Punchbowl and others feeding at the same trough. These efforts are about image and reputation, making the proximity to power critical — and a way to escape the grind of performance marketing. It’s a far better gig to get CEOs in a room with sponsors than to hustle affiliate clicks with SEO-optimized shopping guides.
“Corporate affairs advertisers come to us and they say, ‘We don’t want to reach everyone between the age of 21 and 55.’ They want to reach specific stakeholder segments.”
Events are a better foundation.
Semafor currently generates half of its revenue from events; it will inevitably need to complement that with a subscription revenue line.
But events, especially geared to influential audiences, are a better revenue foundation than advertising or subscriptions. They’ve allowed Semafor to show a strong growth rate while achieving modest profitability. Events are a way to generate revenue quickly; Semafor does not grow this quickly with subscriptions as a core revenue driver.
Semafor did 97 events last year. That’s less than half what FT Live did. Many business publications have high-octane events businesses that are often extensions of their ad businesses. Small-scale events are good leverage — buy $x of ads, “unlock” a breakfast forum. Fortune, for example, did 65 events, including virtual, and boasted a 40% revenue growth rate.
The trick for Semafor is developing event “platforms” with Semafor World Economy and its Next Three Billion summit series. These kinds of large scale events have far different economics and scalability than bespoke events. The big goal: Displace Davos as the central convening of the global elite.
“The convening business, especially if you’re focused on the leadership audience, is a very attractive way to start because it can be more profitable than many other activities in journalism.”
A global orientation greatly expands the market opportunity.
Semafor started with a global orientation, even if it only launched with a token Africa outpost. It now has coverage in the U.S., Africa and the Gulf. It will expand to Asia this year and soon to Europe.
Global orientation appeals in this kind of market.
Corporate affairs spending is often centralized in contrast to fractured brand advertising. Vice had global orientation, only it created insane corporate complexity.
The challenge is being influential globally is tough to pull off in a short time, particularly with a newsroom that’s far smaller than incumbents.
The Gulf is a key market. Semafor is expanding its Gulf newsletter to five times a week. It has held events in the region. Its sponsors include First Abu Dhabi Bank, G42, Mubadala and Invest Qatar.
“If you’re building a 21st century global news brand, you have to look at where the global economy is going, not where it’s been.”
Sequencing is a difference maker.
Perhaps the biggest challenge for media brands these days is calibrating ambition with discipline. Semafor is operating in a far different environment than when it launched.
A subscriptions product has been shelved. It’s a glaring omission when Semafor compares itself to the FT and The Economist, which each have over 1 million subscribers for very expensive subscriptions. (The FT costs around $900 a year; The Economist costs about $250 per year.)
There are rightly two schools of thought about subscriptions; establish your product as premium early vs build credibility and habit first. Justin cites his experience at Bloomberg, which was free for many years before adopting a paywall in 2018. The bet is Semafor’s journalistic product continues to strengthen to the point where it can build a direct revenue business.
“If you could not have a paywall and build a profitable business early, build the brand, fine-tune your journalism, and connect with the right audiences, it’s actually better not to have a paywall.”
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