Semafor Replaces 200 Million With Execution as It Turns One
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In two days, we’re convening for the AMO Summit. I’ve been heads down getting everything finalized. Folders are stuffed. Badges are printed. Sponsor signage is on the way. We’ve picked a great caterer. And in two days, everyone’s coming. I had a few blank badges printed, so if you’ve missed all my marketing emails or your day of meetings were canceled, hit reply and I’d be happy to sell you a ticket.
Subscription businesses are often times referred to as leaky buckets. You have new subscribers joining, but at the same time, other subscribers are churning. You can be doing everything right with your acquisition, but if your retention is bad, your business is going to struggle.
A big way to reduce churn is to understand who your audience is and what their consumption behaviors are. That way, you are able to better message different cohorts to ensure that they are continuing to come back to your site.
Semafor as it enters year two
Anytime a project gets a ton of press months before it launches, you have to be skeptical. The bigger you are built up as you ascend that mountain, the more you will be beaten down as you come crashing down. And in media, that is certainly very true.
And so, it should come as no surprise that I was very bearish on Semafor. As I wrote in January 2022 when the company was first announced, long before it had a name:
And for the Smiths to say, “there are 200 million people,” what they’re really saying is, “we want to serve everyone.”
As the saying goes, “if you try to serve everyone, you’ll serve no one well.”
A more simplistic answer is that, in a few years, it’s likely some of these startups flame out. They’re entering incredibly competitive markets without a clear go-to-market strategy. And so, when these startups fizzle, investor interest in media will retract, despite the fact there are legitimate opportunities if they’d just change their attention to niche opportunities.
So far, Semafor hasn’t shown signs that it’s dying. On the contrary, there is an argument to be made that the business has, in fact, found its footing. It’s also come back down to Earth a little bit. In an invitation to a BBQ celebrating the one year birthday, Ben Smith wrote:
Join us to celebrate our one year anniversary in Ditmas Park with burgers, courtesy of the legendary Amiel Stanek, Semafor-themed drinks, and 200 million of your closest friends.
The ridiculousness of the bolded part rightfully became a joke. There may have been 200 million people in the world that could, feasibly, read Semafor, but that distracted from the fact that, at its core, Semafor was attempting a strategy that was actually much more niche than it let on.
I reached out to Ben to ask him some questions, but he sent me to the company’s head of communications who offered some numbers that are worth exploring to show how the business is doing.
- 500,000 newsletter subscriptions with open rates of 60%+ across all the newsletters
- 3 million monthly readers on and off platforms with 30% outside of the U.S.
- 40+ events in 2023, 40 marketing partners, and a 50/50 split between advertising and event sponsorships
- “Around 65” on staff
I’m never really a fan with the qualifier of “on and off platforms,” so I went to Similarweb. According to the platform:
- July UVs: 1.286m
- August UVs: 818k
- September UVs: 698k
Looking at a three month period to judge the success of a publication is not effective. But I highly devalue off-site eyeballs because they can be taken away from me tomorrow. One very real explanation for the drop in Semafor’s traffic could be social media restricting link sharing. According to Similarweb, 23% of visits came from social over the last three months. Similarweb won’t share earlier data, but maybe that was higher at one point.
So, the website has a long way to go which is unsurprising. You need to publish an immense amount of content to brute force your way to big numbers in quick fashion. From what I read on Semafor, that doesn’t appear to be the strategy.
The newsletter numbers, on the other hand, are impressive. Those sorts of open rates are an indication of good health. With inflated open rates due to Apple’s MPP, anything over 50% is a good sign. But I’m also not surprised by these numbers. Semafor puts its reporters front and center with the newsletters and deliver the entire product right in the inbox. It’s the right approach for any newsletter operation because it makes the newsletter worth signing up for and worth opening.
And so, we come to the revenue. I spent a few days going through the website and one thing jumped out to me: I could not find a single programmatic ad. On the contrary, I saw a number of directly sold ads for Genesis (car), Tata Consultancy, and a few other partners. And if it wasn’t one of those directly sold ads, it was a house ad promoting an upcoming event with a number of sponsors.
It’s on the events side that Semafor has overdelivered. Pulling off 40 events in 2023 is impressive. And many of them have been sponsored, with big names. For example, today they are hosting The Global State of Wellbeing at Gallup’s offices. Blue Zones, Meta, and Wellbeing for Planet Earth are sponsoring. And the best part about this event is that it’s from 8:30-11:30am, so the food & beverage budget is likely very small.
Back in May, The New York Times wrote:
Semafor has booked more than $10 million in revenue in 2023, split between advertising and events, which have been a larger-than-expected contributor to the company’s business, Justin Smith said.
The question then is where is the company going to finish the year. And honestly, it’d be pure speculation. Could it be $20 million? I’d be surprised, if only because half of it has to come from newsletters and the site and those numbers aren’t large enough to support $10 million. On the other hand, I could be wrong and maybe Semafor is charging CPMs in the hundreds of dollars.
The last question is profitability, the ultimate barometer of a media company’s ability to survive. If the company has 65 employees and we assume an all in cost of ~$175k per person, we’re looking at $11.3m in payroll costs (salary, bonus, benefits, payroll taxes, etc.). Why $175k? According to its about page, approximately a third of the company is considered leadership across the two Smiths and various senior editors and business heads. The number could be even bigger than that. If we assume another $5-10 million in other costs—T&E, hosting, ESP, accounting, legal, freelance, COGS for the events, etc.—then we’re probably looking at a business that costs close to $20 million a year to run.
But again, it’s purely speculation. Perhaps Semafor hits $20 million in revenue this year and perhaps its total costs are not as high as I projected. The downside of this job is that I have to make educated guesses with the information available to me.
Here is one thing I can say. Semafor is figuring it out. It is not chasing that ridiculous 200 million number anymore. With those open rates, it’s obvious the audience it does have is highly engaged. It is monetizing its ecosystem as efficiently as it can. It’s showing up. And honestly, that’s all you can ask for a media company.
Do I think it’s going to survive? I have no idea. A strong first year doesn’t automatically mean the second year will be equally as strong. But if you asked me if I was more bullish on Semafor today compared to early 2022, I’d tell you I most certainly am. It’s going to be a long road, but they’re executing. That makes me more confident than I’ve been.
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