Bloomberg Media CEO Justin Smith: 'Profitable growth is the north star'
January 28, 2019 by Max Willens
Welcome to the first installment of Keynote, a weekly Q&A series where top media executives discuss their businesses as well as a hot-button issue facing publishers.
Bloomberg Media spent 2018 trying to prove it could diversify its business. Those efforts have helped push the financial news giant further into the black, according to Bloomberg Media CEO Justin Smith.
While revenues in legacy businesses such as print advertising declined around 1 percent year over year, Bloomberg Media's overall revenues rose 16 percent, right in line with projections and buoyed by four new revenue streams: TicToc, the streaming news channel launched on Twitter in late 2017; the New Economy Forum, a tentpole event in Singapore; a strategic consulting business, which it began assembling in late 2017; and a digital subscription product, which Smith said has amassed more than three times the customers the publisher expected. It also saw strong growth in its emerging areas such as events, with revenue up 84 percent year over year in 2018. (The New Economy Forum is broken out as a separate business from other events.)
Bloomberg Media projects more double-digit growth in 2019, aiming for 15 percent, Smith said. In the following conversation, which has been edited and condensed, Smith discussed the publisher's new businesses and how revenue diversification should and shouldn't tie into a publisher's core practice.
What's the goal for the new businesses in 2019?
TicToc was profitable in our first year. A number of these businesses actually started off without requiring a large amount of capital, and that's because they were started on marketing or repurposing assets from the foundational core business.
We're looking to distribute TicToc content on a number of other platforms for the first time. Twitter will remain the core partner, but we're going to be going directly to our audience via a new TicToc website, a new TicToc app. We're going to be looking at a broader array of platforms, including OTT platforms.
The second major strategic direction is to globalize TicToc's business and look at launching regional editions: both English-language regional editions and local language. We're likely to make an announcement in the next month on those.
Tell me about the strategic marketing services. It's a great way to leverage existing relationships with advertisers, but usually lower-margin.
We've got a really, really nice portfolio of clients that have come on board. A lot of the expression of this stuff will emerge in 2019. As we develop more case studies around this core group, we expect to scale the business very, very quickly around the world, both to a different industry – obviously finance is our core – but to core industries and forums.
The thing about these businesses you mentioned, such as events and agency services, is that they are often lower-margin than scaled advertising can be. Is the reality that revenue diversification means embracing lower margins, overall?
Profitable growth is the north star for any business, especially a media business. If you can do double-digit profitable growth, that's a very good thing. I don't think the media business is necessarily in a position to be completely focused on the most pristine, high-margin new businesses.
The key thing is to be growing profitably, not to be spending a dollar to be earning a dollar. In the case of all these businesses, in '18 and '19, they fall into that category.
Beggars can't be choosers, in other words.
It depends on the models. We've seen some event businesses be very successful from the outset. And from a marketing services perspective, there's a whole range of services that are not the same margin as various marketing services. It's the combination of the strategic services with the advertising offering that's the entirety of the business, not necessarily decoupling one of those from the other.
We did triple our high-end estimates of our subscription business. I know that's kind of a vague estimate, but we 3x exceeded the expectations for the growth for this business.
What do you attribute that to?
I attribute that to the power and the focus of the Bloomberg brand. When professional consumers, or prosumers, are presented with the content offerings of a Bloomberg digital subscription, it's a very powerful and clear value proposition. This content is very comprehensive, very data-driven, very accurate.
A lot of these new businesses carry their own risks. How do you ensure they continue to grow?
Diversification in media has been a term very much associated with how do you wring more revenue or dollars out of your existing media model. You go from advertising to subscriptions to events to commerce to research to data. That's a diversification pattern that many media companies have been journeying on.
Our insight and our strategy in 2018 was taking diversification to the next level: building new businesses that are given a competitive advantage due to your existing assets. It's sort of diversification plus.
That's the lesson that I think is interesting for the broader media industry. Once you've diversified as far as you can, a useful thought or conversation strategically is around what does my brand stand for, what audience do I serve, what assets do I have that others don't have, what permissions do I have to enter into adjacent businesses.
All these different questions which will lead not to, "Let's launch another event" but rather, "What's a completely new thing we can do that is disruptive to a legacy business but is possible because of who we are?"