The way in which people consume news continues to change at a pace most publishers struggle to keep up with. Mobile-centric ‘discovery’ applications like SmartNews point to the future of content delivery and, having recently raised nearly US$40 million in a Series D funding round, the platform is aiming for recognition as a ‘national’ news application in Japan with a high-profile branding campaign.
Now worth an estimated $600 million, the company recently brought out a series of TV commercials and online ads featuring Tamori (Kazuyoshi Morita), one of Japan’s most popular TV personalities. The work positions SmartNews as ‘the forbidden news application’—one so addictive that it encourages binge consumption.
The concept of the branding campaign might be a bit of an exaggeration, but the numbers are compelling: The app has been downloaded 18 million times and has around 2.5 million daily and 5.5 million monthly active users. That compares to platforms such as Gunosy and Antenna, which have also hit more than 10 million downloads, and Line News, which has built up an audience of around 4 million monthly active users.
“This level of growth is quite impressive and [something] a lot of traditional newspapers would only dream of,” observes Khalil Maaouni, head of programmatic at Mindshare Japan, who says despite being popular for some time, news applications like this have only really found their path to growth in the past two years. Major newspapers, by contrast, have a very limited app offering and “totally outdated advertising model”, he says. The relative newcomers “are definitely shaking up the news market.”
Still, Yohei Matsuoka, SmartNews’ marketing director, admits that awareness and perception are not yet high enough for SmartNews to be considered “national”. In fact, its aims are much bigger. Matsuoka defines its mission as being to deliver “the world’s quality information to the people who need it”, which means conquering not only Japan, but the world. “This campaign is just a step towards our mission,” he says. The app has made strong inroads in the US with its English-language service, but monetisation through advertising is still some way off.
SmartNews is not the only Japanese mobile news app with global ambitions. NewsPicks, which is business-focused where SmartNews is more mainstream, aims to become “the world’s number one news service including company information, not just news”, according to MD and editor-in-chief Norihiko Sasaki. Unlike SmartNews, it produces original content as well as aggregating from other sources. On the other hand, it does not have an English service yet, and Sasaki recognises that becoming number one in Japan is the first goal. But he sees it as important to launch an English-language service “as soon as possible”: He predicts slower growth and market saturation domestically over the next five years.
War for time
In Japan, competition for these services is difficult to define, as all existing news apps cater to different audiences. SmartNews sees the younger generation and women as its most important growth areas. At the moment, it caters mostly to men in their 30s and 40s. NewsPicks, meanwhile, aims to attract more traditional readers. “Traditional companies still have more influence over business, so to become the number one business media in Japan, we need to reach them,” Sasaki says.
Matsuoka sees the situation simply as “a war for users’ time”, meaning that SmartNews is in competition not just with other news apps but services like gaming and messaging. Sasaki is more guarded and says that while some might see Nikkei as a competitor, the collaborative model of news apps with other media means it is not overtly so. That is debatable: As people spend more time on news apps, revenue is clearly likely to shift from more traditional media outlets.
Maaouni predicts growth for the likes of SmartNews in Japan will hit a wall in “a year or two”. Hitting the big time in the US, however, will not be easy given the dominance of Flipboard, which has already globalized convincingly with more than 300 million downloads and around 70 million monthly users. But with its recent round of funding, SmartNews is at least up to the challenge, Maaouni suggests. He points out that Gunosy, for example, has been less successful in attaining growth through external investments. It recently invested in Kurio, a news app from Indonesia, where the news app sector also looks set to grow strongly.
How to grow
So what are their prospects? So far, advertising on these applications is relatively sparse, but premium in nature, including native content, especially in the case of NewsPicks. Maaouni says the problem at the moment is a lack of flexibility.
“The advertising model is quite rigid, still [insertion order]-based, lacking programmatic and one-on-one targeting,” he says. “Third-party tracking and ad verification is a much bigger issue, especially for global brands. All these features are becoming the new standard in digital advertising; these apps have all the data and capabilities they need to make it happen. They just need to make it their new priority.”
Indeed, machine learning is one of SmartNews’ key strengths. Refining it will ultimately mean far better ad targeting than the majority of media companies can offer. Video advertising is an important growth area, and Sasaki says he sees it as a more effective way of attracting people’s attention. But Matsuoka admits there is not yet enough video inventory or “safe space” for clients, and that from SmartNews’ perspective, “we have to find a way to provide more user-friendly video ads”.
To achieve their global ambitions, these apps really need to be flexible and plan for the future rather than the present, Maaouni says. “This will probably require external acquisitions to quickly bring in technology and user bases, but also a much-needed global mindset, which means international talent.” Global vision and diversity have been the keys to success for companies like Google and Facebook, he notes. That, and “the acceptance to put their focus on new ventures rather than relying entirely on a single milk cow”.
They also need to keep in mind that news in the traditional sense just isn’t that appealing to younger generations. In that respect, SmartNews and NewsPicks are well positioned, as neither is in the business of offering straightforward hard news content. Bringing in the new audiences they seek will mean introducing new formats, more video and visual content, pesonalisation and stories specifically geared around attracting 20-somethings, Maaouni says. “All things that Facebook, Instagram and Snapchat have been trying very hard to do lately. That shows where the competition is.”
SmartNews may target an even younger generation. “A news app for kids would be good,” Matsuoka says of possible new services. “Kids and teenagers have few opportunities to touch news, which is not good for society. We also need to catch up on how the digital native generation defines news, and this would be a good way for us."
This article was first published on Campaignjapan.com