Looking At SmartNews’s User Growth And Revenue Scale

SmartNews, a news aggregation service, raised $92 million this week at a $1.2 billion valuation. The dollar amount subsumes a smaller round from August when the startup announced that it had raised $28 million at a slightly lower valuation.

That SmartNews is a unicorn is notable, as news-related venture-backed companies have missed revenue targets in recent years, or found themselves up for sale at low prices. SmartNews, which partners with external media companies (including Crunchbase News), helps provide traffic to a number of publishers. For a smaller cohort, SmartNews also pays for its part of the deal.

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I was curious about the deal, so I spent a little time collating some reported figures. SmartNews didn’t share much more than what I already knew regarding its revenue base, but let’s do what we can to understand the investment in the light of a media landscape that I don’t need to tell you is troubled.

SmartNews

As part of its fundraise, SmartNews put out a few new usage metrics. It re-released a monthly active user (MAUs) result, and some metrics on its audience growth in the United States. After sifting through the figures released with the round and looking around for historical records, we decided to put today’s figures (included below) in context.

Here’s what we could find regarding SmartNews’s MAU user growth around the world (the service is focused on the Japanese and U.S. markets):

• January 22, 2015: 5 million MAUs (combined data, source)
• July 21, 2018: 10 million MAUs (source)
• June 26, 2019: 15 million MAUs (source)
• August 5, 2019: 20 million MAUs (source)

Turning to the United States market, the numbers are a bit harder to figure out.

The company reported 1 million MAUs in the United States back in 2015 after the service had been in the market for around three months. Today, the company said that it has seen “US growth [of] 500% year over year per an independent report.” The company described this as “strong momentum” that it expects “will continue.”

Whenever you see a number like 500 percent, your first question must be from what base. It’s hard to say in this case. But, it seems fair to say that unless a huge percentage of the company’s aggregate DAUs are from the United States, the company’s product spent a few years in the doldrums after that initial burst of interest; we can tell that from the 1 million MAU result from 2015 and the amount of time that has passed.

Regardless, the MAU results give context as to how SmartNews managed to raise so much more money after its earlier $28 million raise back in August; the company grew its MAU base by a third in just a few months (give or take, we’re talking about opaque metrics and timings). That is the sort of growth that makes private capital sit up and take notice.

Speaking of money, how much money is SmartNews bringing in? The company provided us with the following note: “[W]e are generating a nine-figure annual revenue.” That seemed interesting, so we asked if the number was net or gross. The company replied that “9 figures is [its] total gross revenue” (emphasis: Crunchbase News).

From that point, I wanted to know if the figure led to a lower net revenue result, or if the sum was merely the company’s GAAP-equivalent revenue that it distributed in part to publishers.

Or more simply, did the nine-figure point include revenue that wouldn’t count as net under GAAP, making it more of a GMV-styled result that included funds that would pass-through to partners? If so, the nine-figure point might be a bit optimistic.

The company, at that point, didn’t have anything more to add. What we know, then, is merely that SmartNews is managing to drive substantial commercial activity through its product. Presuming the smallest nine-figure revenue number, $100 million, SmartNews is worth about 12 times revenue. It’s a smaller number than that, of course, but that’s a maximum multiple.

Toss in the company’s recent user growth as a proxy for top-line expansion and that figure slims even further, provided that the revenue figure all collects under the roof of SmartNews.

So, that’s what I got. I hope some of it was useful!

Illustration: Li-Anne Dias.