SmartNews Becomes First Unicorn News Startup Since 2015

(Bloomberg) -- It's a challenging time in the digital media industry. BuzzFeed Inc. and Vice Media Inc., which defined a generation of news startups, dismissed hundreds of employees this year in cost-cutting maneuvers. But a glimmer of hope is coming from a software company in Tokyo.

SmartNews Inc. announced Sunday a new investment valuing the business at $1.1 billion. That makes it the first unicorn startup in the news business since BuzzFeed and Vox Media Inc. achieved the status within a week of one another four years ago.

Japan Post Capital, a fund managed by the national mail conglomerate, led the $28 million investment in SmartNews. The funds won't go toward hiring a bunch of reporters, though. SmartNews works with major publishers to offer each of its 20 million or so active users a custom news feed from various sources. It has 200 employees, most of whom focus on software development, and intends to hire more.

SmartNews is going up against some much larger companies. Apple Inc. and Google make their own news aggregation apps, each with massive user bases. In China, a news app called Toutiao was the first big hit for its parent company, ByteDance Ltd., now the world's most valuable technology startup.

Ken Suzuki, a former researcher at the University of Tokyo, started SmartNews in 2012. His app looks to sift news that readers might be interested in, by pulling from the most popular content and tracking how long users read an article to measure its value. “Personalization makes people's interests narrower, in general,” said Suzuki, the company's chief executive officer. “We try to use personalization technology to expand those interests.”

SmartNews sources articles from almost 400 U.S. publishers, including Bloomberg and the Associated Press. Unlike many news aggregation apps, SmartNews sends readers to the original article on a publisher's website. That has endeared it to major news organizations. Harvard University's Nieman Journalism Lab recently called it the most reliably growing source of traffic to digital publishers.

Now with $116 million in total funding, SmartNews is looking to invest further in the U.S., where it said the app's audience is increasing sixfold annually. A major part of the company's strategy is around the 2020 presidential election. The goal is to appeal to Americans looking for views from the full political spectrum, said Fabien-Pierre Nicolas, the vice president of U.S. marketing at SmartNews.

“It's great to have engagement around politics, but we want to make sure people really see both perspectives,” Nicolas said. “Breaking people away from their filter bubbles and helping them see news from outside is really at the core of what we are trying to achieve.” Whether millions of Americans will go along is another question.

To contact the reporter on this story: Simran Jagdev in Toronto at sjagdev1@bloomberg.net

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Andrew Pollack

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