'There's no place that satisfies the entire user experience:' Why a relatively unknown Japanese company is betting $110 million on Quartz to disrupt Facebook and Twitter's news dominance

Uzabasefinal_opt

Uzabase, a Japanese-based media company, sees a big opportunity to own all parts of U.S. media —from content curation to distribution.
Thusly, Uzabase thinks there's an opportunity to outdo Facebook, Twitter or Google at news.
The company acquired Quartz for between $75 million to $110 million, depending on the publication’s 2018 performance.
The Quartz team will be tasked with helping build an audience and eventually a subscription-based business model for news curation app NewsPicks.
Quartz’s 2017 revenue reportedly dipped from 2016 because of a drop in advertising, making the publication the latest example of how digital publishers are diversifying their revenue beyond ads.

Atlantic Media’s six-year-old business news web outlet Quartz has a new home in Japan. Uzabase—a Japanese business intelligence and media firm—has agreed to purchase the publication for between $75 million and $110 million in cash and stock, depending on the site’s performance for the remainder of 2018.

Quartz counts 215 staffers total, including 100 journalists that cover the global economy. It's particularly known for creating native ad formats and branded content designed for mobile.

Similar to other digital publishers like BuzzFeed and Vice that initially made their fortunes in custom advertising and have since reportedly missed revenue goals, Quartz has struggled to increase its annual revenue from advertising, according to a presentation from Uzabase explaining the sale. The firm’s materials about the acquisition shows that Quartz made $30 million in 2016, dipping to $27.6 million in 2017. Quartz’s revenue is expected to hit between $35 million and $38 million this year, per Uzabase.

“We’ll quickly be developing paid products for the loyal audience Quartz has accrued over the past six years,” wrote Quartz co-presidents Kevin Delaney and Jay Lauf in a memo sent to Quartz staff this morning. “While high-quality advertising will continue to represent the lion’s share of Quartz’s revenue in the coming years, we expect that the biggest source of growth in Quartz’s next chapter will come from reader revenue.”

Quartz Uzabase1

In another memo distributed today, Atlantic Media chairman and owner David Bradley said that conversations about a deal started in March and were finalized this weekend. “I've known for some time that, eventually, I would write to tell you that I am selling Quartz,” he wrote. “But, I would have guessed that day to be distant, say, in years not moments.”

Atlantic Media will continue to provide corporate support Quartz for at least a year and Quartz will keep its name and staff.

Uzabase wants to take on Facebook and Twitter for news domination

The Quartz team will work with Uzabase on the U.S. version of Newspicks, Uzabase’s news curation app that pulls in content from The New York Times, The Wall Street Journal, Bloomberg, Politico and more through partnerships.

After amassing four million users and 70,000 subscribers in Japan, Uzabase rolled out a U.S. version of NewsPicks in November with the goal of shaking up how people consume news content on Facebook and Twitter. The app also has high-profile ’ProPicker’ users like Thrive Global’s CEO Arianna Huffington and former PepsiCo exec Brad Jakeman that help NewsPicker’s editors choose the best stories to highlight in the app.

In six months, the U.S. version of NewsPicks has 150,000 downloads, meaning that it has grown faster than its Japanese counterpart.

quartz uzabase2

“There’s no place that satisfies the entire user experience,” Ian Myers, CEO of NewsPicks USA, told Business Insider. For example, readers may first find articles on Flipboard or Google and then share it on Facebook, Twitter or LinkedIn, he said. Instead, the idea behind NewsPicks is to be a go-to hub for all parts of news consumption.

“We aggregate the content and the community leaves their commentary,” said Myers.

NewsPicks also wants to make original content—and make money from it

The Japanese version of NewsPicks includes a subscription option for $15 a month to unlock original content. Myers said that the U.S. version of the app wants to replicate the same model, with the help of Quartz.

The U.S. version of NewsPicks is currently free and does not run advertisements but will be “creating high-quality branded content” going forward, Myers said.

Myers said that the team has not decided how much to charge for premium content within the U.S. app, but the Uzabase presentation materials show that the goal is to price content for “hyper-premium users” at $50 a month in addition to the lower $15 subscription level.

quartz uzabase3

In terms of the type of original content that NewsPicks is looking for, the company is interested in “really long-form, in-depth content [like] open examinations of big companies, the life of entrepreneurs,” Myers said. “Some of it could come close to a novella.” The Japanese version of the app has a few such articles each week, Myers said.

While details are scant, NewsPicks’ U.S. team also plans to lean on Quartz’s product and design teams that are known for building slick mobile products. “We expect to bring Quartz’s mobile prowess to our content so it’s more enjoyable,” Myers said.

Join the conversation about this story »

NOW WATCH: Learning to celebrate failure at a young age led to this billionaire's success