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Summary:

Justin Smith has quietly become one of the most important figures in media today. One of his many strengths is building media companies that can thrive even after he leaves.

Atlantic

In a media industry fraught with failure, almost everything touched by Justin Smith has turned to gold. That’s why news of his decision to leave Atlantic Media for Bloomberg led media pundits to heap praise on Smith and, more quietly, to wonder what will happen to the Atlantic without him.

Smith is best known for helping the 150-year-old publication embrace digital media and, in doing so, avoid a Newsweek-like descent into insolvency and irrelevance. While Smith’s reputation as a digital evangelist is well-deserved, it risks overshadowing his more fundamental talent: an ability to redefine what a media company is and how it should be run.

In early June, I had lunch with Smith and met Atlantic executives in their airy offices in the hulking Watergate building overlooking the Potomac. The visit revealed how Smith has rebuilt the company in such a way that it doesn’t depend on any one person or product — instead, the reborn Atlantic has become a financial omnivore that can stay stable even as executives and key writers come and go. Here’s a look at how Smith fixed the Atlantic and what might happen next.

Atlantic launched a new weekly magazine for the iPhone and iPad last month, and the rollout reveals how the place operates these days. The magazine, which sells for $2.99 a month or $20 a year, is nice enough but not eye-popping — it’s just a hand-picked bundle of stories from various Atlantic websites that arrives every week via phone or tablet. For fans, it’s a nice way to get a morsel of content via an app. And for the Atlantic, it’s a way to wring out more revenue at low cost. The company doesn’t see the app as “the future” or a way to strike it rich — instead, the app will just be another trickle in a growing stream of incremental income.

MagazineWall

The weekly magazine follows the arrival in recent years of acclaimed titles like the AtlanticWire and high-end business site Quartz. Together, the products are paying off with a rush of advertising money, which makes up 50% of Atlantic Media’s overall revenue (two-thirds of it digital), that has helped the Atlantic part of the company stay in the black since 2010, when it made $1.8 million.

Smith said the profit, which came after the Atlantic was a longtime financial basket case, has increased every year but wouldn’t wouldn’t specify by how much. The company’s core sites (The Atlantic, AtlanticWire and Cities) are also enjoying a jump in readers: the collective average monthly comScore numbers rose from 5.8 million in the first half of 2012 to 8.5 million for the same period this year (figures don’t include non-US readers).

All of this reflects the company’s well-publicized embrace of digital, but it’s only part of the story. In the last few years, Smith has turned on money taps not just for digital news but anywhere he could find them — a growing events business, ebooks, consulting and so on. Now, according to President Scott Havens, the company is also planning to leverage the Atlantic brand for e-commerce and eduction (through so-called MOOC’s).

And this is what Smith understands so well about building a media company today: the challenge is not print vs digital or about paywalls, but about using brand power to grab revenue wherever you can. Yes, like nearly every publisher, the Atlantic had to make choices about paywalls but the decisions about how to charge for content were pragmatic, not ideological.

“We’re not strategically opposed to it at all. We’ve been exploring how to charge people for content on the iPad and mag but they can still open Safari and read it for free,” said Havens, adding, “We don’t want to lose the buzz from big articles like Anne-MarIe Slaughter’s [Why Women Still Can't Have It All].”

Smith’s agnostic view on paywalls and omnivorous approach to revenue is present not only at the Atlantic. He did the same thing at his first company, Breaking Media, where sites like Above the Law make money from pop-up surveys, market research and more. And his other major project, The Week, which he helped launch in 2001, is also profitable and imbued with a culture of innovation that has produced multiple well-managed revenue streams.

Yes, Smith’s willingness to take money wherever he can find it likely led to the Atlantic’s horrid debacle with Scientology. But the publication has done its penance and now, according to Ad VP Kim Lau, it’s once more experimenting with native advertising with clients like IBM and Mercedes.

Media watcher Jeff Jarvis, who had the best take on Smith’s move to Bloomberg, summed it up well: “[Smith] saw that he had to take on the role of an advertising agency, no longer just selling space on a page, print or digital, but offering creative and marketing services to advertisers [...] all in all, his real lesson to the industry is to change the relationship of media to marketer.”

Who belongs at a media company

“There’s an acceptance that the old revenue streams of subscription and advertising are not enough to cut it. There should be more like 10 revenue streams than two,” said Havens, the Atlantic President.

This 10-rather-than-two math is obvious to many people in media these days, and the Atlantic is hardly the only company to try their hand at it. Less obvious, however, is that this shift requires not just a fresh philosophy but a change in the way you organize the company.

“Places say they’re going digital but they have same organizational structure and same type of people – that’s a failing model,” said Havens, explaining that he and Smith did much more than just shuffle around existing editorial and sales staff.

Atlantic's office

To build a financially stable media company requires, in many cases, hiring different sorts of people altogether. For example, Havens pointed to product directors, social media analysts and economists who are capable of creating sophisticated pricing strategies like those at the New York Times and The Economist.

At the Atlantic, this new approach to management and the economics of content doesn’t apply just to sales and executive staff. It also affects an area that is the soul of any media company: its writers.

So long Andrew, hello Ta-Nehisi

When star blogger Andrew Sullivan moved on in early 2011, he left a large hole at the Atlantic — not least because he took many of the Atlantic’s unique visitors with him. Sullivan’s departure was also emblematic of an ongoing shift in power in which famous writers have become free agents, dictating terms to publications. The latest example is political writer Nate Silver, whose agent told New York Times editor, Jill Abramson, that his client was “the prettiest girl at the party” before Silver bolted for ESPN.

This situation is a special challenge for a small publication like the Atlantic, which has been home for more than 150 years to literary luminaries like Nathaniel Hawthorne and W.E.B. Dubois. Today, the publication still packs prestige but it doesn’t have the financial means to keep the likes of a Silver or a Sullivan on a full-time basis.

The editors of the Atlantic know this. And they’re okay with it.

Editor-in-chief James Bennet says he accepts that the Atlantic’s current crop of young stars, who include Ta-Nehisi Coates, Megan Garber and Alexis Madrigal, will likely move on one day.

“Henry Thoreau was building his individual brand when he was writing for the Atlantic. They can build their personal brand and leave. We’re not making them write with an Atlantic voice — we’re raising writers in a way we’ve never before.”

By this, Bennet means the Atlantic is ensuring new, young writers get plenty of mentoring and the chance to feel part of a literary community. The system also means that the company’s pageviews and reputation don’t rest on the shoulders of one or two writers.

“We’ve got dozens of writers who are up and coming. There’s no dominant person like the days of [Andrew Sullivan's] Daily Dish,” according to Havens. “We’re producing the next generation of great journalists. They’ll leave, to the Times or elsewhere, and that’s fine.” And, indeed, the Atlantic now has more readers than the Sullivan-era, and their visits are spread across a diverse group of writers.

The Atlantic has stood out in the media industry for another reason: in a profession that is self-avowedly liberal, it is one of the few to practice what it preaches by paying interns rather than treating them like free, disposable-content churners. Overall, under Smith’s tenure, the Atlantic has adopted what amounts to a Moneyball approach to high quality journalism — drawing on a lower payroll and fewer stars, but still winning.

The Atlantic after Smith

Justin SmithThe impact of Smith’s departure is reflected in the classy and heartfelt missive penned by Atlantic owner David Bradley. It reads in part: “I decided I would rather write a letter of appreciation for Justin than the traditional corporate press release. I want you to know what I hope Justin knows already — what a gift he has been to this enterprise .. Like Mary Poppins, if a little more euro,  Justin came, changed the family and, when the work was done, moved on. I will miss him.”

The loss is huge one (and a boon for Bloomberg’s growing media ambitions) but it’s one that the Atlantic can withstand. In retrospect, Smith’s greatest gift to the Atlantic wasn’t that he brought it to profitability. His real accomplishment was rebuilding the company — both its culture and its business model — to last for the longterm.

FInally, here’s Smith speaking to my colleague Mathew Ingram about monetization strategies earlier this year:

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  1. Avoiding ideology to create a profitable media business does not mean the lowering of journalistic standards. Nice piece. It occurs to me that ideological thinking as it is applied to media owner/agency/channel is largely responsible for the industry’s challenges today.

  2. I especially like this quote from the interview –
    “Media watcher Jeff Jarvis, who had the best take on Smith’s move to Bloomberg, summed it up well: “[Smith] saw that he had to take on the role of an advertising agency, no longer just selling space on a page, print or digital, but offering creative and marketing services to advertisers [...] all in all, his real lesson to the industry is to change the relationship of media to marketer.”
    It’s not like this is a new concept. This is a strategy that we have been advocating for years…Publishers have been SLOW to move dramatically in this direction. Organizations like Meredith & Hearst have jumped on…Everywhere we still see alot of organizations..Time Inc, Conde Nast and others who haven’t been agressive in this move to be digital marketing services companies…and as a result…are failing as the market shifts towards digital delivery on tablet & mobile platforms.
    Marketers want to work with partners who help them solve their problems…not just display their advertising…Smith is one of the guys that “got it”and who understood the importance of ad revenue to the bottom line in the overall business model.
    There are a few others. Many more are still attending conferences and listening to folks like Smith and who lack the courage and compassion to transform their businesses. In time, they will see the the value of their organizations diminish and have no one to fault but themselves.

  3. A core dilemma of the media business is rooted in media types so hidebound by legacy journalism and warring platforms that they can’t see the deforestation for the falling trees. Sounds like Mr. Smith’s talent resides in his ability to think in abstract business terms and then apply those basic principles to the particulars of media distribution and consumption. Just as “the show business” transformed into “show business” — accent on the second word — media that puts business imperatives first will tend to find a way faster than media mired in its own self-admiring machinations.

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