Newsonomics: Atlantic Media’s Quartz sale is as quirky and quartzy as the site itself

Give David Bradley new credit for publishing innovation. The Atlantic Media owner built his company into one of the country’s highest quality journalism companies, embracing the possibilities of digital far better than most of his peers. Over a couple of decades, he and his team assembled a group of high-performing B2C and B2B companies. Now, as he works to disassemble the group, characteristically, that process is breaking new ground too.

Late Sunday night, Atlantic Media announced quite a non-traditional buyer for its six-year-old business news outlet Quartz. “Quartz is being sold to Uzabase, a Japanese business media company,” Quartz’s own headline put it, having to explain the non-household name.

The company itself laid out the deal more grandly: “UZABASE Reaches Agreement To Acquire The Global Business News Outlet QUARTZ; Quartz to combine with Uzabase’s business news service, NewsPicks, to create leading global business media platform.”

The deal — valued by Atlantic Media at between $75 million and $110 million, “depending on achievement of future financial and operating performance in 2018” — should close within 30 days. Quartz’s two long-time leaders — co-president and editor-in-chief Kevin J. Delaney and co-president and publisher Jay Lauf — will become co-CEOs of Quartz, reporting to Uzabase and NewsPicks founder and CEO Yusuke Umeda.

Uzabase? The 10-year-old Japanese news company doesn’t have the name recognition of Axel Springer or Nikkei — two international news giants that have also spent big to acquire leading business news brands in recent years. (Business Insider for Springer, the Financial Times for Nikkei.) At the end of 2015, not long after those two deals, I picked apart the logic of a Quartz deal. But despite its lower profile, Uzabase offered Atlantic Media a potential fit that other suitors didn’t.

“Rarely, a month goes by that we don’t get a call of interest,” Atlantic Media president Michael Finnegan told me this morning. This particular deal evolved as Quartz executives compared notes with Uzabase leaders over a number of months. Both saw parallels in their approaches to business news and the business news market; both saw opportunities for faster growth. And David Bradley saw an exit that satisfied him.

“Where I am caught by surprise is in the timing,” he wrote in a letter to Atlantic Media employees. “After selling the majority of The Atlantic to Emerson Collective, I had thought it would be a few years before we launched the search for a Quartz buyer. In fact, all of this — my partnership with Emerson on The Atlantic and the sale of Quartz — is coming years faster than I had imagined.”

Like that Emerson sale last year — in which Laurene Powell Jobs’ nonprofit bought of a majority of The Atlantic magazine itself — this connection brings in a non-traditional buyer with what seems like a comfortable fit. Atlantic Media will continue transition-support services in both sales — a year or more for the Uzabase/Quartz transaction and another two to four years for the Emerson/Atlantic Magazine deal.

Quartz has been a fascinating news company to watch from the start. Early on, I identified five things that made it stand out from its more strategically staid peers. Its founding team, most of whom will continue with the business into this transition, possessed a unique vision. Quartz became an entrant in a business-news market that conventional wisdom said had no space left over — a sparrow among dinosaurs.

Quartz targeted “influentials.” Success required Delaney’s unique sense of a potential audience, with content built around what Quartz calls “obsessions,” a new framing to replace the more tired notion of beats. Just as noteworthy: Quartz’ goal to kill the 800-word story.

Lauf, the business head, worked relentlessly to help build some of the sector’s earliest branded-content successes, understanding how Quartz’s high-value audience could be receptive to higher-quality corporate ad storytelling.

The pricing of this deal is a curious one. Where it ends up within that $75 million to $110 million range will be based on several business performance metrics, including but not limited to revenue and profit. Since Quartz has only flirted with profitability, there’s not much of a traditional sales multiple to assign to the agreement. Much more than that, it’s a bet on the future, on those often elusive business synergies. It’s a cash and stock deal, so any calculation of Bradley’s own take will depend on how well the new entity performs.

As reported by Ben Mullin in The Wall Street Journal, Quartz produced $28 million in revenue — a mix of advertising and events — in 2017, and projects a 25 to 35 percent increase for this year. I’ve tracked Quartz’s impressive revenue and audience growth since its birth. In those six years, the company has continually reinvested in its product — now including a staff of 215, including more than 100 journalists, and an audience of as many as 20 million global monthly readers, according to its internal numbers. Forty-five percent of that audience is outside the United States.

The logic of the deal is also driven by time-to-market concerns. “In four weeks [when the deal closes], Quartz can move on strategic opportunities that it might have taken three to five years to achieve,” says Finnegan.

At the core of this transaction: a lack of overlap and a promise of synergy. Quartz brings a big English-language audience and sophisticated ad selling and event marketing. Uzabase — emerging in Japan and more widely in Asia with both B2B and B2C business news products — opens up possibilities for faster Quartz expansion. Quartz had already, to its quirky nature, launched editions in India and Africa; now it can focus more heavily on the world’s fastest growing markets.

NewsPicks is Quartz’s immediate mate in the deal. The Japanese-language product counts 64,000 paying subscribers, at a price point of $15 a month.

Within the last year, Uzabase had launched a U.S. version of NewsPicks in a joint venture with Dow Jones, an operation currently staffed by about 15. Quartz will now Uzabase’s role in that joint venture, so Delaney will work once again with his alma mater — having founded Quartz after spending a decade at The Wall Street Journal.

The move also clears the way for Quartz itself to move into the digital subscription space, a plan that has been awaiting execution as its audience grew. With its high-rate ad business, Lauf has told me the company wanted to move carefully as it added another leg of revenue. Now, it looks the time may be right.

Lauf told me today that the company had already accelerated its subscription plans earlier this year, before the sale became likely. Could Quartz offer a subscription product within 18 months. “Yes,” he said.

Lauf and Delaney will head the new combined Quartz/NewsPicks operation. It’ll be worth watching how the mix of original news and aggregation morph over time. Quartz’s breakthrough news-as-messaging product still stands as one of more intriguing developments of the last several years; will it go global?

At its core, NewsPicks is a social platform that enables users to discover, share, and comment on business news. In Japan, the service has 3.3 million registered users along with those 64,000 paying subscribers. Close to half of NewsPicks revenue now comes from subscriptions, a figure that has grown more than 80 percent year over year.

As Bradley noted in his employee letter, he had planned to be out of the operations of publishing within five years, by 2023. Opportunity appears to have fast-tracked that timetable.

“It’s a little surprising for all of us,” says Finnegan, who added that he expects Atlantic Media’s B2B businesses won’t go out to buyers as quickly as Quartz and The Atlantic have.

What will happen with the innovation that Atlantic Media has spawned over the year? As new owners take over, how will these seeds of changes mature? The risk, of course, is that they scatter in the wind; the promise is that they can each build bigger and better futures.