“The Media Is Singularly Screwed.” Rafat Ali on Sustainable Growth Amid Digital Upheaval
A Q&A with the founder and CEO of the profitable six-year-old B2B media startup Skift.
Rafat Ali is not shy about his opinions. Today’s statement, for instance, that when it comes to predicting the future of the media business, “Everyone is bullshitting about everything,” is largely typical of his industry takes, often disseminated to his 34,000 Twitter followers, who themselves represent a broad cross-section of media execs and reporters.
But another of his favorite topics of discussion is Skift, the travel industry site he founded in 2012—and with good reason. The six-year-old B2B media company, which hasn’t officially raised any venture capital since 2013, is poised to cross $10 million in revenue this year, he says, representing in increase of 40 percent over 2017.
Skift is aiming for a repeat performance in 2019, revealing in September its first acquisition: Airline Weekly, an $800-per-year subscription product. Folio: sat down with Ali at Skift’s Midtown offices to learn more on his plans for the company’s continued growth, his leadership style, and—of course—his thoughts on the media industry as a whole.
Folio: Let’s start with the acquisition of Airline Weekly. Why was now the right time to make an acquisition?
Rafat Ali: Well, we couldn’t have afforded it before, so there’s that. Six years into our journey, I think we’re in a position now where we can make some of these small-ish acquisitions that help us build franchises that we’re already in.
It’s a subscription newsletter, “The Economist of the airline industry” type of brand. It’s under-resourced, meaning we can put it on a machine that we can build with marketing, editorial, sales, all of that. And it’s got a very high-level readership. So it checked all the right boxes for us.
If I can find one or two more acquisitions like these in 2019, especially if it’s a subscription product, I would love to do it. It may not happen; you look at ten acquisitions and maybe one happens. That’s just the way it is.
Folio: You’ve said your revenue breakdown is roughly 40-40-20, across branded content, events, and subscriptions, respectively. Is the idea to build up that subscription revenue to become a bigger piece of the pie?
Ali: Yeah, I would say I’d like to flip it a little bit, to 40 percent subscriptions, 40 percent conferences, and 20 percent branded content. If subscriptions becomes 50 or 60 percent, that’s great, because it’s the most stable revenue. I do think we will always have a relatively large free part; it’s part of our brand, it provides the largest funnel, and it’s what allows us to then build these paid services.
In terms of revenue, I obviously want subscriptions as the largest part, and conferences as another big part because the margins are great. It won’t be a single-year journey, and it will be organic—growing things on our own such as Skift Research—but also inorganic, like acquiring Airline Weekly. We’re thinking of launching one more new subscription service next year, separate from Skift Research and aimed at another specialized part of the industry.
Folio: You’ve also expanded into dining and wellness. Is that a matter of taking the same model you’ve applied to travel and bringing it to these other sectors?
Ali: Yes and no. These are not just random industries we went into; these are aligned, organic expansions from travel. A huge part of the dining industry is travel, and the same goes for wellness. I don’t have five other verticals planned.
Wellness is a completely new industry; it’s whatever you want it to be today. So we see this as an opportunity to put definitions around the sector. I’m excited about wellness because I think it will grow a lot faster than the other sectors we’re in.
Folio: You’ve said you’ve grown your revenues across the board by about 40 percent.
Ali: We are going to reach our stretch goal this year. We’re not going to do that every year, but in many ways we’re insulated by a lot of the larger issues happening in the media industry, especially on the consumer side. In many ways we’re not. If an economic downturn happens, obviously we will be affected. Everyone will.
But we think we’re doing disciplined growth, not over-spending or over-expanding, because we just don’t have the money to waste. That will allow us to adjust when a downturn happens. Economic experts seem to be saying there’s a maximum of a year left, maybe less, so it’s not like we’re hunkered down, but we’re being rational about what could happen. We have about a dozen people that we want to hire in 2019, but we’re not going to hire 10 people in Q1, for instance. The plan is still to grow our revenues by about 35 percent next year.
Folio: Overall, do you expect 2019 to be a difficult year for media?
Ali: I think we—as in the media, not “we” as a company—are singularly screwed. The last two big downturns in media were after 9/11, and during the global financial crisis. Today, while the economy in general is showing signs that [a downturn] may happen, it seems like media is certainly preceding it. It’s not like media was having amazing years for the last five years. Certainly, in a certain subset, the valuations were really high. Some companies have stabilized and figured out their futures—the [New York] Times, the Washington Post, and others. Billionaires have rescued many of these companies. But it’s not like these have been good times for media.
Folio: How bad could things get?
Ali: I think 2019 could be pretty bad. I’ve been saying since 2014 that the winter is coming. Unfortunately, many of these things feed on each other, and perception matters as much as reality because advertisers feel what the buzz is. So when a couple of companies fall through and that general sense of negativity spreads, then advertisers who were already thinking of pulling their money and putting it into Facebook or Google will go and do that.
A lot of these companies that were funded are now coming to the end of that funding cycle, meaning they should have given returns to their investors already, and that doesn’t seem to be happening. I think those companies are going to have a tough 2019. If there was a way for them to figure out their return-to-investor situation, I think they’d be much stronger companies as a result, but I don’t know how that happens.
Folio: Why do you think we aren’t seeing a lot of these same issues—or at least not as acute of an impact—on the B2B side of the media industry?
Ali: I think the B2B side in many ways has gone through a lot of the legacy issues. A lot of these companies have closed down print, they’ve moved to digital, they’ve moved beyond media to marketing services. It looks like conferences are doing well for a lot of B2B media companies. That has always been a part of it. You see the margins that private equity buyers or companies like Informa are paying today for exhibitions and conferences. People still value face-to-face, and that sector is booming.
On the “new” B2B media crop of companies like us, I think many of them have figured out the right mix of new things—subscriptions, advertising, conferences, data services—and they’re not giant, but they’re profitable.
There’s Industry Dive, as I’m sure you know, and there’s another company called Aging Media, launched by John Yedinak out in Chicago, that began with a focus on senior housing. Then he and [his brother George] started some other sites in that space. They didn’t have the luxury of having money to begin with, so they had to figure out profitability as the first thing.
We’re sort of in a hybrid boat because we did raise some money, but we had to figure out profitability pretty quickly—two or three years in. And we’ve grown sustainably since then.
Folio: At the same time, does the lack of accountability to VC money allow you to be a little bit more deliberate about how to plan for growth?
Ali: We’re at a size where we can make some rational, long-term bets. Dining and wellness, for instance. Our first move in wellness is a weekly, curated newsletter run by a freelancer. It doesn’t cost us a ton. If we find out, two to three months into it, that there’s a market for it, I’ll still want to see another two or three months before we start thinking about a full-time hire and then going daily. The goal is to go daily by the end of next year, so we have this window of decision-making. We’re able to take it one step at a time.
Folio: Why launch it as a newsletter specifically, as opposed to a new vertical on the site, or something like that?
Ali: Well, it’s the thing we know best—launching a newsletter. We’re not very focused on traffic in general. We don’t have any goals for traffic, and we haven’t for some years now. We don’t have any benchmarks for that, but we do have benchmarks on email. It follows that if we’re growing on email then we’re growing on traffic, but email is what we know. It’s very early, but we’re up to a few thousand subscribers now.
It’s about us learning, too. It’s not original content right now; it’s just curated with an editor’s note on top. It looks like there’s an appetite for original content, so we’re toying with the idea of accelerating that move from a weekly to a daily. But I don’t know yet. The great part about email is that it doesn’t take a lot to go from a weekly to a daily, from a logistical perspective.
Folio: You wrote that events are more than just another revenue line for Skift. Can you expand on what you meant by that?
Ali: Events are the manifestation of our brands coming to life, in all possible ways. Everything comes together at our conferences: editorial, marketing, sales, our branded content studio SkiftX, research, dev. Everybody contributes. It creates our culture, our work ethic, our motivation. It creates this idea that you will see your work come to life at these conferences, and you’ll be able to see the effect that you have on your industry.
People in the industry have a very fan-based relationship with Skift. What higher bar can you clear in media? Obviously events contribute hugely to our bottom line, but it also brings the premium-ness of the brand to the forefront.
Folio: I want to ask about your style of leadership—
Ali: If you just read my Tweets, you probably think I’m a douchebag.
Folio: Of course not—but I see someone who is outspoken about his views and his belief in the company he’s built and the people he’s brought together. Who or what would you say are some of your influences as a leader?
Ali: My first company, PaidContent, was an accidental company. I was 28 at the time and I didn’t know what I was doing. That was 2002, and the consciousness about work culture has changed since then. So with Skift, everything has been much more planned, including the culture part. Part of it has to do with differentiating ourselves in a very competitive market like New York. How do you attract people as a small B2B media company? So there’s a practical reason to have a great culture.
In terms of who my inspiration is, there’s a book that just came out called the “Made-In-India Manager,” about people who grew up in India, came here for college, and are now doing very well—the CEO of Google, the CEO of Microsoft. The book is about how the training provided by the complexity of India, and all of the challenges and chaos, and at the same time being very rooted in culture and family, makes you empathize more and helps you excel in a more efficient work culture like the U.S. That’s the theory of the book, at least, and in many ways I agree.
So to answer your question, I think my formative years in India and my early work in Delhi, and being an immigrant coming to the U.S., have all led to where I am today. Why should being miserable while building a startup be the default norm? Why shouldn’t you have a meaningful life and meaningful salaries and everything while you’re going through it?
The other inspiration—and this is a cliché, but it’s true—was my son’s birth in early 2015. All the clichés about how having a kid changes you are true. Since our son was born, it just so happened that the company was going through a transition from raising funding to deciding we were going to bootstrap it from here, after 2014. I started leaving the office at 5:15 or 5:30 so I could catch my son before he goes to bed, and that turned around the culture of the company such that we became a much more parent- and family-friendly company. It’s 9:30 to 5:30, get your shit done, leave.
Folio: And that’s allowed you to compete with the Vices and the Voxes of the world?
Ali: In terms of talent, yes. I’m not hiring a hundred people every year, I’m hiring 10 or 15. So I have the choice of being able to hopefully hire the best that we can afford. Affordability is key here. At all times, there’s a gap between ambition and resources available. I want that gap to continue to be large, because as soon as it closes, you slip and you become lazy.
Folio: You told Ad Age that “travel brands can’t sit on the sidelines.” Was that part of your thinking behind launching the new Skift Foundation?
Ali: Yeah, I think that’s part of it. We’re under no illusions that we’re changing the freaking world. We’re a media company that covers the business of travel. We understand the travel industry, we have research and conferences and a little bit of money. We have marketing and branding expertise and we have a platform that we can promote things on. So all of that is part of the Skift Foundation.
We held our annual retreat this summer in Puerto Rico, with the idea of—knowing what Puerto Rico went through a year ago—just going to spend money there and benefit the local economy to a small extent. We ended up meeting a bunch of people in the tourism and travel industry and this foundation, the Foundation for Puerto Rico, which is focused on rebuilding the tourism industry there. So we decided to give them access to our high-priced research through the foundation and tickets to our conference to network with the industry. We’re also adopting Punta Santiago, a small part of the island near where Hurricane Maria first landed, to help that community, which was completely devastated. It’s about using our expertise of what we know, which is travel.
Folio: One final question—I’m going to give you an opportunity to criticize the media critics. What are some of the biggest things that media-on-media coverage is missing?
Ali: Wow. Here’s one thing: I think media is structured to only write about bigness. And this is not just true for media about media, but media writing about any type of business. It may even be true for Skift. We are not equipped to write about bootstrapped companies that nobody knows about, even if they are doing very well. Media reporters only go after the flashy companies and do not write about the other companies that are unique and not in the mainstream bubble.
I feel like the daily operation of media is never captured in the coverage of media. It’s not sexy at all, and it’s hard to write about. They all talk about Facebook and this and that, but what leads to these decisions of leaning into these platforms in the first place?
The last thing is that nobody has a sense of history, the media reporters who cover the industry. I’m on my 62nd book for this year, and most of these books are about business history. I wish that when I was 28, I had read all of these books, because I’d have been a much better reporter. Having a sense of history comes with age, but it could also come with reading. Maybe journalism schools should inculcate more understanding of general history. A media reporter’s job is to connect the dots across timeframes and across different industries.