Dear Seeking Alpha community,
Our Sept. 2018 board meeting was today. In the spirit of greater transparency, and because I imagine some community members might be curious to get a “peek under the hood,” I am publishing a lightly-edited version of our board letter for your reading enjoyment. Please feel free to share thoughts, ideas, criticisms and questions in the comments below.
Dear investors and team,
I hope you all had a joyous summer. I look forward to seeing you on Thursday!
As a reminder, our strategic goals for 2018 are to:
- Create strong, sustainable revenue growth in our subscription businesses.
- Grow Ebitda in our media business.
- Strengthen our balance sheet
We have seen significant growth in #1, and need a great home stretch to achieve our ARR (Annual Recurring Revenue) stretch target. We are tracking ahead of target on #2. And we have already achieved #3.
It’s been a really strong three months for SA since we last met. Some exciting milestones:
- Direct media bookings are at 95% of 2018’s goal, with Q4 still to come.
- Total MRR (monthly recurring revenue) for all subscriptions is +72% YTD. Our year-end stretch target is in sight; we will need aggressive growth to hit it.
- PRO (Essential and PRO+) passed 8,000 subscribers.
- Essential, which was launched in February (and rebranded two weeks ago (see below)), has almost 6,000 subscribers.
- Two weeks ago we rebranded PRO as Essential. With the rebrand, we created stronger landing pages and calls-to-action. Initial results are promising, with a 35% uptick in signups (currently shown to 50% of total audience).
- After down-pricing Essential in late April, three-month retention grew to 76% vs. 58% previously.
- We began selling Essential on mobile apps. Mobile sales currently account for 15% of all sales.
- We completed the architecture for a radical change to mobile development. Once phase 1 of implementation is complete, we will develop only for mobile web (using progressive web app methodology), and support our iOS and Android apps by using a ‘light wrapper’ around the mobile web experience.
- We added outstanding features to our quote pages, many of them exclusive to Essential subscribers.
- We launched exclusive newsletters for Essential and PRO+ subscribers.
- We began rewarding authors who create content that delivers value to Essential subscribers.
- We deployed SEO optimizations that led to a 22% increase in visits to our news coverage in Q3. Year over year, daily visitors from search is +90% to 300,000 visits/day.
- We added 18 new SAers since last board meeting. Key adds include:
- Valerie Kalifa, our new VP Marketing, began building out the future of SA marketing. Valerie will present a six-month roadmap at the board meeting.
- Itai Blitzer, our new VP Data, strengthened our BI team and built out our first-ever data science team. Itai will also present a six-month roadmap at the board meeting.
- We added a third customer service rep, based in our NY office. We subsequently launched VIP customer service for subscribers spending at least $200/month.
- We built out a mobile web team of 5 developers.
- We added developers to our marketing and core product / subscription teams.
- We hired an account management team leader for media sales.
- We replaced our director of finance.
- We hired our first ever inside-sales rep for the media sales team.
- Playing on the gig economy and our large contributor base, we ran a successful PoC (proof of concept) in which trusted contributors stepped in to clear article-review traffic jams, reducing turnaround time and increasing the number of timely articles published.
- We are fully compliant with the new Israel Privacy Regulations that went into effect this summer.
- Our strong growth in both revenue and profits that is thanks to the collective work of every single Alpha. We are a very different business than we were just two years ago.
I would like to discuss a few areas in greater detail.
Launching Essential in February and subsequently locking down its price at $20-30/month (annual/monthly), a price we believe most self-directed investors can afford, has been a game-changer for our subscription trajectory.
Note that our first move was subtractive: we paywalled single-stock articles more than 10 days old. Past experience led us to a strategy that we refer to as “sell the burger, not the bun.” That is, when you have a sticky, engaging, free product that people love (= our content), you need to figure out which parts of that product are valuable enough that users will pay for it, and freemium-ize around it.
This led us to a somewhat counter-intuitive strategy of giving away our real-time content - which is where the majority of SA use happens - and paywalling “old” content. Our intuition was that serious investors regularly research stocks, and want access to our historical research on stocks. This appears to have been correct; users’ propensity to subscribe is strongly correlated to their consumption of free content. So we have been fortunate to find the burger we can sell, without having to bet the farm on a comprehensive paywall which could have negatively impacted our ecosystem.
At the same time, the approach was explicitly subtractive.
Our commitment was that once we saw evidence of product-market fit, we would start adding features to Essential, some of which would enhance the free SA experience, and some which would be exclusive to subscribers.
In that vein, we have been rapidly upgrading our quote pages. Our goal is to have the best quote pages anywhere. We have received positive feedback from both free and Essential users about the upgrades, and we still have a huge backlog of improvements in store.
From a strategic perspective, it’s important to emphasize two key points:
- Our aspiration to have awesome subscription products is not only about the revenue. In order to deliver high-quality investment research, we need a way to monetize the value of high-quality research rather than its popularity. Helping investors make smarter investment decisions often requires in-depth research of stocks with small-to-no followings. This research gets small numbers of overall pageviews, which makes it less valuable to advertisers, but often gives investors a genuine investment edge, which makes it highly valuable to them. For years we subsidized the creation of this “long-tail” content with revenue from popular content, because we had a sense that it was exceptionally valuable. Having successful subscription products allows us to unlock the value we’ve created, and to invest even more in creating content and features that would not be feasible under an ad-supported-only model.
- Delivering on #1 - reinvesting subscription revenue in awesome content and features - drives a virtuous cycle that simultaneously makes our free and paid products more delightful. Because we are capital efficient, the investments we make here are likely to have a high ROI.
Mobile web strategy
It became clear to us - partially thanks to insightful board discussions - that developing for four separate platforms (desktop, mobile web, Android, iOS) was bad business. Desktop development, due to its flexibility, was running too fast for mobile apps to keep up, and the gap was widening. Furthermore, since most of our current mobile use was on the apps, mobile web was almost entirely neglected.
Prior to last quarter’s board meeting, we ran a PoC to validate that we could build a PWA (progressive web app), and wrap it with a thin iOS and Android wrapper to ensure backward compatibility with our existing apps. The PoC was successful.
This quarter, we:
- Built a 5-man team for mobile web, leaving a single developer in place for iOS and Android respectively.
- Built the underlying architecture to support single-page application architecture. This will allow us to take a microservice-based approach in mobile web development.
- Designed and began implementing a unified, responsive design across all mobile platforms.
Once we complete and ship our first production-ready version of the PWA, we have the opportunity to begin developing desktop features based on the same API as mobile web, which will further increase efficiency.
Marketplace growth has slowed. Hosting a successful investor marketplace is critical to our ecosystem. We need to move faster to ignite growth there. There are a number of potential opportunities:
- Figuring out how to sell Marketplace subscriptions outside the article funnel. Examples include the “Main Marketplace” page and other key areas of the website.
- More powerful features for Marketplace authors. For example, the ability to create tiers of services.
- Bundling Essential with Marketplace.
- The Institutional Marketplace. Institutional research is being disrupted by a number of factors, including regulation (MiFId II), and a general mistrust of the sell-side. No one yet (SA included) has figured out how to partner with key research providers (including a growing number of independent research shops), or how to get large numbers of institutional consumers paying for research. But the potential is there, and we already have some Marketplace authors serving institutional customers.
I will be revisiting this topic in December.
We have identified two potentially needle-moving PRO+ features, and will be implementing them in the coming quarter.
- PRO+ Markets Live: Real-time insights into the macro and micro themes driving the markets, written by top SA news analysts and guest authors.
- Institutional Grade toggle: The most common request/complaint of PRO+ subscribers is that it’s too hard for them to find SA’s institutional grade research. To address that, we are identifying institutional grade authors, and releasing features that allow PRO+ subscribers to toggle key SA experiences (e.g. search results, quote pages, email alerts, home page, etc.) between “All” and “Institutional Grade.”
Looking forward to seeing you there,