To prepare for his company’s launch in the U.S., Kaisei Hamamoto went for coffee.
It was 2014, and SmartNews, the upstart news discovery app that Hamamoto had co-founded two years earlier, was bumping up against the boundaries of its home market. Japan was bristling with competition from century-old print newspaper giants. The U.S. market, on the other hand, had far more potential for advertising and readership.
There was a catch: they needed to develop an international version. Hamamoto spoke some English, but knew America only as a tourist. Armed with a prototype, he ventured out to Tokyo’s eikaiwa cafes, coffee shops where English teachers are hired — usually by aspirational businessmen and housewives — to hold casual conversation lessons.
Hamamoto showed his speaking partners the app, quizzing them on everything he could think of. What kind of news were Americans reading? What did they think of the name SmartNews? The design?
Hamamoto recalls the move with pride, even now. “It was much cheaper than conducting user research,” the SmartNews COO and chief engineer told Rest of World over Zoom.
SmartNews launched in English in the U.S. in 2014, and the app is now available in more than 150 countries. The company styles itself as diverging from the received wisdom in American media: that polarization sells. SmartNews has developed a news-recommendation algorithm that promises to serve its readers a personalized, but politically balanced range of stories.
Alongside is a feature called “News From All Sides,” built specifically for the U.S. market. It marks the partisan spectrum of news stories clearly, and allows readers to toggle between them. Rather than pushing consumers into algorithmically driven filter bubbles, SmartNews says, their system gives readers a range of views.
Although the company refuses to disclose user figures by country, its American operations have grown dramatically. It has 100 employees across its U.S. offices, and said that its users there doubled in 2020 alone. That’s been supported by an aggressive marketing campaign that included TV advertising on cable news channels like CNN, and an incentive program that pays national publications to bring their articles onto the platform.
The company’s latest funding round this past September, which for the first time included U.S-based investors, tipped SmartNews’ valuation to over $2 billion. The company has hinted at an IPO.
“There is a difference between what you want to eat and what you need to eat,” Hamamoto said to Rest of World. “So in the same sense, in terms of news, what you want to know and what you need to know are different.”
When readers open the SmartNews app now, they have a choice of news locations: Japan, the U.S and international. The app design is simple — a handful of article categories sit at the top of the window, like the color-coded tabs of a binder. Within each is a curated homepage of stories, drawn from both local and national news sources.
In the U.S. app, a politics tab reads “News From All Sides,” and clearly marks the partisan spectrum of news stories. The reader can toggle within that. A recent trending story on the U.S. national debt crisis links Newsmax, Fox News, and the Washington Examiner as right-leaning; the Associated Press, NBC News, and Axios dead center; and MSNBC, The Daily Beast, and CNN to the left.
Flip over to the Japanese version, and you’ll find something much more conventional. A user can navigate between Japanese politics, entertainment, sports, and several Japan-specific tabs, like anime news and shopping coupons. Advertising is SmartNews’ main source of revenue across the versions, and inline and video ads appear at the top of category pages.
SmartNews started off as a fairly standard Japanese-oriented news curation service, first launched in 2012 by Hamamoto and his co-founder Ken Suzuki. Hamamoto was a data visualization programmer, and Suzuki an entrepreneur and academic who had studied the internet’s effect on democratic societies. They targeted Japan’s millions of daily commuters, a traditional battleground for the news media.
“Train commuters are such a large part of news consumers because we don’t drive to work, especially in Tokyo or Osaka,” said Yasuomi Sawa, a professor of journalism at Senshu University. Well into the early 2010s, Japanese subway cars were packed with business people reading neatly folded-up print dailies.
At the time, big Japanese media companies, including Asahi, Nikkei, and Yomiuri, still enjoyed healthy print circulations compared to their Western counterparts. But because they were fearful of investing in digital transformation at the expense of their print profits, there was little in the way of digital news for the average consumer. There were aggregators, such as Yahoo News, which had retained an audience from the ’90s — but they weren’t personalized, and didn’t offer curated article feeds.
“Showing all sides [of the political spectrum] does not make the perfect solution. I still believe that it is better than just showing one side. That is dangerously comfortable.”
SmartNews initially struggled to scrape together venture capital. Eventually, it secured the backing of large — and normally conservative — funders, including the state-owned Development Bank of Japan. Globis Capital Partners, which had backed other startups like Mercari and former Quartz owner Uzabase, also joined the list.
But as its funding grew, so did the competition. SmartNews was part of a growing sector, joined in the aggregation space by others such as NewsPicks, Antenna, and Gunosy. By early 2016, the company was averaging more than 5 million monthly active users in Japan and had raised roughly $50 million.
Headquartered in Shibuya in central Tokyo, its growing San Francisco office took on the task of building a U.S. audience and adjusting its core products to the needs of American consumers.
Hamamoto’s sessions with the eikaiwa teachers had led him to overhaul the app’s user interface. He took the cluttered visuals typical in Japanese web design and pared them back, bringing in a streamlined interface and a sans serif font. During more rigorous user testing in San Francisco and New York, the company decided to target political bias as a product differentiator, and invested heavily into expanding its machine-learning engineering teams.
“There is so much more diversity among the people in the U.S. [than Japan],” said Hamomoto. “That’s why we started to invest in the idea of personalized discovery.”
SmartNews began ranking what they called “political balancing” and “diversification” as priorities in their algorithms. The company argues that these factors increase the display of multiple political viewpoints. A team of human curators backs up the software, keeping an eye on curation standards by flagging things like inappropriate images.
In the U.S., SmartNews has had to differentiate itself among a crowded field of aggregators. That includes Google News — the clear leader — along with Newsbreak and Flipboard. They each offer curated reading on smartphones, sparing users from wading into social media news feeds or search engines.
In order to raise its profile, the company spent money on TV ads and audience-development partnerships with national publications like BuzzFeed News and the Associated Press. SmartNews grew fast as a result, according to Kelsey Arendt, a senior analyst at data analytics platform Parse.ly. In 2019, the app had a 145% growth rate in referral traffic over the year, a figure that Arendt called “headline-making.”
In August 2019, a funding round led by Japan Post pushed SmartNews’ valuation above $1 billion. That same year, the company says, it had 20 million monthly active users (MAUs), an average annual increase of 500%. The company told Rest of World its total employee count has doubled in the last two years, with 500 people split across its two main offices in Shibuya and San Francisco. It’s also opened R&D offices in Beijing and Shanghai.
Maintaining that growth may be the real challenge. According to data provided to Rest of World by Parse.ly, in 2020, its referral traffic growth rate slowed, though it still saw 651.7 million page views, or about a third of Google News’ traffic over the same period. The company declined to give MAU figures for 2021.
SmartNews’ rising downloads and user growth shows that it is finding an audience. But it’s unclear how much of that can be sustained by focusing on political neutrality in the U.S. market, and whether most readers are actively looking for balance.
“I don’t know what you can do to convince an audience member to challenge their own political beliefs through news consumption. I don’t think that conversion happens easily or quickly,” said Jeremy Gilbert, a professor of digital media strategy at Northwestern’s Medill School of Journalism, to Rest of World. He gave SmartNews credit for building its app with these social issues in mind, but asked, “But what does it mean to tell ‘real news,’ if it doesn’t fit what their notion of that already is?”
In his interview, Hamomoto pointed to a growing body of research that has found that selective exposure to opposing political opinions breeds partisan resentment. “I have to continue thinking about the best mix of technology and human wisdom to combat [such a] a difficult challenge,” he said.
Most recently, SmartNews has added high-traffic public emergency and natural disaster updates. During the pandemic, the company launched a series of Covid-19 information hubs, first in Japan and then in the U.S. It’s also rolled out hurricane and wildfire tracking portals in the U.S. and a typhoon radar portal in Japan.
Over 1 million users in Japan accessed the vaccine rollout portal in its first week. The dashboard includes alerts for when users are eligible to be vaccinated, and a map that displays appointment reservation times — something that was otherwise surprisingly hard to access. To fill these databases, a SmartNews team in Tokyo liaised with government agencies, manually scraping data from government documents that weren’t fully digitized.
In the meantime, SmartNews is selling the promise of political neutrality to its American user base, and Hamamoto claims the company has the tools to serve up a politically balanced diet. His idea, though, is that transparency is an improvement, not a panacea.
“Showing all sides [of the political spectrum] does not make the perfect solution,” Hamamoto told Rest of World. “I still believe that it is better than just showing one side. That is dangerously comfortable.”
