How Rafat Ali’s startup Skift is Weathering the Pandemic
As the media industry contracts with advertising budgets and in-person events drying up, Skift is betting on its innovative founder.
Skift CEO and founder Rafat Ali.
By JP Mangalindan
(Source: The Juggernaut)
When the coronavirus struck in 2020, tourism came to a screeching halt. Flights around the world were grounded, hotels temporarily shuttered, and thousands of hard-working travel and hospitality employees found themselves either furloughed or laid off. People were suddenly far less invested in booking their next business trip or vacationing in some far-flung locale, and more concerned about staying home and social distancing.
The once-bustling global tourism industry, as the world once understood it, had irrevocably changed, hemorrhaging as much as $1.2 trillion in 2020 — and its effects were widespread. Travel industry news and information outlets were hit particularly hard, as companies scaled back their travel ad budgets.
Skift, a travel industry publication geared towards industry professionals, was among the collateral damage. Founded and funded initially by seasoned media operator Rafat Ali in 2012, the business-to-business (B2B) media site — a prolific purveyor of industry news and reports, and hosts podcasts and events — had become an unlikely success story, buoyed by major advertisers like Accenture, Oracle and Accor, and the site’s insistence in 2013 on charging a wide swath of clients like Marriott, Hilton, Expedia, Delta and United juicy subscription fees for its research reports at a time when others were giving content away for free on the web.
Skift was on track to hit $18 million in revenues in 2020, and had tailwinds behind it to continue expanding its staff and ancillary businesses. But with the pandemic scuttling the travel industry, those tailwinds sputtered, and Skift saw annual revenues dive 35% for the year. For much of 2020, Skift received 50% of its revenues from advertising and another 25% from virtual events, according to Ali, with the remaining 25% of revenues derived from subscriptions to Skift Research, which supplies members with access to reports on key trends in the travel market, market estimates, forecasts and deep-dive analysis of travel sectors and companies.
“2020 was very, very hard, but we survived,” acknowledged Ali. “Now the world has changed a bit, and we have [fewer] resources at our disposal.”
More than a year after COVID-19 first made international headlines, Skift finds itself facing a very different future, one where its business is primarily focused on survival, rather than just hyper growth. But what sets Skift apart from the many other media businesses is the founder at its helm. In Ali, the site has a tireless and savvy media operator known for rarely backing down from a challenge and whose sharp, incisive intellect is exemplified — often unfiltered — on social media, whether it’s the deadly insurrection at the U.S Capitol this January, the buzz around current social media apps (“I still haven’t found a use case for Clubhouse in my life,” he tweeted), the likely cancellation of the Tokyo Olympics, or a jab at New York Governor Andrew Cuomo over his handling of the pandemic.
“Rafat is always willing to call out that bullshit, and I think that's refreshing,” said Brian Morrissey, the former president and editor-in-chief of B2B advertising publication Digiday and founder of a weekly newsletter called The Rebooting.
Born in Salford, a city in Greater Manchester, England, to an Indian biochemist father and stay-at-home mother, Ali and his family moved to Denver, Colorado a year after birth when his father received a job at the University of Denver. Ali later earned an undergraduate degree in computer engineering from Aligarh Muslim University in Aligarh, India, but he despised the idea of using his degree in the real world.
“I hated programming,” explained Ali. “I just did it because that's what our cultures do, which is to push their kids into engineering and medicine. I did it because my parents said this is the thing to do.”
Ali initially wanted to be an advertising copywriter at an agency instead, jonesing for the glamorous work culture and decadent lifestyle depicted in AMC’s television series Mad Men. But after being fired from his first job, he switched gears and found a role as a junior reporter covering the business of advertising at an Indian trade publication. The experience opened his eyes to the fast-paced, instant gratification nature of web publishing. “This was where the action was — I wanted to be on the internet,” said Ali.
To sharpen his reporting chops, he applied to Indiana University and received a Master’s Degree in new media journalism. Within a year, he was hired as digital media reporter for the digital news startup Inside.com before going on to become managing editor of Silicon Valley Reporter. In 2002, he founded paidContent, an online news blog that religiously covered digital media.
At paidContent, Ali quickly became known for innovating new ways for his site to monetize. The outlet was one of the first to run ads in RSS feeds in 2003 and deploy “sponsored posts” — advertorial content, marked as ads, that looked and read like traditional blog posts (also called native advertising). paidContent also handled the majority of its own ad sales, instead of employing an ad network, which allowed its ads to be particularly relevant to adjacent content. Today, sponsored posts are commonplace, deployed by many outlets from Buzzfeed to The Washington Post, but in 2003, they were new to readers.
“He was always thinking so far forward for the industries he’s aimed to transform,” said Brian Solis, a global innovation evangelist at Salesforce who has known Ali for well over a decade. “With paidContent and ContextNext, he was trying to inspire traditional media stalwarts and new media entrepreneurs to compete in an online, always-on, real-time world.”
In 2010, opportunity came knocking in the form of a $6.5 million acquisition offer from Guardian Media Group for paidContent, which Ali operated under the parent company ContentNext Media. Ali took the deal.
But the entrepreneur’s path to Skift wasn’t a linear one. After the acquisition, Ali went through a divorce and left Los Angeles for New York to escape “bad juju.” It was also around that time Ali got the itch to travel the world.
“I sort of had an — I hate to use this phrase — Eat, Pray, Love journey of my own,” admitted Ali.
He visited a dizzying array of locales: Iceland’s Eyjafjallajökull volcano, the desert regions of Tunisia, Mongolia’s grasslands, India, Uzbekistan, Burma, the Comoros Islands near southeastern Africa, and the Outer Hebrides, an archipelago off the northwest coast of Scotland.
The time abroad proved formative for Ali and jump-started his thought process on his next career step. What he wanted to build, he realized, was another B2B media outlet, this time focused around travel and hospitality. Ali partnered with Jason Clampet, a former Frommer’s editor, and the duo launched Skift in July 2012. Unlike much of Skift’s direct B2B competition — the aerospace-focused publisher FlightGlobal, Travel Weekly, and Travel Daily News — which covers specific sectors of global tourism or covers travel on a more superficial level, Skift aims to cover the industry widely and deeply. The site also kept its headcount small — a conscious decision by Ali, partly so the site and its staff could maintain flexibility in its operations.
“There were a lot of trade media companies in the travel industry prior to us, but all were covering various subsectors and silos, nobody was covering horizontally across, particularly with a sense of modern consumer behavior and modern tech,” contended Ali, who credits growth in media partly to those outlets having a “confident worldview” on the sectors they focus on. Those that don’t, lack a “core sense of why they should exist.”
It’s a move that Omar Akhtar, a research director for the research and advisory firm Altimeter, considers instrumental to Skift’s growth.
“He [Rafat] wasn't trying to be and do everything, and if you look at the direction that some of the other publications, like Vice and BuzzFeed, followed, they really tried to expand their portfolio,” explained Akhtar. “What we've seen since then is that that hasn't entirely worked once they decided to go beyond what they were originally doing. Their readership was diluted.” (BuzzFeed, which launched in 2006, wasn’t profitable until 2020.)
Skift now blends free news, podcasts, advertising, and sponsored content with paid newsletters, research reports, and events that cater to travel and hospitality companies. Along the way, Skift acquired Airline Weekly, a subscription newsletter in the aviation space in 2018, and published significant stories that influenced the very areas it covers. Skift coined the term “Overtourism,” a now commonly-accepted term referring to the overcrowding of areas due to an excess of tourists, and its oral history of online travel published in 2016 is now required reading at business schools around the world.
“What I say about Skift is that, yes, we cover the travel industry, but we really cover the world through the lens of travel because of how wide [our coverage is], and that was certainly true before the pandemic,” explained Ali.
Still, the pandemic certainly forced Ali to rethink Skift’s strategy. With conferences once accounting for 40% of its revenues, Skift initially turned to virtual events. But while such events can generate some cash, many outlets quickly learned that virtual events don’t generate the same level of attention (and dollars) from attendees. Skift’s annual Global Forum, a premiere event usually held at New York City’s Lincoln Center, typically charges $4,000 a ticket, but the virtual version in 2020 charged just $195 per head and event sponsors paid a fraction of what they normally would.
“We tried to mix up formats, because people would get tired. You can’t do a two-day conference sitting in front of a computer,” said Ali.
Skift is certainly not alone in feeling the crunch. Across the vast media landscape, outlets from BuzzFeed to The Atlantic, which is owned by billionaire Laurene Powell Jobs, slashed budgets and laid off staffers in 2020 as their once reliable revenue streams sputtered — companies laid off roughly 37,000 media workers by the end of last April.
Morrissey estimates, using back-of-the-envelope math, that revenues from in-person events for the entire media industry declined by roughly 75% in 2020 due to the pandemic. The sharp decline was a wake-up call, not just for Skift, but for all media outlets that once heavily relied on in-person events as hefty revenue streams. To maintain a healthy bottom line moving forward, diversification is key, said Morrissey.
“The big lesson of media over the last several years — and it's been reinforced in the pandemic — is the best way to make money and media is to make money in lots of ways,” he added.
To that end, Skift has explored new revenue streams, introducing Skift Pro, a daily news subscription service that offers readers exclusive reporting, interviews and breaking news coverage.
When that normalcy returns is really anyone’s guess. This year is already off to a rocky start for the travel industry, with variant COVID strains ravaging countries and vaccinations in the U.S. moving at a slower-than-expected pace. Adding to an already gloomy outlook, the Global Business Travel Association recently predicted 2021 will be another “year of survival” for the travel industry, and it won’t be until 2025 that global business travel activity fully recovers.
The onus is now on Skift to find a way to survive another brutal year for the travel industry. The site is currently in “cautious hiring mode,” and plans to add five more employees across editorial, marketing, events and research.
“We'll be back up to probably 50 [employees] by the end of the year — if that happens, I'll call that a win,” said Ali, who chalks up his perseverance to the “clichéd” immigrant mentality. “Knock me down nine times, I’ll get up 10.”
(Source: The Juggernaut)