Bloomberg struggles to break out of the box

Justin Smith's ambitious digital transformation hits some bumps

When Justin Smith arrived from The Atlantic to last fall to take over the sprawling media group at Bloomberg LP, the move was greeted by hosannas in the media and journalism circles.

Here was the young, digitally savvy executive credited with playing a crucial role in pulling a 156-year-old monthly from the brink of extinction coming to an immensely profitable company bristling with technological knowhow but struggling to break out of its narrow financial niche and into the media mainstream. Soon after arriving, Smith issued a memo announcing a “hundred day strategy process,” toward a new plan that would raise Bloomberg’s visibility beyond financial circles and, perhaps, help transform the media industry itself.

That was 200 days ago. Since then, the launch of a key product has been delayed, an important designer has bolted, and some Bloomberg editorial staffers are expressing frustration about the pace of decision-making and confusion over the project’s aims.

“It’s still not clear what we’re trying to do,” said one Bloomberg Media executive who is familiar with the planning. “What do we want to be when we grow up?”

Smith arrived last fall to take charge of—and expand upon—a jumble of media assets that include a sprawling TV operation said to post losses of around $100 million a year (an improvement from a few years ago, when losses exceeded $300 million); Businessweek, which posts losses of some $30 million annually; a large radio operation; digital video; Bloomberg Markets, a financial monthly; Bloomberg Pursuits, a luxury magazine; and Bloomberg.com, which publishes selections from the thousands of stories generated by Bloomberg News, a massive newsroom of 2,400 journalists primarily producing for Bloomberg’s famous financial-data terminals.

Smith has described his plans in internal memos and public pronouncements that, amid rather thick digital/managerial rhetoric (“Our strategy calls for building out a portfolio of new digital assets that better align our content offerings to global business audience segments”), spell out broad goals, including “broaden our audience,” spearheading digital “innovation,” and “grow global business TV.”

But the broad goals still don’t add up to a rationale for the enterprise. Bloomberg LP is already immensely profitable by selling a single product, its famous—and costly—terminals, rendering normal financial targets, and the value of casual Web traffic and TV viewers, moot. Bloomberg executives say increasing “impact” is an important objective, leaving open the question of what that means, and the main one: impact to what end?

In March, Smith made a long-anticipated presentation of his strategic vision (missing the 100-day target by a couple of months), including a lengthy Power Point presentation, to members of Bloomberg’s management committee, which includes, among others, the ex-mayor; Bloomberg CEO Dan Doctoroff; Matt Winkler, top editor of Bloomberg News; and Tom Secunda, who runs the company’s massive terminal operation, which generates 85 percent of Bloomberg LP’s revenue.

The detailed strategy presentation was not widely shared internally, though some elements have leaked. According to people with knowledge of the strategy, it has three main elements: 1. Fix the sprawling and money-losing television operation; 2. Ramp up Bloomberg’s conferencing business; 3. The centerpiece, separating Bloomberg content into five editorial “verticals” across a range of digital platforms (Web, mobile, etc.): a general business site, Bloomberg Business, that will replace Businessweek.com; technology; a luxury site drawing on the company’s Pursuits magazine; and Bloomberg Markets, which would draw on mostly financial coverage produced by the vast Bloomberg News operation. Last, a Bloomberg Politics site has already been announced, to much fanfare, featuring the high-profile Washington journalists Mark Halperin and John Heilemann, authors of Game Change. Halperin and Heilemann are expected to anchor a daily politics show after the close of markets.

The first setback surfaced when designer Richard Turley, the creative force behind buzz-creating covers at Bloomberg Businessweek, abruptly decamped last April to take a job at MTV. His departure was accompanied by a torrent of regret and praise from the media press, which ran greatest-hits tributes to his most “awesome” covers. Turley didn’t respond to telephone calls seeking comment.

Then the launch of the business vertical, Bloomberg Business, which had initially been targeted for September, was pushed back to the end of the year.

But the biggest problem, some inside the company say, is that basic goals of the project remain opaque. “There’s a leadership vacuum,” says the executive.

In an interview, Smith said he has been quite clear about the aims of the enterprise, which he described as three-fold: influence (which includes growing the digital audience), innovation, and “commercial success,” in that order. [innovation, growing the digital audience, and broadly achieving “commercial success.” UPDATE: the sentence was changed to clarify Smith’s comments from a lengthy interview.]

Smith says signs of restlessness are natural given the scale of the effort and the change it represents. “We’re creating numerous startups within the company,” he says. “It takes a couple of months to get stuff done, especially when you’re doing things a bit differently than you have in the past. Not everyone is going to be thrilled with the pace. But the real proof in the pudding is when we launch these new properties…We’re trying our best to communicate as actively as possible.”

He says that while Turley’s loss was a blow—“we absolutely love Richard”—the magazine’s new creative team headed by Rob Vargas has “stepped into his shoes with intelligence, wit, and grace.” Citing well-received covers after Turley’s departure, he says, “Rob and the team have proven all the critics wrong.”

As for the delay of the business vertical, Smith says that was merely a function of a decision to speed up the launch of a different vertical, Bloomberg Politics, to October.

“There’s a lot going on, and we’re in the top of the first inning of implementing it,” he says.

To be sure, Smith retains supporters among Bloomberg staffers who sympathize with the difficulty of trying to shift a famously closed, insular, and rigid corporate culture to the more open and free-flowing sensibility of the Web.

“It’s not really a super-fast moving organization,” a sympathetic staffer says. “It’s still a work in progress but he’s a pragmatic guy … they’re shifting more toward being a much more Web-friendly organization.”

Smith’s arrival generated great hope among staffers frustrated by Bloomberg’s near invisibility on the mainstream media stage, and yet any attempt to expand the company’s reach beyond the business news terminals will be fighting both the company’s history and its culture.

Former New York mayor Michael Bloomberg founded the company in 1981 with a laser-like focus: to provide financial data, analytical tools, and an early messaging system to Wall Streeters via a single product, its famous two-screened terminal, “the Bloomberg,” aka, “the box.” Launched long before the mainstreaming of the internet, the Bloomberg was—and is—in fact an intranet, a closed system, with its own keyboard, language, and command system, available only, at considerable cost, to a limited audience of well-heeled subscribers. The box is a world unto itself. It is precisely not a mass-market product, and it remains the soul of the company, presided over by Secunda, a minority owner and early Bloomberg partner who has direct access to the mayor, and actually, as he told Fortune earlier this year (($$)), doesn’t agree that the company needs to diversify at all.

Even after Bloomberg added a news operation in 1990 with the hiring of editor Matthew Winkler, then a Wall Street Journal bond reporter, the organization grew up in something of its own media orbit, with its own peculiar stylebook, The Bloomberg Way, a dry, just-the-facts writing style (that occasionally produces famously puzzling headlines), and a narrow mission: to churn out thousands of stories a day to serve terminal subscribers, mostly traders and other financial professionals.

The latest effort to bolster Bloomberg’s media brand, has been preceded by several others. Indeed, for the last decade or so, Bloomberg has been embarked on an ambitious, and expensive, campaign to extend its journalistic reach into culture, arts, politics, even sports—so far with little to show for it. A parade of high-profile media talent has entered Bloomberg’s news operation from The Wall Street Journal and elsewhere and effectively disappeared from view. The organization has won a string of journalism awards, but has not broken through with the Pulitzer Prize it covets. The company hired media maven Norman Pearlstine to great fanfare in 2008; he quietly left this year. Andrew Lack was hired from NBC News that year to boost Bloomberg’s huge TV operation; on Smith’s hiring, he was later bumped up in the hierarchy, but the network’s ratings remain too small to measure. The Bloomberg Way has not translated well to the Web, and the influence of the newsroom on the public discourse remains limited. When Winkler wanted to call attention to Bloomberg News’ freedom-of-information campaign against the Federal Reserve, he published his op-eds in The Wall Street Journal.

If the media operation has a bright spot, it is Businessweek, bought for a nominal sum in 2009, where star editor Josh Tyrangiel has generated buzz with provocative covers, albeit with the occasional dud. Still, that has yet to translate into financial success and the loss of Turley affects the magazine most directly.

Smith’s successes at the Atlantic’s parent, Atlantic Media, have not been questioned but with the Atlantic’s revenue in the $40-million range, its budget represents a rounding error for Bloomberg—a money machine— which churned out 2013 revenue of $8.3 billion and staggering profit margins of more than 30 percent. And when it comes to the news economics of the internet, the question isn’t so much whether digital operations can be profitable—they can—but the degree to which they can scale.

One question going forward is who will staff the five verticals, and who will control their content. The giant Bloomberg News staff, for instance, has as its primary audience Bloomberg’s 318,000 terminal subscribers and is under the iron-fisted control of Winkler, while the new financial vertical, Bloomberg Markets, under Smith’s terrain. Tyrangiel has been promoted, and after taking a break from Businessweek, is now formally in charge of Bloomberg TV, the magazine, and the verticals.

Another challenge will be navigating Bloomberg’s famously byzantine internal politics, which have become even more so now that the ex-mayor has returned to the company after a dozen years occupied elsewhere. His role so far is undefined, fuzziness that has already led to erroneous reports about what he is actually doing at the company. A Bloomberg spokesperson says merely that he is “the owner.” And while Doctoroff has made it clear that a primary goal was to make Bloomberg’s non-terminal businesses, including the media arm, pay for themselves, the ex-mayor is said to be concerned more about having impact on the public discourse.

As for Smith’s operation, it is not entirely clear the degree to which profitability, or even loss amelioration, is a goal. Smith declined to specify revenue targets or to define “commercial success” beyond the profitability of the entire company, which is already extremely profitable. At any rate, Smith says the profitability is not the only metric, and that traffic, TV ratings, audience engagement, and the like are central to judging the operation.

“Our goal,” he says, “is to lead the industry.”

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.