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You may not have heard of SmartNews, but the Japanese news discovery app has quadrupled its U.S. audience over the past two years and now drives more traffic to publishers than Apple News, according to traffic news referral service Parse.ly.

Expand chart
Data: Comscore; Chart: Andrew Witherspoon/Axios

Yes, but: SmartNews' audience is still tiny in the U.S. compared to that of other news aggregators, like Facebook, Google or Twitter, and it's not considered a strong partner for strategic news distribution. "It's very much just sugar rush traffic," says one audience development manager.

Details: SmartNews is a free news discovery app that was created in Japan in 2012 and launched in the U.S. in 2014. It's raised $88.3 million to date and at the time of its last raise in 2016, was reportedly valued at between $500 and $600 million. SmartNews has an audience of roughly 15 million monthly users, most of which are from Japan.

  • But the company is aggressively pushing to expand its U.S. presence, in part because audience and ad revenue opportunities are great here. It's hired 25 people across three offices in San Francisco, Palo Alto and New York City, Head of U.S. Marketing Fabien-Pierre Nicolas tells Axios.
  • The company has also been buying cable news ads across Fox, MSNBC and CNN. Its goal is to attract older news consumers in the U.S. across all demographics and political ideologies. "For now, the 18-24 demographic is skipping us. Therefore, we are focused on users ages 25 and higher," says Nicolas.

Be smart: In Japan, SmartNews is a market leader and considered one of the top news discovery apps, with roughly 3,000 news publishing partners. But in the U.S., it so far has only signed on 350 publishing partners.

  • According to Parse.ly, SmartNews didn't start to really distribute traffic to publishers until the summer of 2017. In March of 2018, that growth accelerated even further, and has been trending upwards ever since. To date, traffic referrals to publishers have grown by 125%, per Parse.ly.

How it works: SmartNews is similar to Apple News in that it selects traffic distribution partners to work with and helps them set up channels that users can follow. But when it comes to most traffic referrals, the app relies on algorithms to elevate news from vetted publishers in its feed.

  • "Quality is a big weight in the algorithm," says Nicolas. The push alerts SmartNews sends that drive big traffic spikes to U.S. publishers are algorithmically selected, and then reviewed by a human curation team. That team will also respond to content that is flagged as problematic by users.
  • "If you're a publisher, the best way we can do something together is to make sure you have a channel, and to make sure your channel is correctly indexed. We are happy to work on co-marketing strategies, but trust machine learning will do the job and provide quality content from curated sources. We think this can really help people move away from filter bubbles."

Between the lines: Axios spoke with several audience development professionals from different types of publishers, and while most agreed that the added traffic surges from SmartNews are helpful, many argued that they haven't yet become a very strategic audience development partner for a number of reasons.

  1. It doesn't have a great sense of editorial strategy. Publishing executives complain that it will alert breaking news coverage from outlets that didn't actually break the news, often pushing an aggregated story.
  2. Traffic spikes are high, but not as sustained. "Traffic shoots up but quickly wanes after it's moved from the top position on the SmartNews feed," says one audience development manager.
  3. Bounce rates are very high. Because there's little strategy around audience development and platform optimization, it's hard to build audience loyalty with a brand on SmartNews, which means people visit the article after it's pushed to them, but don't engage further with a news brand after that.
  4. There's no pitch process. Publishers say they've offered to pitch news strategically to the app, but it only ranks news algorithmically after a publisher is added as a curated source.

The bottom line: SmartNews is starting to send a lot of news traffic to U.S. publishers, but there's no real mechanism to build an audience yet. For now, it's an added bonus, but not a platform that a company can really invest in strategically.

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The big picture: Even as Omicron cases have begun to wane in some places, many hospitals are still fielding a crush of patients amid record employee callouts.

Sarah Palin tests positive for COVID, delaying defamation trial

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Former Alaska Gov. Sarah Palin (R) tested positive for COVID-19 on Monday, delaying the start of her defamation trial against the New York Times.

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Driving the news: The benchmark S&P 500 dropped for its fifth straight day, with losses nearing 3% in early trading.