Axios has spun up a seven-figure software licensing business in less than a year.
In February, Axios launched Axios HQ, its software-as-a-service business that is designed to teach companies how to write it its trademarked editorial style of “Smart Brevity” for internal communications. After just eight months, HQ has earned over $1 million in software licensing, which starts at $10,000 for an annual contract, and is projected to hit $1.5 million by the end of the year, according to Axios HQ’s general manager Jordan Zaslav. The business made an additional $2 million from its professional services offerings, which provides clients with white-glove management training in “Smart Brevity.” To date, 30 clients have paid for these services in addition to the software licensing, some paying upwards of six figures for an annual contract.
“I view this as, ‘Can we be a Bloomberg? Can we have a terminal business and a news business?’ In our case, we would have this communication business and a news business,” said Roy Schwartz, Axios’s co-founder and president.
Through Axios HQ, Axios provides licensees with email templates for different types of memos (currently there are six templates available); an AI editing program, similar to Grammarly, that provides suggestions for succinct and thoughtful phrasing; and analytics software that tells senders info about any given email sent through the platform, like open rates and engagement.
Currently, HQ has 150 clients, many of which fall in the expected category of small- to mid-sized companies, but also includes blue-chip companies, like Delta Airlines, local governments, and even educational institutions, like Austin Independent School District, which uses HQ to communicate with parents, students and staff. A small portion of these clients have previously advertised with Axios, but Zaslav said his team is not trying to sell HQ as an add-on to media buys. He did not give precise pricing for extended HQ contracts.
The buildup of Axios HQ could help address criticism that Axios, as a media company, has not sufficiently diversified its revenue streams. Media conglomerate Axel Springer had been in talks to acquire Axios but eventually decided against the purchase because of Axios’ lack of revenue diversification, Digiday previously reported. An Axios spokesperson said Axios was the one that pulled out of those discussions. Axios’ revenue diversification efforts have extended beyond HQ to include becoming a local news publisher in 25 markets across the U.S., creating a $5 million business in one year. This past spring, the newsletter publisher toyed with the idea of merging with digital sports publisher The Athletic and forming an SPAC in an effort to acquire a subscriptions business but seems to have decided against that.
Axios HQ is currently operated by 45 people, 27 of whom were hired after Feb. 1 of this year. In growing this team, the company promoted Zaslav from senior director of strategy to general manager of Axios HQ and is in the process of hiring a chief technical officer who will focus exclusively on the HQ business.
The experts who helped craft the “Smart Brevity” style are writers and editors, not salespeople and customer service representatives, so a lot of the overhead costs of building this licensing business will be hiring the right staffers to make this business all it needs to be, Schwartz acknowledged.
To that end, Axios HQ is not yet profitable, according to Schwartz, in large part because it requires significant and regular investment to build the technology, hire the necessary positions, and iterate on the product based on regular feedback. He did not say how much the company has invested in HQ to date.
“When you think about [breaking] even in a software business, the more successful it is, the more you push off [reaching] break[ing] even. Once it’s working, you decide to invest more in it, so when it will break even is a hard question to answer,” said Schwartz.
Axios may be willing to postpone HQ’s profitability because of the stickiness of its revenue, thanks to the length of deals and its current client renewal rate. So far, all of the licensees who signed on in the first quarter of this year have agreed to renew their agreements in 2022 and extend them from the initial one-year deals to two-year contracts, Zaslav said.
The software licensing business’s revenue is projected to increase by 300% year over year from a $1.5 million business in 2021 to a $4.5 million business in 2022, Schwartz said. Meanwhile, the services side of the business will continue to grow more linearly at 20-30% year over year, he said.
This recurring revenue model, which comes with a higher price tag than say a potential subscription business, is appealing for media companies that are chasing revenue diversification opportunities, like The Washington Post with its Arc publishing platform, Vox Media with Chorus and other SaaS products and Minute Media with its CMS and video player software.
“The nice thing about a B2B business is that people get used to it and it gets embedded into their backend,” which ultimately makes it harder for those professional clients to end licensing deals, said Ava Seave, principal at media consultancy Quantum Media. Once this technology is regularly used in day-to-day business, shaking the habit will be difficult, especially if it is user-friendly and provides good customer service.
That service and support will be particularly important for Axios to figure out, Seave continued, because if its HQ product works well and grows a large enough client base, the competition will come out of the woodwork and try to undercut Axios’s prices, as technology companies tend to do.
Axios’s branding and trademarked “Smart Brevity” does help with discoverability, Seave said, but building a team that helps customers and provides them with the serviceable extras — like training and consultation — will be the competitive advantage Axios needs to succeed in the crowded technology market.
This story has been updated to include a statement from an Axios spokesperson, saying that the company ended talks with Axel Springer about the potential acquisition.
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