Dot-com content sites try some new tricks

Inside.com, Salon and others look for new formulas in the online content game

This column appeared Jan. 25, 2001, in the Online Journalism Review. Here’s the version on the OJR site.

In this package:

•  Soul-searching time for online news units

•  Essay: Gut check time for new media

•  High anxiety, new realities at LA Times Online

•  Dot-com content sites try some new tricks

By J.D. Lasica

The new media divisions of The New York Times, Knight Ridder, the Tribune Co. and other traditional media companies don’t hold a monopoly on online journalism. In fact, a strong case can be made that most of the innovations taking pace in the field have their origins in the dot-com world.

Sites like Salon, Slate, iVillage, Inside.com, CNET, BabyCenter, APBNews and others depend on teams of Web reporters, columnists, researchers and editors for their reportage, advice columns, consumer tips and first-person essays. They may call it content, but it’s still journalism.

Content sites have had a hard time lately, with Wall Street pummeling the entire sector. “What investor would invest in content after all the criticism it’s taken?” says Michael O’Donnell, president of Salon.

Sites like Salon, Slate, iVillage, Inside.com, CNET, BabyCenter, APBNews and others depend on teams of online reporters, columnists, researchers and editors for their reportage, advice columns, consumer tips and first-person essays. They may call it content, but it’s still journalism.

As a result, content sites have had to morph into something more. And the year ahead may mark the end of thinking about them exclusively as Web sites.

The company moving most aggressively in that direction is one of the newest: Inside.com. The site launched to great media buzz last May, due largely to its founding troika — Spy and New York magazine editor Kurt Anderson, ex-Spin editor Michael Hirschorn and former Brill’s Content publisher Deanna Brown — and the stellar talent snagged from publications that range from Rolling Stone to Vanity Fair to The Wall Street Journal.

“You have to start with a brand that you need to deliver in different forms,” says editor-in-chief Hirschorn. Last December, the Web site borrowed a trick from old media by launching a regular biweekly print magazine.

The original idea behind Inside.com was simple enough: a Web site that covers film, television, books, newspapers, magazines, and the convergence of technology with the entertainment media. While the content was cool enough, the start-up had analysts scratching their heads over its business model, which forecast 100,000 subscribers — at $19.95 a month or $199 a year — and profitability within three years.

Welcome to the real world of cyberspace, where information, no matter how useful, yearns to be free.

“We’re clearly less successful in online subscriptions that we forecast a year ago,” Hirschorn admits in a phone interview. “But we said all along we need to rely on multiple revenue streams. When we started we said that we were a media company and everyone said, ‘Yeah, yeah, you’re a dot-com.’ That made it easy for us to get a lot of attention.

“But our business plan has always been pokier than those who claimed they’d have billion-dollar valuations overnight,” he added. “We’re hoping to build a $200-million media company over the next six or seven years.”

Toward that lofty goal — and the more immediate goal of staying in business — Inside is counting on income from three sources, Hirschorn says: the digital product (online advertising and subscriptions), magazine (print advertising and subscriptions) and conferences.

The magazine’s mission differs from the Web site’s in several respects. “We found that the site works best as a breaking news vehicle,” Hirschorn says. “The magazine is better suited to step back and provide long-form analysis and context.”

The site also tackles a wider array of media industry minutiae while the magazine will focus on broader themes of “how digital technology is transforming all aspects of the entertainment and information business, everything from instant messaging to cable, satellite, broadband and large media companies placing multibillion-dollar bets.”

The Web site’s traffic is projected to top 1 million unique users this month, he says. Like other sites, Inside.com hopes to spur customers to pay for a tier of premium content.

The Web site’s traffic is projected to top 1 million unique users this month, he says. Like other sites, Inside.com hopes to spur customers to pay for a tier of premium content.

Unlike other sites, this is not really as crazy as it sounds. The premium offerings are a no-nonsense array of useful business tools: book sales, best-selling CDs, airplay data, TV ratings, box office receipts, a litigation tracker, personalized news alerts, industry news digests, a searchable database of movie reviews — the list goes on.

The magazine, which published two trial issues in December, begins regular publication with a controlled run of 75,000 copies. “We expect the plurality of our income to come from magazine advertising and subscriptions,” Hirschorn says. “It’s a tough economic environment right now, but the advertising model will catch up to the content sooner rather than later. We’re in a moment of quasi-hysteria right now, but that will clear. The Web is amazing in letting you build and define a huge, dedicated audience in a very short time. Without the Web you’d need tens of millions of dollars to create a magazine from scratch.”

Hirschorn remains upbeat about the company’s outlook. “There are no guarantees, and I don’t want to pretend it’s a layup. Six months from now we’ll have a clearer picture of where we stand. But we feel that we’ve established ourselves journalistically and are on our way to establishing ourselves as a business.”

Salon: The free lunch is almost over

To some degree, all content sites are at the mercy of external forces. “We were all affected by capital markets on the positive side at first and now on the negative side,” says O’Donnell, Salon’s CEO. “I get a sense that it’s bottomed out, though we’ll still see more layoffs ahead across the industry.”

Like Inside, Salon is positioning itself to become a cross-media company in print, radio and TV, with a loyal base of 3 million monthly users. It took in $8 million in revenue last year and plans on increasing that by 6 to 8 percent this year.

Salon laid off 25 people, or a fifth of its staff last month. For those keeping score at home, the stock, which peaked at $15.13 a share in July 1999, today stands at about $1, making Salon the poster child for Wall Street’s discontent with content sites.

Like Inside, Salon is positioning itself to become a cross-media company in print, radio and TV, with a loyal base of 3 million monthly users. It took in $8 million in revenue last year and plans on increasing that by 6 to 8 percent this year.

The site has experimented with multiple revenue streams for some time. About 10 percent of its income comes from syndicating articles to print publications. It has published three books culled from the Web site. In the coming months the site plans to introduce premium offerings to members.

With Yahoo and Napster already discussing subscriptions for services, O’Donnell predicts that by 2002 a number of sites will be charging for their offerings. “You’re not seeing a flood of free content sites on the scene anymore,” he says. “The audience kind of realizes the free lunch is going out of business.

“At the end of the day, people will eventually pay for strong proprietary content,” he adds. “Whenever there’s another report that Salon is going out of business, we get tons of e-mail from readers who tell us, ‘Don’t you dare leave us. We’ll subscribe. Salon’s our daily addiction.’ ”

Salon is watching Inside.com’s evolving business model closely, but O’Donnell had highest praise for some of the more established brands on the Web: “CNET is the class of the league in the very lucrative tech news niche, and CBS MarketWatch is doing an outstanding job in the finance space. iVillage has taken a lot of criticism, but they’ve got some big backers and I think they’ll figure out a way to make it, too.”

O’Donnell says that Salon’s lack of ties to a corporate parent has both upsides and downsides. “The advantages are the editorial and entrepreneurial independence. You can be more enterprising, faster-paced, get products to market sooner and create a great corporate culture where everybody has a stake in moving the company forward to flourish on its own. The disadvantage is that you don’t have the financial resources and backstop against an economic downturn. But I’m glad we’re out on our own because we’re not beholden to one giant company.”

With Yahoo and Napster already discussing subscriptions for services, O’Donnell predicts that by 2002 a number of sites will be charging for their offerings. “You’re not seeing a flood of free content sites on the scene anymore,” he says. “The audience kind of realizes the free lunch is going out of business.

Charlotte Li, research director for media and entertainment at Forrester Research, thinks both Salon and Inside will survive the current shakeout. “Inside.com may be more supportable because it’s positioned as a business information site. Business professionals will subscribe and expense it to their companies,” she says. “Salon faces the challenge of creating all their content from scratch, unlike large media companies like the New York Times or Knight Ridder that can repurpose their content.

“I like both of their chances for the long haul. If I were running a media company with lots of cash on hand, this might be a good time to go out and bankroll or buy an Inside.com or Salon as a long-term investment.”

Rough seas for content sites

Pure-play content sites have had their obituaries written more often than Mark Twain did, but we’ll likely see more content sites fold up shop this year. Analysts suggest that the “women’s content” mega-niche remains overcrowded and that iVillage and Oxygen may have a better shot of surviving than Women.com.

The award-winning crime news site APBNews.com has dodged several bullets, but it filed for bankruptcy in July and its prognosis remains grim. A company called SafetyTips.com bought the site for $575,000 in September, but has already missed a few payments for the site’s skeleton staff.

The scrappy financial news site TheStreet.com continues its effort to reach profitability. The New York Times sold its 5 percent stake in the dot-com for $3.2 million and severed its remaining ties on Jan. 4. Spokeswoman Lisa Carparelli says the Times abandoned its joint editorial relationship because the publication has established a continuous news desk that provides business news updates throughout the day for nytimes.com.

James Cramer, the founder of TheStreet.com, says the company is “very much” on target to reach its business targets. “As a site that has thousands upon thousands of people paying $200 plus a real revenue stream of advertising, I fail to see how we can continue to be lumped in with those who haven’t figured it out or are clueless. We came through the worst bear market since 1929 alive and well,” he says.

Also on the knife’s edge: BabyCenter.com, the top-rated health site for new and expectant parents, and the only site ever to win a Webby award in three different categories: Home, Living and Commerce (Disclosure: I headed the editorial department for a time). BabyCenter’s parent company, eToys, laid off 700 of 1,000 employees company-wide last month and said it had only enough cash to survive through March.

“In BabyCenter’s case I think we’ll come through fine,” says Jim Scott, vice president of editorial. “The signals we’re getting are that people really value what we’re doing, we’ve attracted a large audience (nearly a million users per week) and we have a smart business plan. The general comment I hear from our staff is that we’re just too good to go away.”

My guess — and hope — is that Scott is right. But BabyCenter isn’t profitable yet and investment capital has dried up for struggling start-ups.

Prediction: The guess here is that eToys will sell its BabyCenter division to a brick-and-mortar company like Johnson & Johnson or Pampers. If that happens — and if that trend of independent content sites being sold to large business concerns takes root — look for lots of discussions on all those content sites about journalistic conflicts of interest when content sites write about products sold by a corporate parent or competitor.

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JD Lasica
Written by JD Lasica
JD Lasica is an entrepreneur, author, journalist, photographer and blogger. | CONTACT