03/05/01 - ONLINE NEWSPAPERS REGROUP, RECONSIDER

By: Staff Reports News From the Past Week


































Monday, March 5, 2001






ONLINE NEWSPAPERS REGROUP, RECONSIDER
A Report From E&P's Interactive Newspapers Conference
























from this week's Editor & Publisher magazine. To subscribe, click
here.

by Karim Mostafa

Something isn't computing here. When Robert Decherd, CEO of Belo, addressed
attendees at E&P's Interactive Newspapers Conference, he declared, "This
is a time to stay the course," and cited MySanAntonio.com, a partnership Web
site operated by Belo's KENS 5 TV station and Hearst Corp.'s San Antonio
Express-News, as one of his company's interactive prizes.

But here comes the computer glitch. The day before Decherd so confidently spoke
to the conference crowd, MySanAntonio.com laid off nine of its 40 full-time
staff members. The staff reduction, which Decherd didn't mention in his
conference speech, was wide-ranging - in editorial, production, and
operations.

"The mandate from the economy is to make money right now," said Sean
Fitzpatrick, content director at MySanAntonio.com, noting that the site to date
has successfully focused on building an audience, not racking up revenue. Even
with the revenue-seeking siren sounding loudly, the partners have yet to
integrate an advertising sales effort for the site. MySanAntonio.com has its own
sales team. So do the newspaper and TV station.

And they're not offering joint buys across platforms to advertisers yet,
according to Director of Sales Susan Nieman at MySanAntonio.com. "That is a
point we want to get to," she said. "I think we will get there this year."

The disconnect between rosy long-term vision and crushing everyday cutbacks is
more often the rule than the exception these days. The view from the strategic
map room often is not in synch with rapid-fire decisions that have to be made in
the trenches. And the cries for profitability, both from Wall Street and the
front office, are largely going unheeded.

Down on the upbeat

Looking at the interactive newspapering landscape today, "Corporate managements
are probably more upbeat than they should be," observed Charlene Li, research
director at Cambridge, Mass.-based Forrester Research. For example, Li said that
New York Times Digital, as a separate entity, has been more innovative than
most, but, at the end of the day, "their balance sheet is horrendous."

The problem, industrywide, is that what's up and running isn't necessarily
running effectively. E.W. Scripps Co.'s newspaper Web sites, for example, are
struggling with e-commerce. "We haven't found it to be particularly profitable,"
said Phil Harris, director of online business development/ newspapers at
Scripps. "We developed our own solution last year, but we're not as heavy into
it as we were then."

At least 12 newspaper Web sites are using an e-commerce platform that Scripps
out-sourced by hiring and investing in a local company in Cincinnati. They've
built more than 300 online stores, but Harris admitted management overlooked a
fundamental flaw as it went forward: Local users continue to prefer brick over
click shopping. In what Harris characterized as a refocused "back to the
basics," Scripps is pursuing classifieds as the core of its online business.

In another major development at Scripps, "We have made a push to put control of
the sites back under the newspaper division," noted Harris. "We feel that it's
more efficient that way." So both Harris and Bob Benz, director of online
operations/newspapers at Scripps, have been shifted back under the wing of the
newspaper division.

At SF Gate, where Deborah Ward is the online classified manager, reality is
finally catching up with strategy, as the San Francisco Chronicle's print
ad representatives are unabashedly approaching the online side, admitting that
advertisers are asking for an online presence. Until now, print reps have been
protective of their clients and their commission, essentially locking out the
online sales people. Those print reps have come full circle at SF Gate, Ward
observed. "I'm just in shock," said Ward, who is both amazed and encouraged by
apologies from print reps for earlier lack of cooperation.

But efforts to make money online are still not getting the returns many hope
for. "I have not made 1 cent on auctions," said Ward, who partnered with
FairMarket, based in Woburn, Mass., on SFGateAuction.com. The auctions vertical,
launched in November, may need some time to garner an audience, but FairMarket's
hosting fee is steep, at $10,000 a month, when all the newspaper site gets back
is a transaction fee from the merchant via FairMarket.

Ward has a response to new technology vendors banging on her door: "Advertise
for six months and if you're still around then, we'll talk," she said. "We can't
afford to experiment anymore. We're making a killing in recruitment, so we're
going to focus on what makes us money," said Ward. "Once we've made the money,
we'll start building up other sections."

The data game

Over at Classified Ventures (CV), Dan Donaghy, senior vice president of
affiliate relations and network development, said that newspapers have taken
news of CV's several downsizings and restructurings simply as corrections to the
irrational growth that occurred during the Internet boom.

But one recent visitor to CV's Chicago headquarters claims "the place looked
like a ghost town." The two classified verticals that have gained some success
are Apartments.com and cars.com, but they're more mature since they entered the
space early, explained Donaghy.

Concentrating on what works is a strategy that Kevin Mabley, vice president of
strategic and analytical services at CyberDialogue, recommends. CyberDialogue,
which provides technology tools to retain profitable customers, reports that 10%
of online users account for 80% of all online commerce dollars spent. Mabley
said that Web sites must determine where valued customers are going on sites
- and find ways to keep them.

Media buyers, who have become more sophisticated, according to Banc of America
analyst Chris Hansen, also are playing the analysis game, demanding more
information on their return on investment. They're looking for cross-platform
buys and finding that such packages are not readily available.

But the high-stakes game of data analysis is extremely costly. SF Gate's Ward
paid $200,000 for a customer survey that provided demographics that were valid
for only six months. She said she's not making enough off her online operations
to sustain that kind of market research.

For smaller sites that don't require user registration, the cost of getting
demographics to offer advertisers targeted marketing is too high. But Hansen
said that larger companies that do not spend on data analysis are the ones that
will be left behind. Meanwhile, a number of companies, such as Scripps, are
adding online registration to some newspaper Web sites.

Who's afraid of the big bad Web?

Despite the hard times, there are troops in the trenches of online newspapering
who seem to relish the challenge of the current market. A lot of them earned
their stripes working the print side for years. They've seen economic downturns
before, and they think they know what to do. Both MySanAntonio's Nieman and Ward
are going about it the old-fashioned way, going out to advertisers and asking
them: How can we best serve you?

Real Media CEO Dave Morgan sensed that conference attendees headed home with
mixed feelings. Budget cuts and slow increases in ad revenue have dampened
spirits, and there's a new twist. Pessimism, Morgan explained, "may be a
recognition that the corporate parents of online publishers are no longer as
afraid of the Internet as they were - and thus may not invest the resources
necessary to win in the online wars."





Karim Mostafa
(kmostafa@editorandpublisher.com) is associate editor for E&P Online.











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Copyright 2001, Editor & Publisher.