How to Make Money on the Internet: Don't Sell Ads!

By: Steve Outing

Conventional wisdom holds that on the Internet, online publishers must sell advertising to support their online services. Most Web newspaper services offer free content supported by ads, perhaps with a charge for premium content.

But cruising the Web looking at newspaper sites, as I often do, you'll find only a handful of actual paid advertisements. At many sites of small newspapers, you'll see blank "Your Ad Could Be Here" place markers. The prospects for filling those small-newspaper Web ad slots are slim.

At the Southern Maine Coastal Beacon, a 25,000-circulation weekly, they may have found the answer for small publishers on how to make money on the Internet. The paper does not sell online ads.

Where the real money is

What the newspaper does, according to editor and co-publisher Geoffrey Baker, is build Web sites for Maine businesses. It gets virtually no revenue from selling online ads, but the Web-page construction business is booming. Baker expects that within one year, he will make more money from this part of the business than from the newspaper itself.

"Everyone thinks they can set up an online newspaper service and start selling ads," says Baker. "But they're missing the boat. ... We have made considerable money on the Internet -- it is rapidly approaching 50% of our print revenue, and may double in September."

The newspaper happened upon this business strategy while talking to its existing advertisers about Internet opportunities. What Baker found was that they weren't interested in buying online ad space. Rather, they wanted to know how they could have their own presence on the Web, just like the Beacon's. Baker quickly realized the opportunity and put together a Web site construction division of his newspaper company.

The Beacon's Web site has been operational since March 1995; its home page gets about 25,000 hits per month. The paper has been in the Web page design business for less than 2 months, but already has created 7 Web sites for local businesses including a restaurant, hotel, bank, and a monthly magazine. Several more business sites are in the works and Baker is bidding on a number of accounts. In 1-1/2 months, revenue from the Internet side of the business has been about $10,000.

The business Web sites are created in-house; 1 full-time employee does the HTML and graphics work, supported by Baker, who does some of it himself, and a stable of freelancers. The paper does not have its own server, but rather rents space with an outside Internet provider. The newspaper creates outside client pages which then are placed on a server of the advertiser's choosing.

Baker has contracted with an outside marketing company to sell Internet publishing services. He feels strongly that existing print ad salespeople should not be selling the Internet services, because the Web business has the potential for bringing in more money than selling print ads. The danger is that salespeople with a dual role could end up damaging the print product by chasing Internet dollars.

E-newspaper feeds Web site publishing business

What about the Web edition of the newspaper? It's not bringing in much money, but serves as a marketing tool for the Internet publishing services. The site includes a Maine directory, which includes links to the companies for which the Beacon has built pages.

The Beacon's strategy makes a great deal of sense -- especially for a small newspaper. Says Baker: "I see nearly zero revenue in ads today; I see a lot of revenue" from Web site development.

Yes, there is much competition in Web site creation, as numerous firms have sprouted to serve the growing market of businesses wanting online sites of their own. But as Baker points out, newspapers have a built-in advantage of having pre-existing relationships with a stable base of advertisers that the start-ups do not. It's a simple matter to talk to an existing client about new opportunities on the Internet.

Geoffrey Baker can be reached at editor@mbeacon.com; voice: 207-284-7714.

Steve

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If you have a newsworthy item about the newspaper new media business, please send me a note at outings@netcom.com.

This column is written by Steve Outing and underwritten by Editor & Publisher magazine. Tips, letters and feedback can be sent to Steve at outings@netcom.com