MSNBC.com WEATHERS BAD ECONOMY

By: Karim Mostafa Site Continues To Add Newspaper Partners


While MSNBC.com is arguably the No. 1 news site, the joint venture between Microsoft and NBC still isn't making money. Yet as the site celebrates its fifth birthday, it has avoided the waves of layoffs that have swept through so many dot-coms.

Original projections had MSNBC.com turning profitable by the end of this year, but that target will be missed. The company won't discuss financial specifics, but MSNBC.com President and CEO John Nicol said he has a new profitability target.

"The date I have on my calendar is listed as ASAP," said Nicol, who added that the date is dependent on an advertising turn-around. The majority of the site's revenue comes from traditional advertising, according to Nicol. Other sources of revenue include content syndication, international agreements for content sharing, and the licensing of publishing tools. For example, the Turkish television station NTV is using MSNBC tools to publish its Web site.

The site has a separate budget from MSNBC cable, but there are some shared expenses. Among the Microsoft Network's other properties, only MSN Shopping plays a significant role. Other sites, such as Carpoint and Expedia are not directly connected with MSNBC.com.

Microsoft announced this week that it will sell its 70% stake in Expedia. Microsoft spokeswoman Erin Brewer said Expedia is outside the company's main business areas. "Content development and travel isn't one of our core priorities," she told the Associated Press. The "content development" remark might lead some to question Microsoft's commitment to a "news content developer," but executives say the software giant is committed to MSNBC.

Same old story: where have the ads gone?

As one would expect, things have slowed down on the advertising front. With several hundred people out there selling advertising, Nicol said MSNBC.com hasn't changed its story much to try and get more advertisers. The pitch to advertisers is that MSNBC.com is the No. 1 online news site that reaches more readers daily than the largest newspaper, according to statistics from Media Metrix and other Web measurers.

A small team sells packages that include advertising on both NBC stations and MSNBC.com, with revenue sharing between the partners.

Meanwhile, the site remains rather unique for it online ad formats. MSNBC.com features advertising space, listing both sponsors and tiles, underneath the first paragraph of every story. Although some industry observers have criticized the placement, Nicol said it's popular with advertisers. Nicol also said that MSNBC.com will be working to add advertising to the rich media and streaming media offerings on the site.

While it has avoided massive layoffs, MSNBC.com has done a lot of cost cutting. "We've really had to retrench a bit," said Merrill Brown, editor in chief of MSNBC.com. "The national ad recession has definitely hurt [us]." Plans for a physical expansion were sidelined, while plans for developing new distribution platforms, especially wireless, were put on a slower growth track. Also, international relationships have not grown as quickly as they would have liked, Brown said.

Yet "our mission is intact," Brown said. That mission is to amalgamate the largest number of eyeballs, which Brown believes will continue to happen as long as MSNBC.com continues to effectively deliver the really big stories. Brown says that telling a good story -- through text and multimedia components -- is what makes MSNBC.com strong. Observers agree, praising the site for its innovative journalism and interactive graphics.

Brown is now concentrating on sports and business. Good business coverage, in particular, is imperative in pursuing at-work users, a group that continues to grow. A partnership with NBC Sports puts the broadcast network's sports coverage, including the upcoming Winter Olympics, on MSNBC's Web site.

Newspaper affiliates: Are they satisfied?

On the local front, MSNBC.com continues to expand its affiliate network -- with the cooperation of some newspapers and the consternation of others. MSBNC.com produces 70% of its own content (including the content that comes from NBC). The other 30% comes from partnerships with the likes of Washingtonpost.Newsweek Interactive and The Wall Street Journal. Affiliates are up to an all-time high with 94 television stations and 40 newspapers providing content.

In hopes of driving traffic to their Web sites, these newspapers provide a couple of stories per day to MSNBC.com, which links back to the online newspaper. The most recent additions are the The Columbian of Vancouver, Wash.; The Salt Lake Tribune, Arizona Daily Star of Tucson; Daily Herald of Arlington Heights, Ill.; The Orange County Register of Santa Ana, Calif.; and Chattanooga (Tenn.) Times Free Press.

Knoxnews.com, the Web site for The Knoxville (Tenn.) News-Sentinel, has been partnered with MSNBC since October. Jack Lail, online director at Knoxnews.com, said, "We think it works pretty well and we're sending more than our minimum [in daily content]."

The partnership hasn't yielded profits. "I couldn't get to McDonald's and back on what we're getting at this point," Lail said. He's sticking with the partnership for traffic and branding purposes, although he admits there was not a huge increase in traffic when the partnership went into effect.

The Arizona Republic in Phoenix, which was one of the first three papers to partner with MSNBC, ended its affiliate relationship with MSNBC.com this week. Mike Coleman, audience manager at the newspaper's azcentral.com, said his site has a new philosophy: "We're not willing to allow our content to be put in any other site's templates unless we're getting cold, hard cash."

Uli Haller, director of affiliate programs, suspects that azcentral.com is ending its relationship because it changed owners since the original deal was struck. Gannett Co. Inc. now owns azcentral.com, and its online flagship, USAToday.com, butts heads with MSNBC.com on the national front.

Coleman, however, tells a different story. After getting NFO Ad:Impact of Greenwich, Conn., to do some local research, Coleman found that MSNBC.com was its major competitor in the local market. Coleman said the newspaper began to ask itself, "Why are we sleeping with the enemy?"

"Frankly, I don't understand why newspapers are giving away their content to the likes of Yahoo! and MSNBC.com," Coleman said. "Arizona Republic stories viewed on MSNBC resulted in clicks back to the newspaper site less than 15% of the time."

Mark Briggs, new media editor at The Herald in Everett, Wash., said his site is also reconsidering its partnership with MSNBC. He's a little disappointed with the numbers, which show that less than 10% of the site's traffic is coming from MSNBC.

Haller said he's well aware of the ongoing debate amongst online newspapers and that's why some newspapers don't send their best stuff. "We only offer the tip of the iceberg on local information," Haller said. He argues that if people want local information they'll go to the newspaper sites first; however, some of the national audience, that might not otherwise look for local information, will be driven to these local sites.

Page views on the affiliate network represent less than 10% of MSNBC.com's overall page views, Haller said. But the company reports that 3.4 million unique users access the affiliate network monthly.

With all this traffic, MSNBC.com executives say they are sticking with the advertising model. As for the latest experiments in charging for news Web site access, the site isn't interested -- at least for now.



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



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