The Death of the Advertising Model? Nah!

By: Steve Outing

This is not a surprising development. Songline Studios' Web Review has shut down its advertiser-supported, free-access service on the World Wide Web, citing the inability of advertising revenues to support the venture. It will return in June, its publishers say, if at least 5,000 people agree to take out 6-month paid subscriptions for the service at a price of $19.95 (or $3.33 per month).

That an online-only Web publication that covers news about the Web itself can't survive on the advertising model spells doom for the dominant business model for Web publishing today, we hear the chorus of naysayers chant. How ironic!

Allow me to inject a voice of reason into the cacophony of voices predicting the death of the advertising model, however. I do not believe that all Web publishers will need to switch to a subscription model in order to survive. Advertising revenues adequate to lucratively support the best ventures on the Web will come, in time -- probably 1997, possibly not until 1998. If you want to do business in the potentially lucrative Internet marketplace, Mr./Ms. Publisher, you will have to be patient.

A participant in the online-news Internet list said it well in speculating on the failure of Web Review:

"Before anybody starts generalizing to ALL online publications, is anyone considering that Web Review's demise is the fault of Web Review? Though it may have been a quality product, what else distinguished it? Seems to me the area of 'field guides to the Internet' is pretty crowded. Unless Web Review could demonstrate to advertisers that its clientele was different/better than the throngs going to Yahoo, Lycos, Point, Magellan, Cool Site of the Day, Suck, HotWired, et al, it didn't have much of a shot at covering its expenses."

So, I believe the lesson is not to panic, not to take this high-profile "failure" of the advertising model too seriously.

The alternative

The alternative strategy, which Web Review now is embracing, is a risky one -- riskier, in my view, than relying primarily on advertising. Let's face it, there's so much out on the Web that it is going to be difficult for all but the strongest Web publishers to attract paying customers. General interest publications like newspapers operating Web sites don't stand much of a chance in attracting paying subscribers in sufficient numbers to survive. Only the likes of the Wall Street Journal and New York Times can probably succeed by charging a subscription fee. Obviously, we're all closely watching the Journal's subscription-fee experiment; if the Journal can't succeed with a subscription model (and its price for the Web service is modest), then nobody can, except narrow vertical-market publications, goes the argument.

Specifically in the newspaper industry, the advertising-supported, no-subscription fee model seems to be gaining momentum. As reported in this column, the Los Angeles Times and Milwaukee Journal-Sentinel learned the hard way on Prodigy that few online consumers will pay an extra fee on top of online access to view a newspaper's content online. They now operate Web services where all but truly premium services like archive access are free.

The Philadelphia experiment

Knight-Ridder Newspapers in the U.S. seemed for a while to be gravitating toward a corporate-wide strategy of charging for access to its papers' Web sites, led by the San Jose Mercury News' Mercury Center Web site, which costs $4.95 per month for access to full content of the site. (Much is still free, however.) This quarter-million-circulation Silicon Valley publication has fewer than 10,000 paying Web subscribers, but because of its free offerings attracts 20,000 to 25,000 visitors per day.

Now comes news from Knight-Ridder's Philadelphia newspapers, the Inquirer and Daily News, that their Philadelphia Online Web service is adopting a model closer to that of the Los Angeles Times. General manager Fred Mann confirmed this week that Philadelphia Online, after much discussion of the issue over recent months, has decided to "draw the curtain" for paid services such that most content will be free-access. Only archive searches and a new personal news clipping agent called "The Philadelphia Clipper" will cost something. Mann says that for a limited time, $6.95 a month will get you unlimited access to the newspaper's electronic archive, and a Clipper account. Customers who purchase Internet access through Philadelphia Online (in partnership with Internet access provider InfiNet, which is partly owned by Knight-Ridder) get these features free as well.

(Clipper, by the way, is not based on Knight-Ridder's Newshound personalized news feature but rather is an application developed in-house in Philadelphia. It searches for customizable news from within the Philadelphia Online site and the newspapers' content only and emails it to subscribers or allows them to view the resulting clipped news on a personalized Web page. Newshound, developed at the San Jose Mercury News, apparently has not yet been readied for use by other Knight-Ridder papers.)

The thinking, says Mann, is that the service needs to build a larger audience such that it will be attractive to advertisers. The site currently gets just under 400,000 hits a day -- translated to about 20,000 visitors. Mann fears that if he were to place the curtain too far forward and charge for some content, it would adversely affect usage just as he's trying to build it.

Expect to see continued experimentation on Philadelphia Online. Archive access, initially allowing unlimited searches for a flat fee, is likely to be changed down the road, Mann says. He'll probably experiment with per-article downloads, or differentiated pricing where a set fee permits a certain number of searches, with prices for different usage levels.

Mann is ready to change the model quickly if necessary. Who knows, he says, "maybe in a few months we'll do an about-face."

The Web backlash

My advice is for newspaper publishers to stay the course with the advertising model. The celebrated failure of Web Review already has generated numerous articles in various media questioning the viability of advertiser-supported Web publications. This is absolutely to be expected, and there will be other failures -- reported on in gory detail by a skeptical press corps -- that may make publishers sinking money into Internet publishing nervous.

The lesson of this bit of news is that only the fittest will survive. If you expect your Web venture to prosper, it better be great. The Web environment is now so competitive that a mediocre service will fail.

And as I've said before in this column (and in just about every conference presentation I give), you can't live on advertising alone. Particularly now, multiple revenue streams are necessary for your financial health. For some papers that means being an Internet access provider; for some, it means designing and constructing Web sites for local businesses; it means figuring out a classified ads online strategy; etc.

Above all, don't panic and stay the course. Online publishing is too important -- and ignoring it poses too great a threat to the core newspaper business -- to back out now.

Movin' On

Chris Hendricks is the new president and publisher of NandO, McClatchy Newspapers' new media subsidiary in Raleigh, North Carolina. Hendricks replaces Frank Daniels III, who founded NandO and recently left the company to pursue other interests, including heading an Internet publishing company called Koz Inc. Hendricks previously was manager of technology for McClatchy.

Bob Gale has been named new media editor at The Herald in Everett, Washington.

Paul Harral, a long-time fixture at StarText, the BBS of the Fort Worth Star-Telegram in Texas, has vacated his part-time position as news editor of the online service. (He held online as well as print duties.) He is now senior metropolitan editor of the Fort Worth edition of the Star-Telegram. StarText, by the way, is now a Web service, StarText.net.

Reaction to new media salaries survey

I received this comment from a reader following my Monday column on salaries paid to new media employees by newspapers:

"The salary figures in your article seem really low! For a large metro newspaper (categories 1 to 3) trying to retain senior people -- for example, a senior technology/systems person for a new media group -- these guys are asking me what developers and field sales engineers earn at Oracle, SGI, Lotus, etc. The comparison needs to be at that level. Good technical people are being snatched away by software/tech companies. And not only tech people; what do you think Microsoft pays the folks they've taken (e.g., Mike Gordon)? You'll do your publishers a disservice if they think they can keep top people for $40,000 to $60,000."

Another reader made a good point about salaries being modest for new media personnel at newspapers:

"One thing I think you failed to recognize in your assessment of the survey, and this plays a role in my case, is that those who work in the newsroom have to fit into the personnel profiles of the personnel department. The situation here is they can't have an editor who supervises a staff of three making more than an assistant managing editor with 40 people under his or her command."

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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