he first era of newspaper experiments on the
Internet, fueled in part by the fear that the Web would devour
profits, is over. A new era of newspaper experiments on the
Internet, fueled in part by the fear that the Web will not
generate profits, has begun.
Where will it lead?
That is what is being asked after several months of bad news
in the industry. Three of the nation's major newspaper companies
- the Tribune Company, Knight Ridder and The New York Times
Company - have handed out pink slips to new-media employees. Net
advertising revenue from the Internet in the third quarter of
2000 was up year over year, but down from the previous quarter -
a highly unusual sort of slippage. Revenue is expected to dip
further in fourth-quarter reports and early this year, as ailing
dot-com businesses worry more about survival than branding.
The mantra now is: reach profitability soon - by the end of
2002, if not before.
The Web sites' parent companies also suffer from anemic
advertising revenue and have less leeway to underwrite losses if
they are to meet the profit targets they have set for themselves
and for Wall Street.
The most important revenue stream, newspapers' Internet
executives agree, will be employment advertising - which, for
the moment at least, is no longer considered the most endangered
revenue source in the newspaper business.
There are few other common threads in the plans of new-media
executives around the newspaper business. Once inclined to
listen and invest as a group - in ``fads,'' some executives said
- they are now concentrating on the special characteristics of
their own properties and markets. The idea is to weave national
and local revenue opportunities or cost savings into one-of-a-
kind business models.
In Minneapolis, The Star Tribune, owned by McClatchy, is
building Web sites for local businesses. The Washington Post has
become partners with online retailers in a virtual mini-mall in
a corner of the washingtonpost.com Web site. The Emporia Gazette
in Kansas is selling a book of local history.
The Augusta Chronicle and The Topeka Capital-Journal, both
owned by Morris Communications, offer Internet access. By
contrast, in St. Louis, Pulitzer Inc.'s postnet.com L.L.C. on
Jan. 12 sold its Internet service, with 14,000 subscribers, to
Earthlink.
Paid subscriptions - anathema to most newspaper Web sites,
except The Wall Street Journal's, which has sold 500,000 of them
- are back under discussion at companies like E.W. Scripps. One
thought is to offer nonsubscribers wide access to news, but give
paying subscribers a look at the classified ads a day early.
Other companies, like McClatchy, are talking about selling to
other businesses the software they have created to move news and
ads from computers to cellular phones to palmtops.
Eric K. Meyer, a managing partner of NewsLink Associates,
which conducts research into online and some other journalism,
called this moment an important juncture because newspaper sites
and their parent companies still need to experiment, but have
less margin for error.
``This has been an industry that has been based on me-tooism
and fads,'' he said. ``Whenever someone did something, everyone
else had to do it. When anyone spent money, even too much money,
everyone else had to do it.''
He added that newspaper companies originally ``were afraid to
get left out of something that could be a billion-dollar
business for them. Now they're afraid to get left in something
that could be an albatross.''
This new era of experiments may well be less lemming-like,
with companies buffeted less by the marketing panaceas urged on
them by theorists who haunt the perpetual industry conferences:
Join an online service. Ditch the online service. Go hyperlocal.
Go regional. Create content and make your site unique. Use Java
and make your site throb. Broadband is coming. Forget broadband.
Banner ads rule! Banner ads ... well, let's just say that banner
ads no longer rule.
``Over time, everyone has been humbled in a lot of things
they tried,'' said Dan Finnigan, the president of
KnightRidder.com. The old stick-to- your-knitting approach ``is
now beginning to make sense,'' he said.
``Five years ago, so many consumer-targeted Web sites
imagined being almost everything,'' he continued. ``Everyone
imagined they could sell cars, have auctions, be an e- commerce
player and change the way you invited people to parties - all at
once.''
Christopher Feola, chief of technology at Belo Interactive,
the online division of the Belo Corporation of Dallas, said a
period of overreaching attends the infancy of every new
technology. ``Then you have business plans that bear no
relationship to reality,'' he said. ``The people who thought
that the telephone was going to enable people to listen to
symphonies look silly in retrospect.''
In any online Darwinian competition, Mr. Feola said,
newspapers have many natural advantages. ``The Internet is about
content, and nothing anywhere produces as much content as a
newspaper,'' he said. An aborted attempt by Microsoft to create
its own newsroom, he said, taught the company that ``managing a
bunch of journalists is very expensive and not very easy.''
One major advertiser supports this view, saying that
newspaper sites offer a better sense of who the audience is than
Web portals with great amounts of traffic.
Susan Shiekofer of Ogilvy One, a unit of the advertising
giant Ogilvy & Mather Worldwide, which itself is a unit of
the WPP Group, represents major companies like I.B.M.,
Ameritrade and Kimberly-Clark.
``What we like to do, especially for direct marketing
clients,'' she said, ``is to track the quality of audience -
what leads are generated, who turns into sales. Newspaper sites
give us more qualified leads or sales than other sources.''
Compared with all- sports sites and most search engines, ``the
news does wind up pulling ahead in terms of response rates and
quality of audience,'' she said.
With a client base of national advertisers, she focuses on
national sites or national networks, like KnightRidder.com's
Real Cities network, with newspaper sites in markets from
Philadelphia, San Jose, Miami, New York and Seattle to Wichita
and Fort Worth. There is also Tribune Interactive, with
newspaper sites in markets like New York, Chicago, Los Angeles,
Baltimore and Greenwich, Conn.
But among the advertisers who spent a combined $6 billion on
the Internet through the first three quarters of 2000, according
to the Internet Advertising Bureau, are some who only want to
buy one local market - their own. Most newspaper sites make
those advertisers their top priority. Washingtonpost.com has a
broader reach in its home market than any other newspaper site;
accessatlanta.com, the site of The Atlanta Journal and
Constitution, owned by Cox Communications, is a close second.
Newspapers are continuing to experiment with online products.
They are trying to collect audiences for advertisers through
e-mail and wireless devices like cell phones. The New York
Times's Web site now sends out e-mail headline packages or news
alerts to more than 1.2 million subscribers, according to Martin
A. Nisenholtz, chief executive of Times Company Digital, the
company's new-media unit. It is also generating revenue by
selling Times content to online distributors like Contentville,
as well as to educational users.
``The reality on the ground today is that it's a very mixed
model,'' Mr. Nisenholtz said. ``I still think that when it is
all said and done, the advertising model is the most scalable
with the best margins.''
For almost all sites, job advertising is crucial. Though
national employment sites like Monster.com and Hotjobs.com say
they have more listings than any individual or formal
combination of newspaper sites, their strength is not local. Mr.
Feola cited an American Press Institute study showing that more
than 90 percent of jobs were filled by people who lived within
driving distance of the employer.
But the national classified marketplace is not one that
newspapers are willing to cede, even if they have found it hard
to dominate. And it is not just jobs. There is money to be made
selling cars; indeed, Microsoft owns carpoint.com. There is
money to be made selling and renting homes, and realtor.com,
produced by the National Association of Realtors, is a stiff
competitor.
Such competitors inspire respect, but no longer the pure fear
that caused newspapers to react with one defensive scheme after
another. Steve Yelvington, manager of Web site development at
Morris Communications, said that when Microsoft started to
create news and listings online, ``We all looked up and said:
`This is not a tech company, it is a media company competitor.
It is fabulously wealthy.' That scared the daylights out of
us.''
For years thereafter, as new online competitors appeared on
classified, auction e-commerce sites, newspaper sites reacted
defensively, Mr. Yelvington said.
``Over all, the newspaper industry's involvement with the
Internet has been one where it had a lot to lose,'' he said,
``and it's been trying not to lose it, as opposed to starting
from scratch and having a lot to win.''
The new, close-to-home initiatives, he said, are a sign that
newspapers are no longer reacting to the dragons of the
new-media world. Instead, they are learning to cope with the
central premise of the old-media world: make more money than you
spend.
