by David M. Cole
About 18 months ago I was sitting in the conference room of a technologically savvy newspaper. Next to me was the vice president of operations. We had been discussing the paper's awesome accomplishments in pagination and the conversation drifted to new media and, specifically, audiotex.
Before I could begin to wax eloquently on the wonders of audiotex, the operations veep looked me in the eye and said, "We don't do audiotex because you can't make any money at audiotex."
He was so forceful-and I so deferential-that I didn't argue and we went on to other matters.
But that comment irritated me then and it irritates me now. Of course you can make money at audiotex. It just depends on how you set up the operation.
In recent months, I've been hearing from a lot of newspapers about their potential on-line activities-specifically on the World Wide Web. I keep hearing that same line:
"You can't make any money with on-line."
I think there are three basic models that affect the profitability of a newspaper's foray into any type of non-newsprint endeavors:
In new media, the business model's cash flow doesn't necessarily have two streams. You can have an audiotex system paid for entirely by users, or you can have an on-line system that's free to users, where advertisers pay the freight. Neither is completely right and neither is completely wrong. You pick the model that you think works the best and follow it through.
Certainly the case histories of newspaper on-line "experiments" (a coy way of saying there's no expectation the project will make money) have had a certain amount of red ink, but there are at least two on-line operations that have made money by properly establishing a good business model-HotWired and the Global Network Navigator. Neither of these World Wide Web products is based on a print product; neither dumps the text of a magazine or a newspaper on-line ("shovelware").
According to its founders, HotWired (a division of the company that publishes Wired magazine) has been consistently profitable. It provides advertisers with "sponsorship" positions that allow users access to the advertisers' Web areas. It charges $10,000 a month for a three-month position. There is, apparently, a waiting line for these positions.
The Global Network Navigator, a sponsored Web site that includes the Whole Internet Catalog and special information on the Internet, travel, sports and finance, was recently sold to America Online-for $11 million.
Either of these stories could have been about a newspaper company.
If you have your own on-line service, you have to support all those modems. If you align with America Online, for example, certain portions of the revenue you generate for AOL go back to AOL. If you go with the World Wide Web, there are costs associated there as well (buying the server, Internet access fees, etc.).
I've talked to a lot of newspaper executives who are doing some sort of on-line. All are reluctant to reveal whether they make money, but my best guess is that only one or two services do.
Look before you leap-don't leap without doing some research. But don't get so wrapped up in the research that you don't act.
The bad news is that your local retail sales staff might not be the people you want selling your new-media advertising.
Audiotex, fax-on-demand and on-line are more analogous to radio and TV than to print. You should probably hire your new-media sales staff from broadcast rather than your newspaper, as they are more attuned to the notion of "sponsorship" than a space salesperson.
You're selling your association with readers, not column inches. Put together a crew that understands that.
Can you make money at new media? Of course. Can you lose money at new media? Just ask most of the newspapers who are practicing the art.
Cole is a San Francisco-based newspaper consultant and is editor of The Cole Papers, a monthly news-letter on technology, journalism and publishing.
E-mail, dmc@colegroup.com; phone, (415) 673-2424; fax, (415) 673-2449. The opinions expressed are those of the author and not necessarily of TechNews or NAA.
TechNews Volume 1, Number 4: July/August 1995
©1997 Newspaper Association of America. All rights reserved.