IP: internet SELLING NEWS not profitable - from I A & Online

[David Farber <farber () central cis upenn edu>]

In, Around and Online- Issue 2.37 - Week Ending 9/22/95


Copyright (C) 1995 Robert Seidman (robert () clark net).  All rights
reserved.   May be reproduced in any medium for non-commercial
purposes.


      .......tons deleted..........................


*WHY THERE'S NO REAL MONEY IN IT TODAY*


Don't get me wrong, there is money in the way of advertising revenues
that the bigger services are generating.  But, HotWired's
<http://www.hotwired.com> Andrew Anker, when asked whether the advertisers on
his service were happy, confessed that AT&T, MCI, and SPRINT represent about
50% of his advertising base, and because those companies have a big stake in
this industry, they're pretty happy about their relationships with
HotWired.


But the truth is, as much as the Web has grown, there's still not enough
people to generate megabucks for everyone.


Paul Sagan, a senior vice president at Time Inc. New Media said that
Pathfinder ultimately plans to try a subscription based service.  While I
have gotten on Pathfinder executives in the past for talking about "hits"
(and to be fair, Sagan didn't talk about hits at all), one thing is clear
-- Pathfinder is one of the most popular sites on the web, perhaps even
the most popular.  In spite of "hit counts", I'd estimate that Pathfinder
gets less than 250,000 unique individual visitors per week.


Forget about the fact that if they go the subscription route, they'd
probably get less than 1 out of 10 of the 250,000 to pay.  Truth is, if
they got all 250,000 to pay, it's still not a cash cow.   And if
Time-Warner-Turner can't make a lot of money at it, who can?




*ONE OF THEM AGREES*


DON BRAZEAL, Editor and Publisher for the Washington Post's Digital Ink
service on Interchange second guessed the ability to make money on an
online service.  On a track titled "Negotiating the Thicket: Online Deals
and Options" at the Online Developers conference, Brazeal wondered out
loud if there  "is such a thing as a good online deal."


He referred to the leaders of the big 5 companies AOL, CompuServe,
Prodigy, MSN and Interchange (where Digital Ink lives) as "5 wolves in
sheep's clothing".


Brazeal said, "The cost of producing (online content) is much higher than
the potential revenue streams."


Brazeal indicated that his revenue model with Digital Ink on Interchange
is based on advertising.  He's not sure if that can work on Interchange.
No kidding!  Why did he ever think it WOULD work?  You need EYES to
advertise.  You want to make people pay $9.95 a month for 5 hours, plus
$2.95/hr. for just Digital Ink and the basic Interchange service?  And
you want them to pay for ads too?   Well, that works in the newspaper
world, but so far, it isn't working online.  Plus, in the Interchange
model, Digital Ink has the responsibility for marketing their service.
For Brazeal though, the bigger issue seemed to be with the online service
model there is a question of who "owns" the advertiser, the service
provider or the platform provider.  In the case of Interchange, it
appears to belong to the service provider.  On AOL, apparently AOL (the
platform owner) wants to own the advertiser as well.


Brazeal then spoke of how companies like AOL pump out start-up disks ,
but that the magazines don't share in the marketing success.  WHAT?
Sheesh, it sounds like Brazeal is whining because he picked the wrong
"wolf".  Unfortunately for him, that "wolf" just announced that they were
launching their own local based content services.


Now AOL is a publisher too.  They're making they're own content with the
new local services and with offerings created by the AOL Greeenhouse.
Their first local service?  Digital City.  You guessed it, aimed at the
Washington, DC market.  Brazeal probably views it as a direct competitor
to his Digital Ink service.  He's right.  But unfortunately for Brazeal,
AOL already has 100K-150K customers in the Washington metropolitan
area.   With the way things are going with Interchange, it could take
Brazeal years to have access to that many eyes.  And even that isn't
going to set the advertising world on fire.


I take issue with the notion that the magazines should share in the
marketing success.  AOL, CompuServe and Prodigy do pay handsomely to get
shrink-wrapped in those magazines.   The more they succeed, the more
they'll advertise, so, in that fashion, the magazines do share in the
success.
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