To E or Not to E

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IN THE BEGINNING, website owners convinced themselves that it was just fine to give products away for free. As long as they lured eyeballs with compelling content or sticky apps, the theory went, they'd rake in the dough with ad revenue. Now, five years later, when having a website is no longer a novelty and venture capital money is no longer flowing freely, the give-it-away business model has been called into question.

And while many industries' webmasters have long ago accepted that advertising won't keep their sites in the black, the publishing industry still relies on it. The problem is, only those publications with big money readers and legions of sales staffs are winning. The rest are either scaling down their operations or creating sites that expand on (and stray from) their publications' editorial missions. Cincinnati Magazine is one example of a publication that must decide how it will enter an arena that will likely produce very little monetary returns and present a product that is probably quite unlike its print version. Should the magazine ignore the Web and save the cash, or hop on and reach a new audience while better serving its loyal readers?

Cincinnati Weighs Its Options

Cincinnati Magazine is the quintessential city guide. Locals read it to stay in tune to seasonal events, changes in the housing market and, of course, the occasional city scandal. But a Cincinnatian looking for a southern Ohio jazz club to hit on Thursday night doesn't scour the publication's calendar of events on www.cincinnatimagazine.com. The website doesn't exist.

Cincinnati's publisher, Dianne Bohmer, says they've simply been too busy to invest time and money in a business plan that seems unlikely to generate much revenue. The monthly publication brings in just under $5 million each year and employs a tight-knit staff of 23 editorial, advertising, finance, clerical and support personnel. Bohmer knows that to establish a Web presence she'll have to add more staff and dig into the magazine's coffers. She also knows there's no pot of gold on the other side of the screen.

"Magazines I know that could once sell banner ads for $700 are now selling them for $140," says Bohmer. "So when you make a business plan based on $700 ads and it's brought down to $140, you have a lot of compensating to do.... It's hard to get excited about a business plan that isn't a moneymaker."

Industry observers are also losing faith in the ad revenue business model. "Rates are coming down for Web advertising, and people are responding less to Web ads," says Dan O'Brien, a senior analyst for Forrester Research in Cambridge, Mass. "Advertising has become a tough model to make work. Everybody wants to be the next Yahoo, but that may be yesterday's success."

Even those publishers that may have a shot at duplicating yesterday's success in terms of luring advertisers are finding another source of revenue drying up: venture capital. APBnews.com, a breaking news website that employed such luminaries as Pulitzer Prize-winning journalist Sydney Schanberg and O.J. Simpson prosecutor Marcia Clark, folded in June, days after receiving an award from Investigative Reporters and Editors, when its third-rouund backers pulled their money. The venture capitalists were aware that APBnews.com's banner ad campaign, which had client cash cows such as Microsoft, wouldn't pay the bills.

But what about city and regional publications like Cincinnati Magazine? They have niche audiences in specific geographies. They probably can't attract high-paying advertisers, but they may be able to exploit the local market for high-end restaurant and real estate advertising. "This whole area is in a constant state of turmoil," says Jim Dowden, executive director of the Los Angeles-based City and Regional Magazine Association (CRMA). Of its approximately 77 members, only around 50 CRMA magazines have a website, and many of them simply post subscription information and their tables of contents, directing users to buy the print publication to read the stories.

Some find unique ways to get around the banner ad trap. San Diego Magazine (www.sandiegomagazine.com) gave its site a name, San Diego OnLine, that is different from the publication's and offers noneditorial services like Web hosting. But observers say that even San Diego OnLine is operating in the red. Another regional publisher, Homes & Lifestyles Publishing, a division of Englewood, Colo.-based Wiesner Publishing, sometimes sells its 12 city and lifestyle magazines sites, including www.atlantahomemag.com, www.coloradofrontiers.com and www.stlouishomesmag.com, to advertisers as a package deal. But Wiesner's Web Products Manager Tobi Anderson admits they haven't made money and the Web is still a threat.

"We don't have a plan to make money; we're not an e-business," says Anderson. "It's important to be on the Web, and that's why we do it." In Boston, The Improper Bostonian, a monthly tabloid, informs visitors to its website (www.improper.com) that it does not have a Web presence "because we're still trying to figure out how magazines are going to make money in this new medium once the inevitable stock market correction occurs and ridiculously overpriced dotcom companies are forced to show a profit." That profit-revealing time may be now. Business consultant Seija Goldstein, owner of New York City-based Seija Goldstein Associates, conducted a financial standards survey for CRMA in 1999 and found that, with the exception of city magazines in spots that are major tourist destinations, the typical city/regional magazine does not make money online.

In Cincinnati, publisher Bohmer, against her better judgement, still feels that she should build a website to better serve Cincinnati Magazine's readers while attracting new ones. "We want the up-and-comer who's 33 to read it now, instead of at 38.... As we look at circulation, we want to skew to younger readers, and the Web generally gets younger readers." Bohmer, like Wiesner's Anderson, has reluctantly come to believe that being part of the media means being on the Internet.

And Bohmer knows that most of her magazine's readers use the Web. So why not keep their attention while they're looking at their computer monitors? Bohmer imagines a hypertext Cincinnati Magazine with a presentation somewhere in between The Improper Bostonian's confession of bewilderment and San Diego Magazine's attempt to do business that is far from the magazine's core competency. Bohmer would like to post all of her magazine's articles, as well as supplemental content that helps to package the print pieces. "We're known for our 'best of the city' issue," she says. "Instead of doing only the 12 best places to have dinner online, we could have an online guide that corresponds [to the print coverage]."

Kitty Morgan, Cincinnati's editor, is a bit more enthusiastic. Morgan thinks a website will increase subscriptions by posting subscription forms and spreading the magazine's brand. "I see [a website] as a marketing tool," says Morgan, "not as a new business that we'd launch." And this marketing tool, she believes, could serve its readers and attract advertisers by serving as an expert guide to Cincinnati.

Despite all the benefits Bohmer and Morgan recognize in a CincinnatiMagazine.com, they have not yet made the leap, largely because of Bohmer's doubts. She knows readers and advertisers like the print magazine the way it is. And so does she. "We know from feedback to our recent redesign of the magazine," says Bohmer, "in which we went from black and white to four color, from saddle-stitched to perfect binding, that people want the package. They want to pick it up, feel it, see great photography." Bohmer wonders if all of Cincinnati Magazine's readers will visit a hypertext version if the articles are its primary lure.

And of course, there are also the typical concerns about cannibalization. "If people have access to our calendar of events without buying the magazine, I'll have reservations," says Bohmer. "I worry that this could affect our subscriptions."

As a publisher, Bohmer wants to run a profitable shop, but now, with Morgan's encouragement, she is finally ready to swallow her pride and go online. She has come to believe that to thrive as a business that delivers information to a paying audience, her magazine must serve those readers through all the mediums they use.

"A fax machine is not profitable," she says, "but it's necessary to do business. Rent isn't profitable, but you have to pay it to do business." Maybe a CincinnatiMagazine.com won't be profitable, maybe it will cannibalize the print product and burden its staff, but Bohmer and Morgan believe the advantages outweigh the disadvantages.

Bohmer admits that she has been approached by Cincinnati-area sites for partnerships but just can't figure out what sort of Web business strategy works. The magazine's parent company, EMMIS Communications in Indianapolis, is working on a plan for another publication, Texas Monthly, a plan Bohmer intends to watch and copy if it's successful. "We're holding back until we see this plan," she says. "Until that's in place, our hands are tied."

Strategic Advice

Three new media pundits offer suggestions as to how Bohmer can address Cincinnati Magazine's online publishing dilemma.

DEFINE WHY YOU'RE GOING ONLINE

Jimmy Guterman, founder of The Vineyard Group, a media consulting group in Massachusetts that helps existing publications build websites, suggests that before Cincinnati Magazine shops around for Web servers and designers, Bohmer and Morgan should try to identify exactly what they want in return. "If they ask what they're specifically trying to get out of it, they can save a lot of money in terms of building it," says Guterman. "A site that is intended to increase subscriptions will look quite different from one built to lure advertisers."

Guterman says if Bohmer and Morgan decide they'll measure success by traffic, they may institute a content strategy to bring visitors back on a regular basis, such as posting content far more often than once a month. But if they hope to use the site primarily to drive up circulation, they shouldn't put the effort into creating more timely content. And if success for them means more revenue, they'll have a lot of sales pitches and partnering ahead.

CONSIDER THE CONSUMER

If Cincinnati Magazine hopes to reach a younger group of readers, says Guterman, it has to add new editorial features that speak to people in their 20s. City magazines, says Guterman, aren't known for speaking to young readers. "It won't work to put up the same content packaged differently," he says. "People aren't that stupid."

Fellow consultant Mark Logan agrees but thinks Cincinnati Magazine shouldn't rush out to hire new writers and freelancers to create the new content. Logan, a managing partner at Lookandfeel New Media, a Kansas City, Mo.-based interactive marketing and design company, says hiring a new staff would devour any increased profits. He suggests that Bohmer and Morgan should, as much as possible, steer their existing editorial and advertising staffs toward the Web.

LEARN FROM THOSE WHO HAVE GONE BEFORE

To keep costs low, Logan advises Cincinnati Magazine to look outside its walls for Web production tools. Because many online publishers have already undergone the painstaking tasks of connecting word processing and publishing tools as incompatible as ATEX and Microsoft Homepage, Logan suggests Cincinnati Magazine learn from them. "A lot of people who have already jumped into the game are renting out their systems," he says. "Why not piggyback on their successes?"

LOOK AT ALTERNATIVE REVENUE MODELS

Even though Logan believes that profitability is "a very tricky game for startup Web publishers," he doesn't think it's impossible, provided Cincinnati Magazine looks at its content in a new light. "Its events calendar has an obvious tie-in with e-commerce," he says. "It can establish a revenue stream by putting it online, partnering with ticketing agencies and arranging to get part of revenues from sales made through the events calendar."

Logan suggests that Bohmer and Morgan sit down and brainstorm about all possible revenue models. "There are many ways to make money in addition to ads," he says, "like sponsorships, e-commerce revenues and sponsored text, which is a huge moneymaker, though it gets dangerously close to editorial boundaries."

ENTICE ADVERTISERS

Cary Berman, an angel investor based in Chicago, thinks content sites can be lucrative investments. He predicts that content companies like News Corp., Marvel Enterprises and Disney will prevail over portals like Yahoo. But Berman warns that small sites are viable only if they attract niche audiences. "The problem with content is people don't pay for it," he says.

"You can't just put the feature articles online. You have to build a new model around it," says Berman. And a model that would entice Berman to fork over cash would have to attract a strong niche audience or revenue base. "They need to figure out how they can rearrange their assets to meet a need that isn't being met in Cincinnati. Maybe it's artsy listings, maybe it's real-time, up-to-date information. Whatever it is, it has to attract very targeted advertisers."

Attracting advertisers, ultimately, may require crossing the boundary of editorial and advertising that many journalists hesitate to cross. The Vineyard Group's Guterman suggests that doing so would alter the magazine's identity. But if it doesn't go that way it probably won't make money, says Guterman. "Going online merely to be part of the Web is not a sufficient reason to spend a lot of money."

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