Looking for Online Dollars

News providers are finding ways to make their Web sites profitable

The Internet boom brought with it a set of buzzwords for the online news industry – “page views,” “eyeballs,” “site visitors.” Back in those heady days of the year 2000, the goal was to get as many visitors as possible. Those publishers who thought the idea of giving away content was crazy put up “brochure-ware” sites, or stayed out of the game altogether.

After the dot-com crash, the new buzzword is profits. Online news publishers cut back staffs and scrounged for new revenue streams.

Today, online news sites are learning to combine the best of both worlds – leveraging multiple revenue sources to generate profits and offering the public a variety of online content to bring in visitors.


PROFITABILITY

According to the Newspaper Association of America, slightly more than half of 171 daily newspapers that responded to a 2001 survey are showing a slight profit on their Web sites. Classifieds were cited as the largest revenue source. They were followed by banner ads, sponsorships, and Web site hosting and development fees.

“Don’t believe any of the nonsense that you hear that nobody’s making money online,” said Peter Zollman, founding principal at Advanced Interactive Media Group, L.L.C. “It just isn’t true. Lots of traditional media companies are operating profitable Web businesses, ranging from tiny weeklies all the way up to The New York Times and Gannett. Some other companies, like Tribune, have made very sound decisions to invest significantly in developing their interactive media businesses, so they’re not unhappy with the fact that they’re not profitable yet.”

Some newspapers are showing a profit by committing very few resources to the online operation, he admits.

“But that’s not a very smart way to generate a profit,” he said. “You have to invest in a business for the future and develop a new audience and new advertisers.”

At the Washington Post, for example, a slower road to profitability is just fine, according to Christopher Schroeder, CEO of Washingtonpost.Newsweek Interactive.

“We’re still investing,” he said. “We’re taking a very good long-term view to this industry. Some organizations are saying to themselves, you have to be profitable this year, but that’s not what the board of directors is saying to me.”

Instead, Schroeder is focusing on developing his audience and advertisers.

“We’re reaching an audience at a time that no one else is reaching them,” he said, explaining that traffic spikes during the workday when people have access to high-speed connections and can’t watch television or read newspapers. “This is the one medium where people can get you all day.”

Schroeder said that he expects real revenue growth to come from the advertising side, and that department is encouraged to come up with new, creative ad products.

“The one rule I’ve given to my creative folks is: Do not break someone’s train of thought,” he said. “But they can surround the readers’ experience with visually interesting things, particularly if they’re in context with the article.”

It can be hard to get an accurate accounting of exactly how many newspaper Web sites are profitable because each organization does its accounting differently.

For example, said Dan Claussen, director of the graduate journalism program at Pittsburgh’s Point Park College, many organizations consider a Web site profitable if it simply covers its own expenses – without asking it to chip in for the costs of the news content it receives from the print editorial side.

“They’re only offsetting variable costs against variable revenues,” said Claussen. “But they should also be allocating their fixed costs, as well.”

But the converse could be true as well; in some cases, the online operation leads to significant savings for the company as a whole.

“Lots of newspapers have cut way back on the space they devote to stock lists because they’re running and making them available online,” said Zollman. “So if the parent company saves $2 million a year in newsprint costs – and that’s not an unrealistic number – because it’s making this service online, how does the online department get credit for that? Probably not at all.”


REVENUES

One thing that profitable newspapers seem to have in common is diversification.

“The profitable interactive news operations are generating revenue through multiple revenue streams,” said Zollman. “They’re generating revenue through classifieds, through sponsorships, through banner and button advertising of simple stuff like baby sketch, through small but growing subscription revenues, through specialized and niche sites, through online sales of archives and photos, through sales of print subscriptions, and other revenue streams.”

At the Topeka Capital-Journal, as at most newspapers, classifieds are the top revenue generators. Classifieds, together with ads bought in combination with the print edition, bring in 42 percent of the revenues. 

The second-largest revenue generator, at 39 percent, is Web development.

This part of the business was born as a service to advertisers in the mid-90s, said Rob Curley, who works as new media director at the Capital-Journal. But the newspaper soon branched out from building sites for small advertisers to the area’s largest businesses.

“Early on, we tried to position ourselves as the top Web development company in the Midwest,” said Curley. “If a mom-and-pop wants us to build their Web site, we will, but it’s much more profitable to go after people who can afford forty-, fifty-thousand-dollar Web sites. So we target banks, and we’ve had some success in the educational space.”

One of the things that the Capital-Journal learned is that if a site is branded under a different name, it can be resold. For example, its HawkZone sports site is syndicated to television and radio stations throughout the West, Curley said. “That’s something we wouldn’t want to do with our core brand.”

Another of its branded Web sites, TopekaHomefinder, won an award in its category last year from the NAA for best classified use of new media.

“We wanted to build a real-estate site that was on steroids,” he said. “And, to be honest, with our Web development being so important to us, the people who want to build huge Web sites want to know that you have experience building huge Web sites. They want to know we understand how to build a database, they want to know we’re great with video and good with flash. So these separate brands we’re building helps.”

Diversification also is the name of the game at boston.com, the Boston Globe’s sister site.

“Broadening our revenue base is one of our chief goals, if not our chief goal, for this year,” said Eric Bauer, boston.com’s director of content. “We are aiming for less of a reliance on banner advertising and looking at transactional revenue and premium content.”

Boston.com already has some transaction-based partnerships, such as deal with Amazon.com to sell books related to the Oscars. The site also makes a fair amount of money from its archives, Bauer said, and is looking to expand on that.

“The New York Times has something they call ‘archive packs,’ ” he said. “They’ve got one where they bundle together Tom Freedman’s columns and charge $5. We’re looking at doing that.”

Another big revenue-related push, he said, is in classified verticals – cars, careers, and real estate. The careers site already has been spun off, as bostonworks.com. “We think those are going to be a really important way to make some money.”

The disheartening spate of layoffs last year wasn’t due to the fact that online news sites were all necessarily losing money, Zollman said.

“They might have been too big to be economically sustainable,” he said. “A lot of companies grew their interactive media operations very fast in order to participate in the land grab and were more concerned with market share and getting big quickly than they were concerned with profitability.”

Today, with the economy rebounding slightly, online sites may not exactly be beefing up but the worst seems to be over.

“I’m seeing some selective hiring by a few companies,” said Zollman, “and I’m seeing a lot of vendor activity again, which tends to be a precursor towards growth and renewed interest.”


GIVING READERS WHAT THEY WANT

Readers want everything, and they want it for free.

As a result, some newspapers have been hesitant about putting all their content online – why should readers buy the paper if everything is right there for the asking?

“We believe that there’s value in our content and we consciously chose not to give it away,” said Christine Lavelle, director of Internet services at Mesa, Arizona-based East Valley Tribune.

Most other papers – including almost all of the largest ones – have decided to go the other direction, however.

“There are only a couple of hundred people who read the newspaper front to back online,” said Tom Pellegrene Jr., manager of news technologies at the Fort Wayne (Indiana) Journal Gazette. “And a lot of them work in our newsroom. So we don’t believe there is a significant degradation of single copy sales as a result of having the newspaper commitment online. Some papers have chosen to put up only a few stories, or no stories at all. We have taken the position that we are going to put up everything. Except for those things that we are prohibited from putting up, we are going to put up pretty darn everything.”

Meanwhile, Lavelle’s East Valley Tribune is looking for other ways to give the readers what they want.

For example, in February the East Valley Tribune broke ground in becoming the first paper in the world to offer an interactive, browser-based exact duplicate of its print paper.

Several other newspapers have since followed suit, or are soon planning to do so, including East Valley Tribune’s four Florida-based sister papers.

The reader response has been extremely positive, said Lavelle.

It helps readers transition from the print publication to the online version, she said. In addition, it preserves the visual cues about the relative importance of articles that newspapers have spent a hundred years developing – and readers have grown used to.

“I probably have hundreds of e-mails of positive feedback from readers,” she said. Although she would not release registration numbers, she said that the response so far has shown the project a success. “It has far exceeded my expectations,” she said.


BREAKING NEWS

The number one thing that readers want – besides free content – is breaking news, according to many online news site managers.

Whenever a major news event occurs, traffic spikes to online news sites – whether the event is Sept. 11 or a local basketball tournament.

That has had led many online news operations to beef up the timeliness of their news stories.

“We’re treating our off-cycle as an extra edition of the newspaper,” said Pellegrene of the Journal Gazette. “Our newspaper’s print cycle is arranged in such a way that we can deliver the print paper to people’s houses by 6 a.m., and that usually requires that the news in it be no later than midnight or 1 a.m., sometimes earlier than that. For example, last night, the Indiana University basketball game started very late – it was supposed to start at 10:10, and the previous game went to overtime, so it didn’t get started until way closer to 11 p.m. There were a number of our readers who were not able to get the final (score), and normally we would find that intolerable, but this time we put a skybox on the front page. If you want to know how it turned out, go to our Web site.”

The Web site also is updated throughout the day, he added.

“If there’s a major fire or event, or if we find out something in the course of the day and we don’t want to wait until next morning to tell people about it, we will put six inches about it on the Web site and a cross plug to the print edition,” he said. “We’re using the newsprint editions to promote the Web site and using the Web site to promote the print edition.”

Sometimes it’s a bit of a culture shock for a newspaper when reporters suddenly are asked to write to multiple deadlines.

“That’s a key area of discussion right now between the news area and the Web site,” said Bernard Gwertzman, editor of The New York Times on the Web. “Most reporters and editors who work for morning newspapers are used to starting work in the morning and making phone calls. Even if a big story breaks, they continue making phone calls, filing a summary at around 3 p.m. and their story any time around 6 or 7 p.m. For us, if a story breaks in the morning, 7 p.m. is much too late. What we hope for is when reporters see a breaking story, they sit down and get the gist of it to us.”

If anything, the Internet has replaced afternoon papers, said Gwertzman, who began his career at the Washington Star, an afternoon daily.

“You had to update stories very quickly and afternoon papers would have several editions,” he said. The goal for an editor was to have front pages significantly different from those of the morning paper – encouraging people to buy a second newspaper that day.

“We’re really asking people to send us copy before the story is completely put together, as a wire service does,” he added, “and then you go back to the story and update it. That’s not something that comes naturally to a morning newspaper reporter.”


MULTIMEDIA

Some newspapers, particularly the largest ones such as The New York Times and the Chicago Tribune, have begun incorporating multimedia content – audio, video, slide shows, and searchable databases – as a regular part of their day-to-day news coverage.

Most newspapers, however, don’t have those kinds of resources. Many have begun to use multimedia, however, for special events and news stories.

The Journal Gazette, for example, has one full-time Webmaster who makes sure that the newspaper is posted from the previous day, and one other staffer comes in three times a week.

“We have done some video, but we do not make video and sound a routine part of the experience,” said Pellegrene. “That is still very labor-intensive. Most of our commitment in this area is making sure that the newspaper is posted from the previous day – and working on projects that supplement weekend packages and important breaking stories.”

At the Spokesman-Review in Spokane, Wash., the state basketball tournament was a major local event – and the newspaper went all-out in producing a comprehensive online package, with video, audio, a “Weblog,” brackets, and other material unique to the online version of the paper.

“Usually, you go to the Web from the newspaper perspective,” said Managing Editor Scott Sines, who supervises the Web site. “You look at what you have and think about how to present it on the Internet. This was our first effort where we said, ‘We work for the Web. Now, how can we take what we’ve done and translate it to the paper?’ “

Although the paper only has two full-time employees dedicated to the Web site, others can be pulled away from their regular duties and assigned to producing material for the Internet, he said. That’s what happened during the tournament.

“In addition to the regular coverage, we had four other people who were over there with the task of creating this total experience of what the tournament was like,” he said. “These were the people who picked up the audio, and did the blog (online Web log or diary).”

One unexpected benefit of covering the basketball tournament so extensively was that the e-mail tool developed for keeping in touch with the coaches of all the different teams was reused by the advertising department as a sales tool, said Sines.

“Now the advertising manager can send information about ad rates or specials to all of his interested clients with just two key strokes,” he said.

Many newspapers dedicate additional online resources to specific parts of their Web site, such as sports and weather.

“One unusual thing we’ve done is to enhance our weather page with daily area-customized weather forecasts and analysis – why the weather does what it does – by a local former professional TV meteorologist,” said Mark Stokes, an internet coordinator at Western Communications, Inc., which owns nine small-to-medium-sized papers in Oregon and California. “It’s the most accurate, insightful, and informative weather information in the region and has very high readership. The weather page is paid for by a local tire manufacturer and retailer – tires are very important here due to the weather.”

With a few exceptions, video doesn’t seem to be a big hit on newspaper Web sites.

Partly this has to do with lack of video expertise, and partly due to the time it takes to download streamed video – and to downloading the plug-in necessary to watch the video.

One very popular alternative to traditional streamed audio and video are photo slideshows, occasionally with audio backgrounds.

“With just a plain slideshow, you don’t have to worry about having the right browser, or does it take a long time to load on my machine,” said Lisa Green, online editor of The (Nashville) Tennessean. Some of the most popular ones feature celebrities – local musicians and sports heroes.

“We had phenomenal results when Alan Jackson’s house was put up for sale,” she said. “It had more than half a million page views.” Even though the house is no longer on the market, that slide shows still attracts visitors, she said.

The success of slide shows compared to video shows that site managers don’t need to have everything possible online, she said. “You need to choose your projects carefully. The Internet opens up such a wide range of things that we can do, and sometimes it’s difficult to know which of those many, many things we should do.”

Slide shows have also proved to be very popular at The New York Times Web site, where photographers narrate the shows.

“These are based on Flash as a tool, and it’s been extremely successful,” said Gwertzman. “You don’t have to stream anything. Streaming video, particularly for people with dial-up connections, can be a bit herky-jerky. And if people work in offices, a lot of offices have firewalls built in which makes it difficult to get streaming video and audio.”


LOCAL CONTENT

The weather forecast illustrates an important point for the nation’s smaller newspapers – local content is king. For national content, readers have lots of choices on the Internet. For local news, the local newspaper is often in a monopoly situation – or close to it.

Western Communication’s largest site, the online version of The Bulletin, makes a profit just from online advertising and sponsorship revenue due to the fact that it owns the Central Oregon market as a portal, said Stokes.

It includes recreation and travel information pages, archives of stories about best destinations in central Oregon, and a database-driven real estate sub-site, he said.

There’s another reason for profitability, Stokes added.

“It’s also due to the fact that all of our sites are managed by a staff of one, me, so we have low overhead,” he said.

Community news is what first brought the Madison (Ind.) Courier to the Web.

“We kind of struggled – like everyone else – with the newspaper’s need to be online,” said new media director Robin Cull. “We originally started out doing a community calendar for about a year.”

Last June, the newspaper decided to make a bigger jump to the Internet, with the online calendar remaining a major attraction but now supplemented by content upload from the print newspaper.

Other content includes a professional directory and a photo tour of the newspaper.

“We’re working on doing a city and county guide, and we’re going to put that online, with all the contact numbers and everything,” Cull said. “That should be live in the middle of May.”

The evidence that, on the whole, online news sites are delivering is that last year the Internet became a more popular source of news than print and radio. According to a Harris Interactive poll conducted late last fall, the Internet was the primary source of information for 8 percent of Americans with Internet access – compared to 5 percent for newspapers (and 76 percent for television). And the Internet was one of the sources of information for 80 percent, compared to 78 percent for print (and 98 percent for television).

This article originally appeared in Quill, the magazine of the Society of Professional Journalists.