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Thursday, June 8, 2000

SURVIVOR STRATEGIES

With the impending closure of APB News and cutbacks at Salon, it's been a bad week for online journalism. How can news sites make it?

By Jane Manners

When acclaimed crime-news site APB News announced June 5 that it had run out of money, chairman and CEO Marshall Davidson blamed the market. But with the likely closure of APB News and Salon's announcement yesterday of layoffs, the question has to be asked; Will online journalism sites ever make a profit?

APB News's financial needs were daunting. An APB News spokesperson said the company had raised less than $5 million of the $25 million it had hoped to raise from their latest round of funding. But Sreenath Sreenivasan, a professor of new-media journalism at Columbia University, says that amount of money simply is "[what] they need to do good journalism on the Web." And by all accounts APB News was a journalistic success. The site combined innovative features like a database that let you search crime risk by zip-code, with hard-nosed reporting by veteran journalists, including former staffers of The New York Times, The Washington Post, and Associated Press. Just days before news of the shutdown, APB News was celebrated at the Investigative Reporters and Editors conference at New York's Waldorf-Astoria hotel.

But good journalism, of course, doesn't automatically produce a solid business model. Though APB News is updating its site through the end of the week, any staffers who have remained are now unpaid volunteers. "In an atmosphere where money is short, websites that don't have tangible products are on shakier ground," says Sreenivasan. By that measure, APB News was precariously perched. Aside from its small online store which sold APB News clothing and assorted crime-related paraphernalia like security cameras, APB News's revenue came mostly from advertising and syndication fees.

AIM LOW

So how can content sites survive low investor confidence? Joshua Fouts, editor of the Online Journalism Review, thinks the answer is to cover less ground. APB News, he believes, "tried to grow too quickly and do too much too soon." "What APB News started out with," Fouts explains, "was specific news and information that was very compelling. Then they [became popular] and decided that their one focus was not enough." Fouts points to Suck.com, the granddaddy of Web 'zines, which posts only one new column a day, as an example of a site that succeeded because it aimed low. "They're paying their writers, paying their bills, and making a little money to boot," Fouts says.

But for sites to make more than small change, says Aram Sinnreich, an analyst with Jupiter Communications, an industry research firm, they must go for a wide audience. "APB News's fundamental problem is that it's fairly narrowly focused," says Sinnreich. "Yet it's trying to go for a syndication [business] model that requires broad markets." If you're going to focus on a niche market, Sinnreich believes, you need to diversify your revenue, with a strong focus on e-commerce. Take CNET, a profitable tech-news site that doesn't rely solely on advertising; it also makes money each time a user clicks on a CNET link to an e-commerce site, and has TV and radio syndication deals as well. The company netted $24.1 million in the last quarter alone.

Slate publisher Scott Moore thinks the content sites that will survive are those, like Microsoft's Slate, that are part of larger media companies and thus can piggyback onto the owners' marketing machines. "Because we're part of MSN we have an economy of scale. We do almost no marketing for Slate, [but] we benefit from the market that MSN has." In the next few years, Moore predicts, we'll see a lot of consolidation, and the sites that get acquired are the sites that will survive. "Getting large economies of scale is what the game's all about."  

 

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