The Quest for Online Profits

Media websites change fast as they try to figure out how to make money

Content Tools

There's a saying at Microsoft that goes something like this: If you're unhappy with your job, close your eyes and wait six months. After recently leaving a career in online publishing that took me to three different Web sites in as many years, including a stint at Microsoft's sidewalk venture, I can honestly say that, with respect to online media, truer words were never spoken. The field is careening through a toddlerhood of dizzying change, transformed each time a new philosophy for making money from the World Wide Web emerges. Considering that none of these plans has yet to yield a profit, the only thing I can surely tell you is that by the time you take your summer vacation, this article will be out of date.

Still, my days in the trenches have given me a certain perspective on this young industry and where it might be headed. I began my online career in 1995 as executive editor of the Utne Lens, this magazine's early presence on the Web. My next job was content coordinator for the online edition of a daily newspaper, the St. Paul Pioneer Press, at a time when the big news organizations were jumping into electronic publishing. Finally, as executive producer of twincities.sidewalk, I saw yet another financial strategy sweep the Web: the current emphasis on providing "services" like entertainment listings, classified ads, and electronic shopping.

In other words, in a few short years I've watched the field move from utopian dreams of an alternative virtual community to electronic versions of traditional journalism to the virtual marketplace it hopes to be today. The business model behind the latest incarnation is the oft-mentioned "portal" strategy. By adopting this approach, many media companies want to be gateways to the Web, entry points where users drawn by popular search engines bundled with other services will be exposed to lucrative ads. That's the theory. Time will tell whether the portal strategy proves to be any more viable than its predecessors.

What shape will the online media industry take tomorrow? A clue may lie in its beginnings. Way back in October 1994, Wired magazine launched HotWired (www.hotwired.com), the first Web site to feature both Fortune 500 advertising and original content. Others were soon to follow, including the graphically groundbreaking Word (www.word.com) and the intellectually interactive Feed (www.feedmag.com). Both were idealistic as well as creative guesses at what might eventually capture the attention of an as-yet-untapped market.

Of all these pioneers, Word perhaps had the most arty and audacious vision of what the new media could do. Combining sophisticated graphics with animation, sound, and text, Word hinted at a future in which online media were less about information and more about entertainment. An early example is an online documentary about a river trip through Guyana's rainforest (www.word.com/place/guyana/) first posted on Word in 1996; it includes not only diary excerpts from the three artists who journeyed there, but also an accompanying original score and links to artwork, footnotes, and related readings about the area's plants and animals.

As someone in the same young business, I was sure Word's playful commitment to a multimedia experience was the wave of things to come. But original content was still seen then as the way to make money. The near-term future proved far less creative than I had imagined, and original content was soon being viewed as an economic dead-end in online publishing. Around the same time, traditional news organizations, worried about losing their hold on the information business, were scrambling to get online. For the most part, these enterprises traded in nothing more than "shovelware"—the daily paper or the nightly news packaged in a multimedia frame.

When she's asked why mainstream media companies weren't—and still aren't—taking more risks, Word editor Marisa Bowe points to staffing. Many traditional media outlets have tried to expand online by converting staff members into techies, she says, with unspectacular results.

"The people who understand this medium usually spent their adolescence playing video games or hanging out in MUDs [multiuser domains] or BBSs [bulletin board services]," Bowe explains. "They usually aren't socially adjusted enough to pursue careers like mainstream media jobs. So what happens instead is that the youngest and least successful journalists already on staff [at traditional media organizations] are the ones who are willing to work on the Web. And the results are hacky." (Before taking over at Word, Bowe was one of the leading players at ECHO—East Coast Hang Out—an online community popular in New York bohemian circles.)

Whatever they try, online media have yet to figure out how to make money. In the early days, the belief was that Madison Avenue would quickly turn this explosive new communications form into a wildly effective venue for their messages, but online advertising generally has been a qualified success at best. The truth is that the companies bankrolling Web sites are, for the most part, seeing rivers of red ink.

But unlike traditional publishers, who assume at least five years of losses for almost any startup, online investors expect profits from their ventures fast. Their impatience has accelerated the speed at which Web sites feel pressured to reinvent themselves. Gone are the days of developing a product and steadily building it over several years; online these days we're talking months. Of course there are exceptions—Salon, the high-quality think site for the intellectual set, comes to mind—but by and large this is a frenzied industry desperately trying to justify its existence by inventing the next big thing.

There is one segment of the Internet industry that's making cash hand over, uh, fist: pornography. Boston-based Forrester Research, a group that monitors trends in high technology, estimates the 1998 profits for the adult online industry at $185 million. The potential power of online media continues to show itself in other ways as well. As many people know, the Clinton-Lewinsky affair was brought to light by Matt Drudge, an unabashedly unschooled reporter who publishes the no-frills Drudge Report out of his dingy Hollywood apartment. "I get readers who say they are disenfranchised by the mainstream press, who don't trust it, who don't look for straight faces from corporate editors," Drudge recently told Brill's Content. "So to that respect, I think I'm offering a glimpse of how it can be otherwise."

But the near future of online media seems destined to be shaped largely by the current mania for providing services and fostering commerce. Whether it's books or plane tickets you're looking for, it is now possible to make impulse purchases on the Web, and the online marketplace is growing. "The Web will also overtake newspapers when it comes to publishing classifieds," predicts Lisa Allen, a senior analyst at Forrester Research. "Our research shows that the longer folks are online, the more they like looking for cars, jobs, and houses online as opposed to print.”

Many experts say even bigger changes will begin within a year, when sound, video, and animation become central to the online experience. That's surely no surprise at Word, which, after shutting down for several months in 1998, recently relaunched under a new owner, Zapata Corporation, just in time to compete in the online era they anticipated years ago. As Bowe puts it, "What people currently think of as bells and whistles will become the meat and potatoes." In the end it may be that entertainment—not content, not community, not shopping, not any of the other ideas that have had their three hours in the sun—will be king.