IQ News: Closure, Cuts Give Content Sites Pause

Following in the recent footsteps of its e-tailing brethren, the online content site category suffered a shakeout of its own last week as, a crime news Web site, laid off its entire staff of 140 and online magazine let go 13, or about 9 percent, of its total staff.
Despite the attention such announcements received last week, however, few observers took the moves to mean the end of viability for content-only plays.
“I think you have to separate the future of the business and the development of the medium from specific companies,” said Scott Moore, publisher of Microsoft’s Redmond, Wash.-based online magazine Slate. “Clearly, millions and millions of Americans are getting information and news from the Internet, so I think that bodes well for the future.”
David Card, a senior analyst with New York-based Jupiter Communications, agreed, blaming the cuts on shrinking capital markets and newly scaled-down business plans–the same combination that has shuttered some retail sites in recent weeks.
“We’re just getting much more realistic expectations now and that’s a good thing because those [earlier] expectations were crazy,” said Card. In the meantime, he said, “I think Salon is probably a viable property, but maybe in Q2 2000 it’s not realistic for it to have a Seattle office.”
As part of its staff reductions–part of an effort to trim costs by 20 percent in fiscal year 2001–Salon has closed its one-person sales office in Seattle, a spokeswoman said. According to a Securities and Exchange Commission filing, Salon lost $18.3 million on sales of $8 million last year.
To Moore, whose site is supported and backed by Microsoft, the plight of Salon and leave the future of independent content sites open to some question. “It’s hard to amortize costs for a stand-alone content play,” he said, “just like it is for a stand-alone magazine. The economies of scale are critical in the media business.”
But should advertisers be worried about content sites disappearing?
“It gives you more than a little pause,” said Card. “But the reality is that you don’t have to sign up for a long-term contract. And it also doesn’t mean that you should go running into the arms of only an AOL or Yahoo!, because they’re tremendously overpriced, or they can be.” Both are great mass-market companies that segment their content, he said, “but you can get better bang for your buck more often than not by dealing with a smaller player.”
Meanwhile, Moore argues that such shakeouts will only strengthen the content-only market. “It leaves fewer high-quality choices for media buyers to select,” he said. “If you’re a media buyer trying to get good placement with a quality demographic, there’s a set of sites that you’re going to consider. And if there are fewer sites to consider, then that’s better for the survivors.”