The keys to profit-making on the Internet - what periodical publishers must do to make money with their Internet products

Is anyone out there making a profit on the Internet?" asked Alan Douglas in the February 1, 1996 Folio:. He compared publishers' eagerness to join the online stampede with the mindset illustrated in Hans Christian Andersen's fable, "The Emperor's New Clothes." Although his headline singled out the Internet, his comments conveyed a lack of confidence in the financial feasibility of electronic publishing in general.

As a publisher and developer of electronic-publishing software who's been online with different magazines for the past year and a half, I'd like to present another viewpoint. Mr. Douglas points out that publishers who have ventured online aren't yet claiming profitability. While that may be true, it's not necessarily a warning flag. No one expects a new print publication to begin coining profits immediately. It takes more than a few short years for a conventional magazine to enter the black. Doesn't a publication launching in a brand-new medium deserve the same kind of patience? Right now, it's easy to ridicule online publishing. There's a tendency to assume that all those who led the way are losing their shirts. The fact is, some electronic publications are already producing serious revenue. Profitability, though elusive, appears to be just down the road.

Although we haven't yet included advertising from other clients in our company's electronic publications, we are earning revenue online. We're selling substantial numbers of subscriptions to our paper magazines without the high costs associated with direct-mail marketing. In addition, we're selling and delivering online upgrades of our electronic products. As paper, marketing and postage costs continue to spiral upward, the ability to distribute content to readers without incurring those expenses will become irresistible.

To make money and serve readers online, publishers must remain the masters of both producing and presenting their content and information. New technologies allow for compelling visuals and better delivery. But for the most part, pub fishers often continue to act only as content providers, and then turn the content over to those companies that they think better understand new media.

However, simply to wholesale content rather than manage it would be a mistake. Without the editor and the editor's effective management of informational content, readers lose perspective. They lose the element of surprise, and the information then has no dimension. Managing information through print and electronic means, by publishers, is critical to the dimension and form of content.

Other publications that have chosen to manage their content, rather than be "aggressive followers," are already ringing up big bucks online. Wired's HotWired is the best-known example. It developed the first successful sponsorship model, which last year attracted 24 major advertisers willing to pay hefty fees. Web sites for CondeNet's Epicunous and Conde Nast Traveler have landed numerous paying advertisers who recognize that the elaborate designs, useful information and interactivity of those sites are attracting repeat visits from users who comprise a rapidly growing, loyal electronic community. The Wall Street Journal recently reported estimates that Net-related advertising revenue will skyrocket from $20 million today to $1.4 billion within the next two years.

With the electronic publishing tools already available, publishers can easily produce cost-effective, visually appealing information online. There is software that not only retains the graphical look of printed pages, but also lets publishers organize publications' content into logical groups for readers, and easily update previously released data.

The future is digital

Just as railroad executives forgot they were in the transportation business when the airlines came into being, many publishers are forgetting that they are not in the magazine business, but rather in the information-distribution business. And as they find new ways to distribute their information, they must maintain the role of content managers.

Mr. Douglas asserts that it's "the fear of not keeping pace with the competition" that's motivating many publishers now online. Mr. Douglas then admits "There is no doubt in my mind that the future is digital." Many would say that future has already arrived.

Robert Wright is director of new-media development at IVY International Communications.

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