NEW MEDIA: SPOTLIGHT ON ONLINE PUBLISHING - Can traditional publishers cut it in the digital environment? Niche opportunities offer the best chance for online success

Jeremy Bullmore pursued an interesting analogy during last week's

"On the Campaign Couch" therapy session. In dispensing pearls of wisdom

to Worried From Cyberspace, he took us back to the 50s, when satellites

answered to the name of Sputnik and computers were the size of a

house.



Internet advertising in 2001, he said, is in the same sort of state as

TV advertising was in the late 50s and early 60s. It's hard to believe

it now, but back then advertisers didn't believe in the power of TV,

agencies paid lip service to the business, and ITV franchises were

anything but the licences to print money that they subsequently became.

Bullmore also pointed out that Associated Newspapers, a shareholder in

the franchise then believed to have the greatest theoretical potential,

Associated Rediffusion, lost its nerve after years of losses and pulled

out.



And, of course, Associated Rediffusion's London weekday franchise went

on to fulfil its potential. So fear not, Worried From Cyberspace. It's

only a matter of time before online publishing becomes a licence to

print money and one day we'll all shake our heads in disbelief when we

think back to those dark days at the turn of the century.



And publishers, eh? They never learn, do they? In the past few weeks,

two of the UK's more proficient magazine publishers, IPC Media and Emap,

have been thrashing about trying to engage ever more powerful reverse

gears when it comes to the internet.



Last week, IPC closed its women's lifestyle portal, BeMe.com, its

listings site, unmissabletv.com, and its offering aimed at juvenile

delinquents, uploaded.com. IPC will now concentrate on its smaller

spin-offs, such as nme.com. Meanwhile, Emap was completing a structural

review that looks set to continue a retrenchment begun back in April.

Sources say it's almost certain that the specialist Emap Digital

division will now be closed and online expertise will be relocated to

the various relevant publishing divisions.



Neither development is exactly a bolt from the blue but it does make you

wonder just how much further the business can contract without dropping

off the radar altogether. Hadn't the two publishers previously told us

they'd pared down to a base from which it would be possible to move

forward? So what conclusions can we now draw?



John Owen, the head of digital services at Starcom Motive, is certainly

disappointed: "They are being unbelievably short term and the timing

seems typical of the current climate. A year ago, people were investing

ridiculous amounts of money, now they're doing the exact opposite.

Sanity has to return at some stage."



Some, though, see a positive side. They argue the online publishing

industry is now almost entirely focused on niche opportunities and this

is where salvation will lie.



Perhaps everyone is starting to learn a few tricks from Conde Nast - a

publisher that's reputed to have cracked the internet in its own modest

way. Conde Nast's online operations are not completely in the black but

they're not far off - and the company boasts some profitable digital

assets, such as vogue.co.uk and cntraveller.co.uk. Advertising is still

the centrepiece of the Conde Nast digital business plan and it offers

niche audiences similar to those offered by the parent magazines.

Advertisers know where they are with the Conde Nast offerings. In other

words, the classic "small is beautiful" creed.



Conde Nast's managing director, Nicholas Coleridge, says that

sustainable development is fundamentally important. He says: "The

publicly owned companies would have been penalised by the City if they

hadn't thrown ludicrous sums at the internet. Privately owned companies

have been able to get on with things in a far less hysterical

atmosphere. Our policy has been to run it tightly, develop off our

existing magazine brands and be much more cautious in our

targeting."



However, some sceptics remain, well, spectical. They argue that the

dominant business model - that advertising revenues are bound to grow as

internet usage grows - is still flawed.



Not so, Andrew Walmsley, the chief operating officer of i-Level,

counters.



He states: "Advertising revenues as a whole will be down by 3 per cent

here, 4 per cent in the States this year but online will be up by 10 per

cent. It's continuing to buck the trend. What last week's news did for

me was to reopen the question about whether online media is best handled

by traditional players or brand new players? Traditional players still

have the advantage in terms of leveraging resources they already have

but that doesn't mean they'll make best use of that advantage."



Which brings us back to the ITV analogy. And the more you look at it,

the more dangerous it seems. For instance, ITV's early struggles are

much exaggerated by industry myth-makers. Associated Rediffusion was

only wobbly for its first two years and its worst year was its first

one, when start-up costs galloped out of control. It was making massive

profits by 1959.



And the more cosmopolitan of those in the 50s ad industry over here

would also have heard of the US, where commercial television was already

going like a train.



You still can't say that about the internet. So in that respect, Owen

agrees that complacency remains the big enemy. He concludes: "The

industry must work hard collectively to put together credible

propositions. The thing is that I honestly believe companies such as IPC

and Emap will eventually be back making lots of money in this market.

But they have to think more laterally. They have to get out of the habit

of tying to replicate what they do in print. The values are different.

They have to sit down and ask themselves what they can do on the

internet that they can't do elsewhere."



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