If it seems like only weeks ago that there was a never-ending stream of stories about journalists leaving the old world of daily newspapers for the brave new world of dot-com media, well, that's because it was just that recently that high-profile defections from The Wall Street Journal, The Washington Post and Rolling Stone spawned stories about the inevitability of the online media revolution.
Then last week the fickle breezes of the media's conventional wisdom suddenly blew cold as a round of layoffs and mothballed Web sites suggested that it might be impossible at this time to make money offering news and editorial content online.
There were 13 layoffs at Salon as the daily online magazine jettisoned much of its coverage of books and media. Newswatch.org, the savvy media-criticism site produced by the Center for Media and Public Affairs, lost its funding. And APBNews, the respected crime- and justice-news site that attracted Pulitzer Prize-winning reporters and famous columnists to write for it, was badly hemorrhaging cash. Staffers were asked to continue working for free while management searched for an angel.
Just last year, Salon, CBSMarketwatch, DrKoop.com and TheStreet.com had a combined market value of almost $5 billion. Now that value has tumbled to less than $650 million.
And this is happening even as polls suggest that more Americans than ever are getting their news and information online. A new Pew Center survey found that a third of the public now goes online for news at least once a week, up from a fifth two years ago, and that 15 percent get daily news updates online, compared with just 5 percent two years ago.
What's happening? Can news sites figure out a way to turn a profit before burning through all their cash in an Internet culture in which people have gotten used to not paying? Will investors be patient enough to wait until a real advertising model develops to make these sites profitable?
Many online pioneers remained optimistic throughout this uncertainty, sure enough that the promise of the Web will lead to profits. Someday.
Hoag Levins, a veteran Philadelphia newsman who jumped from the daily newspaper world to become executive editor of APBNews.com, said the Web does not yet offer a fully matured market for advertising and e-commerce -- the primary sources of revenue for online publishing ventures. And that makes news sites all the more vulnerable to impatient investors looking for a quick return.
''What happened to Salon, Newswatch and APBNews.com is not as much a comment on the viability of the Web as a news publishing venue as it is on the volatility of the stock market,'' Levins said. ''If anything, APBNews.com has shown that the Web offers an amazing potential for publishers. In just 18 months, we went from zero to 18 million page views a month. No other emerging medium has ever enabled publishers to draw so many readers in so short a time.
''One aspect of the problem is that the only way to fund a stand-alone news Website is through venture capitalists who have the money and tolerance for the risk required by start-ups in a high-cost infant industry. But those same investors are vulnerable to the wild fluctuations of the market and the often rumor- and whimsy-driven nature of market movement,'' Levins said.
The advertising doesn't work yet either. The click-rate on banner ads is famously abysmal at this point, so the early structure of how online advertising was imagined has not come close to reality.
''In many ways, the Internet is like a large casino right now,'' Levins said. ''Great ideas and great content are drawing a lot of investor attention, but the real winners must have great ideas, great content, great marketing and, most importantly, the deep-pockets financial wherewithal to keep it going for years until the potential geysers of advertising revenue DO materialize.
''The race now under way is to see which dot.coms will ultimately own large market niches when that advertising 'flash' occurs. Those companies will be the new media giants of the coming online age.''
Yet, the current uncertainty -- let alone the massive mergers of online providers and entertainment companies -- might mean that the new media giants will be the same as the old giants.
That doesn't necessarily mean the troubles of Salon, Newswatch.org and APBNews.com portend bad news for those who want to build new online sites based around original journalism.
One of the most talked-about new editorial sites (probably because it focuses on the media) has been Inside.com, the Kurt Andersen and Michael Hirschorn venture launched last month. Inside.com has made the daring decision to charge for its stories from inside the media, TV and publishing worlds, just as Salon and Newswatch pull away from those areas.
Others, such as Slate, have tried to charge for content, failed and gone free. How can Inside.com hope to charge? Andersen, in a column Monday, suggested the opposite: How could they hope to succeed giving it away?
The collapse at APBNews, he wrote, means that ''creating expensive content that you offer exclusively online and for free is a way to spend money very fast.'' The troubles at Salon suggest ''giving away original online content of a madly eclectic general-interest nature isn't by itself a strong basis for a business.''
Andersen suggests there's room for ambitious, original online journalism sites that employ fewer than the 140 people working at Salon and APBNews. He points to the successful Indiewire.com -- which covers the independent film industry, employs several people full-time and has been profitable for several years.
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