The Online Reading Room

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General-interest online mags face a fundamental challenge: Their content is not well-suited to the Web.

Most analysts predict a major shakeout, as consumers determine which sites are worth their dollar.

At the same time that its stock value dipped below 50 cents a share in January, Salon.com reported its highest traffic month ever. According to Jupiter Media Metrix, an online measurement service, the 7-year-old online magazine reported a whopping 51 million page views for the month of January.

While Internet audience measurements are arguably unreliable, there is no question that online magazines attract a significant number of eyeballs each month. Even as financial woes and layoffs continue to plague content-based Web sites, one group — readers — has remained loyal throughout. Unfortunately, their readers don't pay — yet. “Most of these magazines have loyal readers, but they're not profitable businesses,� says Jupiter Media Metrix analyst Robert Hertzberg. “They'll either need to develop an offline component or figure out how to capitalize on their readers online.�

Readership is one of the few solid indicators of potential value these sites have, and the online magazine reader represents a desirable target for marketers. Research indicates that online readers are affluent, educated, and tech-savvy — the elite influentials and opinion leaders of the Internet. Feed magazine refers to its readers as “the new Technology Influencers.� Salon calls its users “Cultural Creatives� and “The Thinking Public.� Precisely the kind of consumer advertisers want to reach.

Online magazine readers tend to be avid consumers of a wide range of media and early adopters of all kinds of technology. According to @plan, the online audience-research arm of Diameter (a recently created online media-research service launched by DoubleClick), 65 percent of Microsoft's Slate readers have been online for more than three years, as have 54 percent of visitors to TheStreet.com. Salon boasts that 67 percent of its users listen to audio on the Web and 61 percent use online video.

These online readers are also Internet shoppers. According to @plan, 93 percent of TheStreet.com readers shop on the Web — 70 percent for travel products and services and 52 percent for cars. High online shopping patterns also hold for Slate: 93 percent of its visitors have shopped on the Net in the past six months, and 75 percent have transacted online. An @plan analysis of online shopping over the past six months shows that Salon.com readers are 189 percent more likely than the average online user to purchase computer software online. They are also 131 percent more likely to buy movie videos and DVDs online and 102 percent more likely to order up home electronics.

On a number of issues, online magazine readership appears to rival those of the most prestigious print magazines. Salon readers appear to be better educated than The New Yorker's: 79 percent are college grads, compared with 54 percent at the latter, according to @plan and MRI data, respectively. Slate beats out The New Yorker in terms of its readers' average household income ($83,126 vs. $77,033), with Salon not far behind ($71,300). TheStreet.com (average household income of $100,286) similarly outstrips Forbes ($84,097). The skew isn't surprising, given that these sites gear themselves to the highly educated with content that is often unapologetically highbrow. As Patrick Hurley, Salon's senior vice president of business operations, puts it: “We're smart and topical like The Washington Post, but also opinionated, literate, and thought-provoking like The New York Times Book Review…like public radio with a libido.�

The attractive profiles of online readers transcend the traditional upscale skew of Web users. Online magazine readers are significantly more affluent than the general Internet population. According to Jupiter Media Metrix, 28 percent of TheStreet.com readers, 26 percent of Salon.com readers, and 33 percent of visitors to The Onion have household incomes above $100,000, compared with 19 percent of Internet users overall. Readers of TheStreet.com are more than twice as likely as the average Internet user to own an investment portfolio worth more than $250,000, and are twice as likely as the average Internet user to earn more than $150,000 a year.

Such readers are both passionate and loyal. These sites have tremendous, mostly untracked, pass-along value. The Onion famously snowballed into success after users e-mailed its satirical news reports around the Internet. (Recipients were often unaware they were reading a spoof.) Salon notes that between 250,000 and 350,000 articles are e-mailed every month using the “E-mail this article� feature, and that's not including the number of times users simply paste an article's URL into an e-mail, a common online practice. “These Web sites typically offer original content and a unique point of view, and they speak to an audience that's very passionate about what the sites have to say, and that's always intriguing,� explains Fran Powell, managing director and chief strategy officer of @tmosphere Interactive, the digital arm of BBDO Worldwide. “They could work well for a range of products — books, wireless technology, movies, electronics, computers.�

So what's the problem? Why are many of these sites struggling for survival? Magazine sites still don't attract enough of these readers, at least compared to major Web sites like AOL and Yahoo! “Unfortunately,� Powell explains, “these sites don't make it into many media buys because they're small, they're niche, and there are so many other options out there.�

Moreover, their readers don't seem to read online magazines enough — or at least not in a way that pays. General-interest online magazines face a fundamental challenge: Their content is not particularly well-suited to the Web. Instead of the quick how-tos, money-saving fixes, stock tips, and news briefs that typically draw the utilitarian Internet population, general-interest magazine sites provide thoughtful essays, literary nonfiction, and in-depth reporting. As Jupiter Media Metrix's Hertzberg explains, “The simple truth is, while Salon may be comparable to The New Yorker in terms of its content and readership, print is a far better format for leisure reading than the computer.� In other words, readers want to curl up with such content in an armchair, not glaze over it for hours on-screen.

Online magazines don't measure up because readers don't want them to — or rather they don't want to get such long-form content online or on-screen. Salon acknowledges that every month, users employ the “Print Article� function to print between 800,000 and 1 million articles. In addition, many users likely print the pages directly, though there is no way to track this behavior. And although Salon.com claims that 27 percent of its users read five or more articles per visit and that they spend an average of 26.3 minutes on the site, Jupiter Media Metrix estimates that Salon's average visitor spends only 14.4 minutes a month or 30 seconds per day.

Such discrepancies in audience tracking are partly the result of how consumer behavior is measured online. Jupiter Media Metrix — which includes Media Metrix, the first Internet audience-measurement firm — along with net ratings companies PC Data and Nielsen//NetRatings, model their audience-measurement data on a sample of tracked users (ranging from 55,000 to 60,000 for Media Metrix to 120,000 for PC Data). The firms then extrapolate overall audience measurements from their behavior. The system is faulty. Among other issues, the companies reportedly undercount at-office use and international usage, and they often rely on outdated pools of users that may not be representative of the changing online population. Yet, however unreliable these figures may be, they are the best measurements currently available. “We don't take any numbers as definitive in this space,� explains Adam Gerber, vice president and director of media strategy for Digital Edge, the online media unit of Y&R. “They all have their problems, so we use the various services for directional purposes only.�

Whatever the precise duration of visitors' usage of Salon.com, it's not terribly long, even though the site holds on to its readers for longer than most other popular online reads. By Jupiter Media Metrix's count, Slate readers spend an average of 7.9 minutes on site a month; TheStreet.com users stay for only 6 minutes. The prognosis looks even bleaker considering changing Internet-usage patterns. Several recent studies have shown a drop in time spent online. Nielsen//NetRatings reports that consumers spent an average of 14.9 hours online in December, down from 16.5 hours in November and 17.5 hours in October.

Even the most avid online readers may not necessarily equal paying readers. The unfortunate reality for online magazines is that readers took the early Internet gospel of “content should be free� to heart. A recent survey by the Consumer Electronics Association revealed that 77 percent of Internet users oppose fees for content — and until now, Web sites have heeded their demand.

That's about to change. Content can no longer be free because content sites no longer have a choice. Although online magazines can tout their cost savings over print (no printing or postage), they have yet to figure out the revenue side. Advertising revenue hasn't been enough, and in a soft ad market, it's only gotten worse. Online magazines are now searching for ways to capitalize on their customers by merging, coordinating resources, launching print versions, creating offline products, and rethinking subscription models. Such changes will probably save the best online magazines from dot-com extinction. While the specifics of each model vary, with some sites offering free access to print subscribers and others creating tiered pay structures, subscriptions seem to be the emerging market consensus. According to Powell, like most print magazines, online magazines cannot survive on advertising alone. “I think a lot of these sites are going to have to change their business model,� she says. “They're already recognizing that they can't depend on advertising for their survival. Just like offline magazines require subscriptions, online magazines need to find another way to make money, most likely through paid subscription.�

The real remaining question is whether readers will buy it. Most analysts predict a major shakeout, as consumers determine which sites are worth their dollar. Salon announced in March that it would introduce a two-tiered approach to generate revenue. It will now offer a basic version of its site, supported by enhanced, rich-media advertising, as well as an ad-free version, Salon Premium, with additional exclusive content, for a $30 annual fee. An in-house Salon analysis reveals that 53 percent of its readers visit the site to “stimulate new ideas� and 75 percent log on for “entertainment.� Whether readers will pay for such idea stimulation and entertainment remains to be seen.

Another major issue is whether these newly configured sites will become more attractive or viable for marketers. “What Salon is doing may be a step in the right direction in terms of getting people conditioned to accept online advertising,� says Digital Edge's Gerber. “But at the same time it will make Salon's ad audience less attractive because the people who gravitate towards the ad-free environment will be the more upscale consumers.� Gerber isn't the only media executive to think Salon's approach will backfire, but Salon's Patrick Hurley disagrees. “I don't think we'll alienate advertisers for three reasons,� he explains. “First, we are making the ad-free site optional. Second, our projections of who will actually use the subscription service are tiny — 1 percent to 2 percent. And third, it's almost a benefit to advertisers, because we'll be weeding out the small amount of consumers who actively complain to advertisers, the ones with a low threshold for advertising no matter what. Advertisers don't want those complaints, so in a way, we're pre-empting that possibility.�

The best-case scenario for online magazines may be for free content to fade online and readers to adjust to that new Internet reality. Of course, the fundamental problem facing online magazines would still stand: Their content — compelling, interesting, and thought-provoking — isn't necessarily suited to the Internet, which values information that is fast, useful, and bottom line (i.e., news you can use). And though coupons and tips are about as appropriate to Salon as they are to The Atlantic Monthly, unless online magazines pay off for readers, those readers may be unwilling to pay them back. “It's a tough business to be in,� notes Hertzberg. “I think the market will get better for online magazines, but that very few of them will still be around to enjoy that rebirth whenever it comes.�

WHICHEVER WAY YOU READ IT

The most prestigious online magazines rival the readerships of their offline counterparts.

SLATE THE NEW REPUBLIC SALON THE NEW YORKER THE STREET.COM FORBES
Unique Monthly Visitors (2/01)/Paid Circulation 1,966,000 104,841 1,510,000 843,151 1,368,000 865,631
Male 68% 78% 58% 48% 90% 67%
Female 32% 22% 42% 52% 10% 33%
Married 62% 60% 37% 54% 74% 65%
18-34 35% 11% 34% 1 21% 27% 29%
25-54 71% 58% 54% 2 57% 76% 67%
Average age 41 51 34 49 46 45
$75K or higher 47% 79% 40% 43% 63% 53%
$100K or higher 28% 64% 26% 31% 43% 36%
Average HH$ $83,126 $148,000 $71,300 $77,033 $100,286 $84,097
College grad + 65% 92% 79% 54% 77% 55%
Professional, managerial 3 40% 74% 70% 40% 46% 41%
1 18-29 years

2 30-49 years

3 also includes executive and administrative for offline magazines
Sources: Jupiter Media Metrix, MediaMark, Cahners Research, @plan, NFO Interactive
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