Hoaglund (l.). Money Managing Editor Frank lalli sounds cautionary notes about the importance of the youth culture and new media. LALLI PUTS HIS 'MONEY' ON MIDDLE-AGERS

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Frank Lalli, Money managing editor, has earned a reputation as one of the nation's most marketing driven editors. In a wide-ranging interview with Advertising Age, the program chairman of this week's American Magazine Conference in Boca Raton, Fla., takes editors, publishers and advertisers to task for scrambling after the youth market while ignoring Americans in their 40s, 50s and 60s; says new media won't overshadow core products such as magazines; and discusses columnist Dan Dorfman, now on a leave of absence after insider trading allegations.

Advertising Age: What is the biggest challenge facing the magazine publishing industry today?

Mr. Lalli: It hasn't changed over the years. It is still to remain relevant and continue to attract vibrant audiences.

AA: Many magazines say they're trying to reach a young, upscale audience. But you seem to feel the industry may be overemphasizing youth.

Mr. Lalli: That's because the young audience may be smaller and less affluent than the core audience. The young audience is changing. By the time I was 27 years old, I was married five years, I was into my career and I had no debt.

Today, to get a similar profile, you'd have to look at someone who was 35 years old. Young people today are taking longer to establish themselves in careers. And they are in debt, so many of them are living at home. Even with a college education, they are finding that their first job out of school often isn't a very good-paying one. Because of that, many of them are postponing marriage until their late 20s or beyond.

In a sense, young people are younger psychographically and economically than they were in other times. At the same time, people in their 40s or 50s are actually acting younger than before. They are traveling, remarrying, starting a second career or starting a family. Our image of the true older people-of people close to retirement-is out of step. Many people in their 60s are acting the way somebody who was 50 acted a decade earlier.

You have to ask yourself, are we putting too much emphasis on the youth culture that's essentially run its course? It's just a question, but one that I think good editors and smart advertising and marketing people are going to increasingly think about.

AA: What does this mean to magazine marketing?

Mr. Lalli: I think we have to ask what is the core audience. Are we focusing on the people who are truly financially viable and getting ahead? If the answer comes back that the core audience is slightly older than it used to be, then why shouldn't we be growing up with it?

AA: Doesn't that imply some magazines will just disappear?

Mr. Lalli: I think it creates new opportunities. With technology the way it is, you may have the opportunity to create two or even three new products where before you only had one magazine.

AA: For the past few years, the buzz at the annual American Magazine Conference has been about new media. How do you see it fitting into

Mr. Lalli: I think we've seen enough now to know that print is the predominant mode. Our flagship magazines are going to be driving our businesses for as far as we can see. There will be some ancillary opportunities and we think profitable ones. But print [properties] will be the mother ships of our companies, the primary focus of our enterprises, and that's where our primary focus should stay.

AA: Do you consider yourself a marketing driven editor?

Mr. Lalli: I'm not sure I know what that means. We have a plaque on the wall that says, "Our readers above all." We constantly ask ourselves are we delivering the kind of things our readers are interested in. We certainly pay attention to newsstand sales-that's a crude measure but a useful one.

AA: What about reader focus groups? We've heard that Money has the technique so fine-tuned you test cover lines. Mr. Lalli: We do have ongoing testing of our cover lines. We ask a couple hundred of our readers to judge a sample of 10 or 12 cover lines. [The results] are a piece of background information. We use it to hone language. But it is no substitute for instincts....You just have to have the confidence that you're onto something and maybe you're ahead of the reader. But you can't ignore the reader, and I don't think modern editors do.

AA: How does reader focus fit into marketing and ultimately your

Mr. Lalli: One of the things that editors and publishers have to come to grips with is niche marketing. It is becoming more and more possible to identify a small audience and serve it. You'll see a lot more select edit, the way Sports Illustrated does it with special sections in some editions devoted to golf or football. The parenthood magazines do it by sending a different version of the magazine to parents of newborns than to the parents of toddlers. You'll see regional edit, customizing.

I think you'll see editors using inkjet technology expanded to the point where you could do an entire page instead of just several lines. They will do things that can make a magazine appear to a reader that it is edited just from them.

AA: In the magazine world, there have been two major controversies in the past year that have touched you. One was the apparent leaking of 13 of the 14 winners of the National Magazine Awards. Have you ever found out how the names of 13 winners that were supposed to be secret and guarded came to be published in a weekly New York newspaper?

Mr. Lalli: We do not know what exactly happened. I know the publication did a lot of reporting and talked to a lot of people. I think it was unfortunate. We are going to change the way we do the judging this year. There will be an expanded number of judges and judging panels who will make the decisions. And there will be less information among the judges about who the winners might be than we've ever had in the past .*.*. The confidentiality will be maintained at a much higher level than it has been up to now.

AA: We can't let you go without talking about Dan Dorfman. Business Week reported recently that he was under investigation for possible insider trading for information he received from a public relations executive. You've stood by him so far, yet he's taken a temporary paid leave of absence. We know you haven't given any previous interviews on the matter, so we'd like to ask, do you still feel he's innocent of any involvement in the scandal? And if so, why is he on leave?

Mr. Lalli: We have no reason to believe Dan committed any crime. And we believe that none of the work he did for Money is involved in the investigation. But I felt I had to get an independent view of the matter and not be driven by another publication's headlines. We wanted an independent view, and that's why we brought in an independent counsel. While that's going on, Dan and I mutually agreed on his taking a mutual leave of absence. We hope to wrap it up as soon as possible.

AA: Finally, you didn't mention the paper and postage price hikes that have afflicted the industry. Are they as big a problem as they are cracked up to be?

Mr. Lalli: They are major factors, I didn't mean to minimize them at all. We went through an extremely favorable cycle up until a year and a half ago with paper. You just hope that this negative cycle will run its course and we'll get back to some kind of equilibrium soon.

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