Questions of profitability dog Pathfinder

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Time Inc. New Media chief Sagan downplays ads as revenue stream

As Time Inc.'s Pathfinder prepares to launch a subscription-based service, there are new concerns about the ability of the Web site to make money.

Pathfinder later this year will offer Pathfinder Personal Edition, a customizable product with a standard subscription charge. Subscribers of CompuServe online services will have free access to Personal Edition, which will offer deeper content and faster access. But observers and Time Inc. insiders wonder if subscription revenues will put much of a dent in Pathfinder's growing expenditures.

1995 SPENDING: $35 MIL

Time Inc. spent at least $35 million on the service last year, insiders said, and generated about $2 million in ad revenue. Even if it signed 100,000 subscribers paying $10 per month (Time Inc. has yet to reveal prices and subscriber goals), annual subscription revenue would amount to only $12 million.

Meanwhile, Paul Sagan, president and editor of Time Inc. New Media downplayed the importance of ad revenues on the Web.

"We see the summer as a new starting point for us going forward," he said. "I don't think advertising will be as significant in this medium as it can be in [other media]."

According to one estimate, Pathfinder advertising is falling.

Pathfinder generated $279,000 from 22 advertisers in March, reported Webtrack Information Services, a New York Internet marketing consultancy. That's down from $329,000 and 26 advertisers in February and $380,000 and 30 advertisers in January.

Bruce Judson, Time Inc. New Media general manager, denied revenues were falling last quarter, but wouldn't give other figures.

Observers caution, however, that Webtrack's results may be more representative of trends, not actual numbers. Employees manually scan Web sites looking for ads, meaning they could miss some. Rates are based on published rate cards and don't assume discounting or other deals an advertiser might have struck.

AGENCY EXECS UNCERTAIN

Agency executives are uncertain of the value of a subscription service.

"They're adding a twist to their plan again . . . and I don't think they've built up enough consumer thirst to do this," said Steve Klein, managing partner-director of media and interactive services at Kirshenbaum Bond & Partners, New York.

Pathfinder leads competing print-oriented media companies in ad revenues.

Figures for the first three months of 1996 show it outpaced total ad revenues at Conde Nast Publications' Conde Net, Hachette Filipacchi Magazines' four Web sites and Hearst HomeArts, according to New York-based Webtrack.

Mr. Sagan said adding a subscription service is consistent with long-range business plans. He referred to Pathfinder's business structure as an "evolving model."

Copyright April 1996 Crain Communications Inc.

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