Recent layoffs at Wired Digital raised questions about the prospects for other Web publishers and the fate of Wired's online venture.
Approximately 20% of Wired Digital's staff, 33 employees, were let go in mid-November.
Wired Ventures' financial challenges are no secret. In the past 18 months, the privately held company has twice prepared for initial public offerings only to retreat at the last minute due to perceived ill investment climates. Meanwhile, the company does not project a profit before the end of 1998.
LOSING LESS THAN $2 MILLION
Chief Financial Officer Jeff Simon has said in published reports that Wired Ventures would lose less than $2 million in the fourth quarter of 1997 compared with $11 million in the same period in 1996.
Co-founder Louis Rossetto recently agreed to step aside as CEO in favor of a more experienced leader, but the hunt for a new CEO has not yet borne fruit, with several candidates having passed so far on the offer, executives familiar with the situation said.
Business Week cited sources who claim that Wired's investors, including CUC International and Advance Magazine Publishers, are pushing for a quick end to the red ink and that Wired has hired the Lazard Freres investment bank with a possible view toward selling the whole enterprise.
However, Hunter Madsen, senior VP for marketing at Wired Digital, denied the company was actively shopping for a buyer. "As best I understand, [Wired Ventures] in the ordinary course of financing the company, is looking for continued finance," Mr. Madsen said. "We'll of course look at all alternatives, but [selling the company is] not really a front-burner interest."
PRESSURE ON WIRED DIGITAL
To whatever extent the recent layoffs represent a renewed urgency to start making money, that pressure is felt hardest at Wired Digital, the online complement to Wired Ventures' other division, Wired magazine. While the magazine division went into the black two quarters ago, according to Mr. Madsen, the online component continues to be a drain on the overall venture.
FOCUS ON CORE WEB AUDIENCE
Mr. Madsen explained the layoffs as being the latest in a series of steps to streamline operations and refocus the company's online properties to best serve Wired's core Web-head audience. Indeed, Wired's online properties have covered a wide spectrum over the years, including a search engine, HTML tutorials, pop culture, travel, health, cocktails, job opportunities, and more.
Wired Digital's latest aim is to serve an audience that wants to be at the vanguard of all things Web.
"We felt increasingly we need to be creating a portfolio of content that's coherent . . . as is the Wired brand, which is dedicated to helping connect people to the technological future." said Mr. Madsen.
Presently, the biggest revenue earners of the Wired Digital family include the HotBot search engine; Wired News; Wired's PointCast channel; and a HotWired HTML feature dubbed Web Monkey.
LESSON: WEB PUBLISHING IS `TRICKY'
Combined, Wired Digital is doing around 3 million page views a day, said Andrew de Vries, Wired Digital's recently hired director of marketing communications.
Citing competitive reasons, he wouldn't break the traffic down by individual properties. An executive close to Wired Digital, however, who requested anonymity, claimed that three-quarters or more of all Wired Digital traffic went to HotBot.
"The ad sales department manages to do a good job with what it's been given," said the executive. "Most of Wired Digital is 100% sold out. The problem is [it] needs more traffic."
Indeed, both traffic and revenue growth are large for any online publishing venture, with ad sales up 300% over last year, Mr. Madsen said. The question remains, however, whether the growth is fast enough for Wired's investors.
"In the old days of new media, everyone made fun of AOL. The newest, hippest thing to do is make fun of Wired," said David Card, an analyst with International Data Corp. "Wired has been erratically managed. It's not firing on all cylinders yet, but it's not necessarily doing a heck of a lot worse than anyone else. I'd argue they're doing better than Time Warner, for instance."
"The only lesson to learn" from Wired's lasted restructuring, Mr. Card said, is that succeeding in the realm of Web publishing "is tricky."
Copyright November 1997, Crain Communications Inc.