It's back. Online content again key battleground

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John Battelle is back. When we last left him, the founder and former CEO of Standard Media was standing in the wreckage of The Industry Standard, which broke the all-time record for ad pages in 2000 before collapsing under its own weight. Now he plans to launch his first media venture since then-a collection of "really high-value, small sites"-that won't require buckets of venture capital funding.

Mr. Battelle, who's been working on a book about Google and search engines for the past few years, is convinced that the next generation of search technology, which will peer deeply into databases and even desktops, will radically transform the Internet's user experience.



You can't blame magazine publishers for wanting to put their heads in their hands at the news. In just the past few years, online publishers had begun to feel a sneaking feeling of maturity-online advertising will likely top $10 billion this year for the first time, maintaining a blistering pace of the 20%-plus growth. The Internet had settled down into an inventory game. Content companies were ultimately in the process of producing page views and then selling them.

Having the inventory on hand to meet the surging demand became a paramount concern. The cash-rich, relatively low-growth newspaper chains aggressively pursued this logic-Dow Jones & Co.'s $519 million January purchase of MarketWatch, The New York Times Co.'s $410 million February acquisition of from Primedia and even The Washington Post Co.'s deal for Microsoft Corp.'s Slate were the result.

So far, magazine publishers have been content to sit on the deal-making sidelines, and the largest players seem eager to outsource online strategy to the pros. The majority of Hearst Magazines' titles, for example, live on (often mentioned as an acquisition target itself), while the fate of Time Inc.'s magazines is inextricably bound up in the ongoing rehabilitation of Time Warner sibling America Online.

Hachette Filipacchi Media U.S. this month began offering three of its titles in perfectly re-created digital form through a partnership with Zinio Systems (Advertising Age is also a Zinio partner). The digital files so closely mimic the print editions that the Audit Bureau of Circulations considers them to be part of the total circulation. In other words, Zinio isn't really an online strategy at all-it's a tool to make rate base.

"It's easy to imagine that 5%-10% of their subscribers will eventually read magazines that way," says David Zinman, Zinio's senior VP-marketing and product management. "When publishers see that 10%, then they'll think, `Maybe I should add a little more editorial bells and whistles to this.' "

Or maybe not. "For the percentage who would like their content delivered digitally, we would like to make it possible for them to get it that way," says Hachette President-CEO Jack Kliger. "It makes sense for us to look at that option. But I don't foresee a day when magazines abandon print and paper."

No one is saying they should. But Mr. Kliger's reflexive comment raises the larger question of whether publishers, with the balance sheet carnage of the bubble era still fresh in their minds, aren't a little gun-shy, and whether that will end up costing them missed opportunities.

"Magazine publishers ... have a set of practices and business assumptions that, like every business, are very hard to change," says Mr. Battelle. "If you have a newspaper doing $50 million in revenue, why would I want a Web site that does only $5 million? But look at it from a purely financial calculation: Would you rather own 10 Web sites with $2 million in revenue each with a 50% margin and a 20% growth rate? There are companies that will be able to do both, and there are those that can't cross that bridge. But I've made my own decision. The next [project] I do is going to be very magazine-like in its basic aims. But it's going to be a very online company."


Mr. Battelle's view has been shaped by the same online media and ad trends that have given rise to a second generation of content pure-plays like the commercial Web log networks Gawker Media and Weblogs Inc.

The rise of Google and paid search has armed budding publishers with an ad model that, in its most basic form, requires publishers to do little more than sign up for the search giant's AdSense program. As Google gathers strength and refines its technology (and as Microsoft and Yahoo innovate to keep up), the theory goes, the search field will replace the URL as the average user's window into the Web.

In this paradigm, the importance of content's freshness takes a backseat to its usefulness. Visitors to a site or a network of sites won't stroll in through the front door anymore, but will arrive via superpowered search engines. The value of microcontent like recipes and sports stats begins rising again, since users will no longer have to find your databases to use them. Publishers that have been building those databases since day one, such as Meredith Corp. with Better Homes & Gardens or perhaps Conde Nast Publications' destination sites like Epicurious, may find themselves sitting atop unexpected treasure troves.

As Jack Griffin, president of Meredith's publishing group, says: "All media brands [including print] ... are going to develop through the way customers find them."