Nisenholtz's big-picture view of Web ads' future is bright

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Martin nisenholtz made his new-media bones years ago. Only 45, he can look any twentysomething dot-com hundredthousandaire in the eye and say with a straight face, "I was at this when you were in diapers."

Perhaps to his chagrin (he's too discreet to ever let on), Nisenholtz never cashed in while those around him were getting rich. But he also never backed down from his belief that emerging technologies would change everything.

In 1979, Nisenholtz was a research scientist in NYU's alternative-media lab, working on early teletext projects. He left the university in 1983 to join Ogilvy & Mather, although his inner academic is never far from the surface (he peppers even casual conversations with phrases like, "it's sort of binary").

Since mid-1995, Nisenholtz has run The New York Times Co.'s digital unit. A year ago the company was in a quiet phase, but its IPO was eventually called off. Now reality has hit the Times Co. even harder. First, it backed out of a joint newsroom venture with TheStreet.com and sold most of its stake in that company. Then Nisenholtz was forced to lay off 69 staffers. He blamed the slowdown in advertising and said he still expects his unit, which had $28 million in losses in the first nine months of 2000 on revenue of $37 million, to hit profitability in 2002. A second IPO filing should follow that.

"For us, it was about one thing and one thing only-the advertising turndown," Nisenholtz said over lunch in a private dining room at the Times Co.'s 43rd St. headquarters. "It wasn't a change in strategy."

Nisenholtz said the loss of dot-com ad dollars will be only partially offset as traditional marketers increase their online spending. "They're not moving in fast enough to replace the money that dropped out, but our hope is the money moving in is more sustainable."

The layoffs were the first topic of discussion because they had been announced just a day before our lunch. But in conversations with Nisenholtz, the real value is in the big-picture view.

He doesn't think charging for content is scalable, but does see opportunities to get money for premium services. He still believes in ad-supported models and is angry with those who say Web ads don't work. "There has been a horrible and unfair belittling of the Internet as an advertising medium. It's a pile-on. Where's the information? Where's the data? The argument is the medium isn't as emotive, doesn't have the same resonance. But that depends on the environment."

Strong content sites, Nisenholtz says, have bonds with their audience as strong as any TV show or magazine. For that reason, he believes the Internet is effective as a brand-building platform, not only as a direct-marketing tool.

The biggest megatrends Nisenholtz sees are the "Webification of entrepreneurs" and the "distributed notion of information," which promise to transform supply chains and customer interfaces. "It's a huge change, generational in some ways," he said. "It will ultimately change the way people get information."

Nisenholtz rejects the idea of convergence and the notion of a non-PC world. He expects, instead, divergence in the form of devices that will give people multiple ways to access and interact with digital information.

While the dot-com bubble has burst, Nisenholtz expects another period of momentous change to hit the marketplace in about two years, a shorter-than-usual business cycle. Eventually, he said, sustainable business models will be implemented and profits will be made.

"The Internet continues the trend of applications being ahead of business models," Nisenholtz said. "It's been true for 20 years and it will continue to be true. The trick is to get these things in alignment, and very few people can do that."

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