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New Strategy Tried as Once-Profitable Online Marketer Runs in the Red

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NEW YORK ( -- Diet Web site eDiets has launched a free online magazine today for its 13 million subscribers that mirrors hard copy magazines in its appearance.
EDiets' new digital magazine looks like a print publication but is published in a special .pdf-like format.

Executives at eDiets believe the concept will expand the company's advertising base beyond food and nutrition marketers and eventually attract a raft of new subscribers -- even if they're not members of eDiets.

$9.85 million loss
After years of profitability, for the first nine months of 2004 the health site incurred a loss of $9.85 million, compared with a loss of $2.82 million for the year-ago period. Most of that loss was due to a 50% increase in sales and marketing costs, which included a foray into TV advertising. This year, the $31 million marketing budget will increase by 15%.

CEO David Humble said the e-magazine will be personalized to eDiets members' particular interests; for example, diabetes, lifestyle, low-carb and fitness are four of 13 topics that will be offered. Different topics allow advertisers to target their ad messages to a specific audience.

Personalized service
Seven-year-old eDiets was a pioneer in online personalized weight programs, which have the benefit of offering anonymity and 24-hour service. There are more than 20 diet plans on the site including Atkins, Dr. Phil's and Slim-Fast Optima. An automated lifestyle assessment engine matches a weight-loss plan with an individual's height, weight, lifestyle and other characteristics. A nutritionist is on call and members fill chat rooms around the clock for dieters seeking support.

But today, in a crowded field of weight-loss purveyors including Weight Watchers and WebMD that employ many of the tactics that eDiets made popular, Mr. Humble is gambling on the digital magazine concept to set eDiets apart, and in the process regain profitability.

Analysts question whether the format of the magazine will appeal to consumers or backfire.

Resembles a print publication
The magazine differs from a Web site's content by resembling an offline print magazine. Readers can leaf through the pages as they would a hard copy, with stories and art appearing exactly as it would offline. But unlike a paper magazine, the ads can use animation, video and audio and let the reader interact -- answering surveys, clicking through to an advertiser's Web site or buying a product on the spot -- without losing their place in the publication.

"The technology is trying to mimic the offline magazine reader's experience in which the ads are part of the enjoyment," said Georgeanne Brown, vice president of marketing services at the Deerfield Beach, Fla., company.

That incidence of reader engagement, incidentally, is viewed in much the same way by offline publishers, who at industry conferences last year said readers considered the advertising to be part of a magazine's editorial fabric -- in stark contrast to how ads are viewed on TV and the Internet.

Subscribers to eDiets are the typical readers of women's magazines, Ms. Brown pointed out: 80% are women between 24 and 54, with household incomes in the $70,000 range. The average subscriber wants to lose 50 pounds. The lifestyle issue that debuts today has 9 million readers, the diabetes version 185,000. The 11 other titles will roll out over the winter.

Segmenting to an avid audience is the appeal for Splenda, the sugar substitute, which is advertising in the premier issues. "We want to make sure we are reaching the right target," said Cathy Grayson-Roper, a spokeswoman for McNeil Nutritionals, maker of Splenda. She said she expected the diabetes placement to resonate especially well. Other advertisers purchasing placements at launch are Discovery Health Channel, Hydroderm, Kraft, Murad and Revival Soy.

The success of Mr. Humble's new gamble depends on whether consumers, accustomed to content served up in a digestible but decidedly Web-centric manner, respond to an online publication that looks like a magazine.

'A step back'
"It's like a step back," said Nate Elliott, an analyst at Jupiter Research. "This is the Internet, it's not print. There's a reason that TV developed beyond the point where an announcer looked into the camera and read copy."

"I suppose its fun to 'flip' the pages the first time through but unless I can roll it up and take it to the girl's room I'd rather have the real thing," said Colleen DeCourcy, executive creative director at interactive agency Organic.

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