Online newspaper sites not profitable quite yet

But the biggest sites such as the Chicago Tribune and the New York Times continue to hemorrhage as they maintain extensive staffs and operations.

"It seems fairly obvious that the long-awaited Year of the Dollar is finally arriving," said Eric K. Meyer, online news analyst and professor of journalism at the University of Illinois in Champaign-Urbana, in an e-mail interview.

Hundreds of online news site executives will descend on the Newspaper Association of America's Connections conference in Orlando, Fla., later this week, many seeking tips on developing revenue, marketing and news improvements for online news publications.

Most-visited sites losing money
None of the three most frequented news sites reports profitability:

CNN, which has claimed profitability in 1996, when it launched, and in 1997, reports it will not be profitable this year because of several capital investments.

Meanwhile, at CNN's archrival, MSNBC, staffing and startup costs mean profitability is a year or two away, according to Merrill Brown, MSNBC's editor in chief.

"Like the medium, we're doubling revenue year to year. We're on plan," said Brown. "This organization has 200 people attached to it, so figure out the economics of that. We'll be profitable in a couple of years."

CNN Interactive reports 210 to 220 staff members, while USA Today reports 90 staffers.

USA Today reports it may break even this year as revenues are over budget and costs are below budget. Transaction partnerships with the likes of Preview Travel and Barnes and Noble account for 30 percent of the site's revenue, said vice president and general manager Lorraine Cichowski. USA Today gets a percentage of the transaction revenues from the partnerships. Banner advertising also is strong revenue producer.

Art of the deal
"In exchange for exclusivity on the sites, vendors attempting to build business are willing to guarantee (lucrative deals)," Cichowski said. "It's safe to say we've been the beneficiary of those payments."

According to the U.S. Commerce Department's "The Emerging Digital Economy" report, the New York Times lost between $12 million and $15 million from its Web projects in 1997, even though its undisclosed online revenues grew 66 percent.

"Revenues are very strong," said Chris Neimeth, vice president and director of sales and marketing for the New York Times Electronic Media Co. "Advertising is by far the strongest; and then sponsorships, reselling database of articles to Lexis-Nexis and Dow Jones; archiving; and subscription fees from overseas."

"We're very excited by consistent growth of registered users and page views, and importantly, revenues. We have consistent growth on all three."

Tribune spent $30 million
Meanwhile, the Tribune Company spent $30 million in 1997 on its interactive properties, including Tribune Interactive, four online newspaper Web sites, its stake in Digital Cities and Tribune Media Services, while taking in $12 million.

The Tribune expects to spend about $40 million this year, while doubling last year's revenue to about $24 million, said Owen Youngman, director of interactive media for the Chicago Tribune.

Media giant Knight Ridder forked over $27 million last year to finance 32 of its newspaper sites, while making $11 million, the government report said.

"There are a lot of companies in the interactive media field that have started making money. Some of them are making significant money," in the seven figures, said Peter Zollman, an online news consultant based in Altamonte Springs, Fla. He declined to name them because he is researching a similar report.

"There are some companies that have decided strategically that they have created sites -- not necessarily for being profitable -- but for experimenting, learning and building."

WSJ counts on subscribers
Meanwhile, the Wall Street Journal reports it has sold 150,000 subscriptions online -- the only major newspaper to sell subscriptions online. That's about $6 million, plus roughly $10 million in ad revenues, said industry analyst Benjamin Compaine, a research affiliate at Harvard University.

"Are they making money on this? Depends on how they do the accounting," Compaine said in an e-mail interview. "In fact, whether the others are profitable depends to a large extent on how they load joint and common costs with the print paper."

The leading revenue streams are banner advertising, partnerships, sponsorships, becoming an Internet service provider, Web design services, Web hosting, subscriptions, and selling content through archives.

"The problem is, all the ideas are for quick fixes, not long-term profitability. When you can't sell the base product, the next step is gimmicks," Meyer said. "Those who believed from the beginning that this was a supplemental medium seem to be doing OK.

"The rest? Well, time -- and shareholder patience -- will tell."

Smaller sites make money
Zollman reports that several online newspapers, particularly smaller sites with lower overhead, are profitable. They include the Arizona Star; the Fort Worth (Texas) Star-Telegram; and the Plainview, Texas, texasonline.net site, among others.

"I can no longer count the number of sites that are making money on one hand. There are dozens of sites in the media arena that are making money online," Zollman said.

Martha Stone teaches New Media & Technology at Roosevelt University in Chicago, and is a frequent contributor to ZDNN.