NEW YORK (Reuters) - The few online publishing ventures that have survived deep cost cuts and the prolonged ad slump so far will look to more paid services, mergers in the industry and deep-pocketed parent companies to weather the dismal outlook projected for this year.
Companies in the sector "made hard decisions on costs in 2001," TheStreet.com Chief Executive Thomas Clarke said in an interview. "2002 is the year when you have to start focusing on revenue growth and driving revenue again."
Executives have taken a conservative outlook for the year, forecasting little to no rebound in the economy, and have focused on getting operations to profitability and finding new ways to make money.
"We are not projecting a huge amount of growth this year," MarketWatch.com Inc. (MKTW.O), Chief Executive Larry Kramer said in a recent interview. "If advertising comes back in any shape and form, it's going to be an awesome year."
Online financial news provider MarketWatch.com, in which Viacom Inc.'s CBS and Pearson PLC have stakes, has said it expects to be cash flow positive for the fourth quarter that just ended and Walt Disney Co. (DIS.N) said its Web operations will get out of the red by the end of 2002.
The WSJ.com, the online unit of Dow Jones & Co.'s (DJ.N) flagship Wall Street Journal, continues to be one of the few examples of what works in the sector, largely because it has been able to make money by charging at the start of its run.
The online media landscape has also been littered by a slew of ventures that threw in the towel including APB.com and Inside.com and the Web efforts of major media companies such as General Electric Co.'s (GE.N) NBC and News Corp. (NCP.AX), who ended up folding the ventures back into the more traditional parent concerns after they had little luck on their own.
Both Disney and the New York Times Co. (NYT.N) have said cost cuts made in 2001 will help move their Web operations into the black this year.
MarketWatch.com also spent much of 2001 restructuring to a level where it could meet objectives and build a business and then sought out new revenue sources, such as licensing or bulk subscriptions to other large companies for their customers.
"Licensing very definitely closed the valleys and gave us the opportunity to run the company at a certain level," Kramer said.
Online financial news provider TheStreet.com Inc. (TSCM.O) has turned to paid products and services aimed at a niche audience of professional and institutional investors to weather the ad doldrums. The paid products should comprise about 70 percent of the company's 2002 revenue, Clarke said.
The Sept. 11 attacks on the United States also highlighted that the Internet has increasingly become the place for breaking news, especially for at-work computer users, positioning the Web to become the "prime-time" for daytime hours.
Financial sites are best poised to benefit since their information and news is most targeted to market- or daytime hours, analysts said.
Still some industry experts are skeptical about whether new services will get online publishers through 2002.
"Right now it looks like the sites doing the best are financially tied to a larger organization that has other media products either paper, TV or radio," said John Pavlik, of Columbia University's Center of New Media.
The all-important relationship
Slate, the online magazine backed by Microsoft Corp. is one venture that has such a relationship. The other is WSJ.com.
"WSJ.com works because it is the only example of paid content. Two-thirds of their subscribers don't buy WSJ in print," said Patrick Keane, analyst at Jupiter Media Metrix, who said he was bearish about other newspaper's Web efforts.
It is becoming harder to give newspapers a reason for throwing money at Internet initiatives, Keane said.
"For the first time, we are really getting a sense if this is just promotional content or is there an incremental opportunity," he said.
Using traditional media company's Web initiatives for promoting offline assets, such as with Disney's ESPN, does offer value because the Web site can help the network from losing audience share to the Internet and competing channels by offering compelling information, Keane said.
Consolidating market share during the downturn could also help online publishers grow revenue, analysts said.
MarketWatch.com is now in the shape to look for potential deals, Kramer said. While the company has not identified specific examples, Kramer said companies that had tried to be financial portals could be potential candidates.
Edgar Online Inc. (EDGR.O), Hoover's Inc. (HOOV.O) and Multex.com Inc. (MLTX.O) are among those that offer specific types of financial information and could be attractive partners.
Media giants AOL Time Warner Inc. (AOL.N) and Yahoo! Inc. (YHOO.O) are trying to bulk up their financial offerings, for example, and could also be suitable partners for some of the independent news and tool providers, analysts added.
A pick-up in mergers and acquisition activity could indicate that the buyer has seen a bottom in business fundamentals and wants to be pro-active before valuations go up, said Salomon Smith Barney analyst Lanny Baker.
MarketWatch.com shares were off 6 cents at $3.42, down 18 percent from its near-term high hit late November and off sharply from its $17 initial public offering in 1999. Shares of TheStreet.com -- at $1.41 -- were up about 35 percent from its near-term low touched mid-December, but considerably off its $19 IPO price in 1999.