PROFITABLE CONTENT WEB SITES: Secrets to their success

Definition

For the purpose of this report we have chosen to focus our definition of successful new media enterprises on those that are currently profitable. This definition was chosen in order to ensure that EPS? choice of case studies remained as objective and unbiased as possible as profitability is a mark of success recognised throughout the business community.

Whilst web publishing has been evolving over the past ten years and moreover, profitability amongst new media enterprises remains a relatively rare phenomenon and whilst this has meant that, in many ways, our choice of case studies has been limited, it also enables us to highlight with some confidence ?best of breed? examples. We have chosen a range of case studies to include content sites appealing to niche, targeted marketplaces as well as more general horizontal audiences.

Case studies

Following our definition, interviews were conducted with senior management representing:

• Consumer Reports Online
• Estates Gazette Interactive
• Metal Bulletin
• Vavo.com
• The Wall Street Journal Online

Decline in advertising

With the internet advertising industry currently experiencing a downturn, many companies previously reliant on advertising revenues are looking to generate funds by charging for their content. According to figures released by Forrester in February 2001, 80% of content sites are not profitable with consumers unwilling to pay for content as the majority of online content is perceived to be of a low quality. However, consumers who do recognise quality content online are three times more likely to pay for it. This finding is corroborated by an ICM Research report, commissioned for Mondex in May 2001, which shows that an average of 57% of consumers would pay for content, from music downloads to information on the weather. The survey also revealed that respondents were prepared to pay an average of 63p per download. The Wall Street Journal Online is a key example here, and our interview with Neil Budde, Publisher of WSJ Online, highlights the efforts the company takes to ensure that the customer remains satisfied with the quality of its content and product offering in general.

Start-ups v bricks and mortar

Recent research reports and industry headlines in the past few months have highlighted the difficulties new media enterprises can have in achieving profitability. Research published in April 2001 by the Javelin Group warned that most ?pure-play? e-commerce firms are unlikely to survive without developing partnerships with traditional ?bricks and mortar? retailers - a finding confirmed by a number of our case study companies which have found a bricks and mortar parent/legacy company to be advantageous.

An exacerbating factor here is the fact that the level of competition between new media enterprises - and bricks and mortar entities - is rife. Mitchel Ingham-Barrow of Metalbulletin.com highlights a case in point - at the end of 2000 209 e-marketplaces operated in the global metals industry. Only four remain - one of which is Metalbulletin.com.

There is some evidence to suggest, however, that new media enterprises in general are having more success than some of these reports suggest. Research published by ActivMedia in June 2001 claimed that in actual fact, 54% of those dotcoms aiming to make a profit have done so, with a further 28% expecting to be profitable by the end of 2001.

Key issues

EPS identified seven areas of major importance when conducting interviews. These were:

• Products and services;
• Organisational structure;
• Personnel;
• Customers;
• Branding and marketing;
• Print legacy;
• Business models and strategies.

Products and services

All companies we stressed the importance of their product (ie content) to their success. Those with print l