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Web Entrepreneurs Find Value In Print



By FOLIO: Staff
02/28/2006

Magazines have long seen the value of increasing readership and advertising revenue through online versions of their publications. But can Web-based publications do the same;bring in more readers and advertising dollars;by launching magazine versions of their Web sites or by acquiring established magazines to complement their sites?

The answer, at least according to a few Internet entrepreneurs and editors, is yes. "From a reader standpoint, there's something more legitimate about print than there is with a Web site," says John Craven, president and senior editor of the Internet portal, BevNET, which acquired Beverage Spectrum in October 2004. "You can hold it in your hands. You can take it on a train."

From a publishing standpoint, a print magazine can give an online publication more credibility and bring in more readers and higher advertising revenue. But launching a print publication is much more expensive than launching on online venture. Here are the stories of three online businesses finding additional success in print.

"From a reader standpoint, there's something more legitimate about print than with a Web site." John Craven, president and senior editor of the Internet portal, BevNet.

EnergyBiz

Steve Drazga, CEO of Energy Central, started his Internet publication for the global power industry in 1995 from a home office. At the time, he employed three people, one of whom, Mark Johnson, is now Drazga's business partner. "We started with a $100,000 investment from an angel investor and boot-strapped from there," he explains.

Prior to starting his online venture, Drazga spent five years in management consulting to the utilities industry, first with Stone & Webster Management Consultants and then with EDS (Electronic Data Systems) Management Consulting Services. Based in Aurora, Colorado, Drazga's online venture generated about $150,000 in revenue its first year in business. Last year, his online ventures, which represent about 60 percent of the total business, generated more than $3 million.

In January 1996, Drazga moved his business into its first office space, which encompassed about 1,800 square feet. Today, the company employs 35 people, all of whom work out of a 10,000 square-foot office.

Nine years later in November 2004, Drazga launched EnergyBiz which is delivered six times a year to more than 20,000 power industry executives.

"Our vision is to create a company that is media-agnostic," Drazga says. "Our goal is to deliver knowledge in the way that professionals want to receive it. Print is a major component of that knowledge delivery strategy."

But the launch of EnergyBiz was costly. Drazga budgeted $160,000 just to launch the first two issues. By the end of the year, he had spent about $500,000 to print all six issues of EnergyBiz. By comparison, an EnergyBiz e-newsletter, which comes out three times a week, costs about $100,000 a year to produce. "It costs about 500 percent more for one twenty-sixth of the frequency," Drazga says. "Our cost structure for online has very little incremental cost to launch new publications or expand our circulation."

Still, the advertising revenue and the increased readership that print can bring in are worth it, Drazga says. EnergyBiz netted $700,000 in revenue in its first full year in publication, close to five times more than Drazga's Internet publication did in its first full year. EnergyBiz is on target to earn about $1 million in revenue this year.

"Many traditional advertisers started working with us both in print and online after the launch of EnergyBiz," he says. "It has both expanded revenue from existing advertisers and generated new revenue both online and in print from a new group of advertisers."

"At the time, it was to our advantage that advertisers who trusted us in our online form, also trust us in our offline ventures."
Nan-Kirsten Forte, editor-in-chief, WebMD the Magazine.

WebMD the Magazine

WebMD has had a storied and profitable existence in the Internet world since it launched in 1998. In April of last year, it launched WebMD the Magazine to complement its Internet ventures. Although costly to start, the magazine is generating increased revenue and has been profitable for WebMD's publishing division, company executives say.

WebMD was launched in Atlanta in October 1998 at the height of the first dot-com boom by a 29-year-old entrepreneur named Jeffrey Arnold. Much as it does today, the site offered health services and news to physicians and consumers.

By May 1999, Arnold agreed to merge his privately held firm with Healtheon, an Internet site founded by Jim Clark, who had previously headed Silicon Graphics and Netscape. With Arnold as CEO and Clark as director, WebMD made its initial public offering in late 1999. In October 2000, with a net worth estimated to be more than $300 million, Arnold resigned.

Today, New York City-based WebMD is billion-dollar company with more than 750 employees, running public Internet portals for consumers and physicians, as well as private health portals to manage the health plans of large employers and insurance carriers.

Editor-in-Chief Nan-Kirsten Forte says WebMD used its brand-recognition to market WebMD the Magazine, which is published 10 times a year and has a circulation of 1 million." Like the Web site, WebMD the Magazine offers health and wellness information to patients, as well as quizzes patients can take in the waiting room, and questions patients may ask physicians. Some content refers readers to the Web site for more in-depth information.

Forte acknowledges the cost to put out a magazine is considerably higher than operating a Web publication. The magazine brought WebMD's publishing division about $500,000 in additional revenue in the third quarter of last year, increasing total revenue to $5.9 million up from $5.4 million in the third quarter a year earlier. Still, the company's total cost of operations;for online and publishing;for the first nine months of 2005 were up $51 million, compared to $37 million in the first nine months of 2004. The increase was driven by the launch of WebMD the Magazine.

The high cost of publishing the magazine also drove the publishing division's earnings down in the third quarter to $1.3 million, compared to $2.1 million in the prior year. Even so, the magazine has been profitable for the company.

WebMD knew it could count on its online advertisers to do some cross-over advertising for the magazine, but also sought out advertisers apart from the site, Forte says. "We wanted the magazine to stand on its own," she adds. "At the same time, it was to our advantage that advertisers, who trusted us in our online form, also trust us in our offline ventures."

Forte says audited figures show a circulation of between 6 million and 7 million for WebMD the Magazine, which is distributed free of charge to physicians.

"Our vision is to create a company that is media-agnostic. Our goal is to deliver knowledge in the way that professionals want to receive it. Print is a major component of that knowledge delivery strategy."
Steve Drazga, CEO, Energy Central.

Beverage Spectrum

Cambridge, Massachusetts-based BevNET was started by president and senior editor John Craven in 1996 in his Boston College dorm room. The venture was funded by a $500 loan from his father, Jack Craven, a longtime publishing executive, who is now chairman and publisher of BevNET.

"The Web site was originally a way to obtain beverages from around the country," John Craven says. "The Web site was well-received and industry feedback helped me realize that there was a business opportunity in the project, as well. Ten years later, we are still going strong."

In 2004, Craven acquired Beverage Spectrum, a wholly owned subsidiary of CSP Information Group Inc., an Illinois- and New York-based publishing company. At the time of the acquisition, Craven's father, Jack, readily acknowledged the "man bites dog" scenario. "This is not your typical acquisition of Internet by a print media company and may point to an interesting trend: Profitable Web acquiring print," he said at the time.

"We're not exactly a tech-savvy company," explains the younger Craven. "We see sort of a premium value in the print format, especially in terms of advertisers who want to be able take that tear sheet and put it on the wall as something they can have and look at."

The magazine is published eight times a year and has a monthly circulation of more than 17,500 retailers, distributors and brand marketers. Craven says it costs his company about $1,500 a month for basic "bare bones" Web hosting and other fees related to keeping his Web site online, and about 10 times that amount, or $15,000, just to print one issue of his magazine.

Today, BevNET has total revenues of greater than $1 million annually, compared to a few thousand annually in its first year. "Revenue (for the Web site) has grown about 300 times since year one. The magazine was bought using profits from the Web site and since acquisition we have almost doubled print revenue," says Craven.

Print gives advertisers more flexibility. "You can do a whole page ad or whatever you want," Craven continues. "On the Web, it's mostly banner formats. It's like being a print publication and telling your advertisers all they can have is a quarter-page ad," he says. "We want to be in different mediums, print is one of them."

Craven says the magazine also makes his online site appear more credible. "There's a preconceived idea, from a consumer standpoint, that Web sites are just fan sites. The magazine gives us more legitimacy."

BevNET will take another page from more conventional publishers by acquiring more publications and also is trying its hand at hosting b-to-b conferences.

Print vs. Online

EnergyBiz puts out an e-newsletter three times a week at a cost of about $100,000 a year. The magazine, at six issues a year, costs about $500,000 to produce annually.

WebMD's third quarter 2005 print revenue was up slightly to $5.9 million.

BevNet spends about $1,500 a month in Web hosting and other fees to keep its Web site online. It costs the company 10 times that amount, or $15,000, to print an issue of its magazine, Beverage Spectrum.

By FOLIO: Staff
02/28/2006







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