Downsized Dotcoms  | American Journalism Review
From AJR,   March 2001

Downsized Dotcoms   

By Kathryn S. Wenner
Kathryn S. Wenner, a former AJR associate editor, is a copy editor at the Washington Post.     

Related reading:
   » Can Salon Make It?


THE JOBS STARTED DISAPPEARING late last year, with several dozen layoffs at online news operations. By mid-January, television, print and Web news companies were slashing online jobs by the hundreds, like bloated holiday revelers on crash diets.
Most said they were cutting costs because of the slump in spending on Internet advertising, down 6.5 percent in the third quarter of 2000, according to the Internet Advertising Bureau. In an industry that has become known as a money sinkhole, it is hardly surprising that companies are deciding to slash their deficits in an effort to reach break-even status in the next year or two.
 Officials at some companies acknowledge that the cuts, which in many cases have been accompanied by restructuring, reflect the fact that media companies have yet to find a way to make money delivering news online.
 It's also a tough time for companies seeking capital. Voter.com, a site dedicated to generating online political discourse, folded February 5, putting 45 people out of work. Despite such star power as Carl Bernstein and Jack Germond, the company was unable to secure financing after a deal collapsed in November, says 26-year-old founder Justin Dangel.
 Among those companies wielding the ax:
  CNET Networks, parent to technology and commerce sites CNET, ZDNet and mySimon and one of the most successful Internet companies, which cited the dotcom economy slowdown in its February 6 announcement that it is cutting 10 percent of its work force, or about 190 positions. Spokeswoman Blaise Simpson says that to remain profitable, the company needs to │run as lean and mean as we can.▓
  NBCi, the network's Internet subsidiary, which announced on January 18 that it was eliminating about 30 percent of its workforce, or approximately 150 staff positions in all areas of the company. Last summer, NBCi cut more than 100 people as part of a restructuring. NBC itself also announced plans to cut between 5 and 10 percent of its 6,000-member staff.
  CNN, which on January 17 revealed plans for a massive restructuring that would result in the loss of some 400 workers, nearly 10 percent of its staff. A third of the jobs lost came from CNN Interactive, the division that has housed the network's Web operations. Because one major goal is to consolidate CNN's multiple newsgathering operations, Interactive employees will no longer work in a separate division. CNN journalists will now produce stories for radio, television and the Internet. "CNN's goal is to have all its correspondents prepared to package stories for more than one venue, allowing us to speak with one voice in reporting that will cross over from one media platform to another," CNN President of Newsgathering Eason Jordan said in a press release.
  New York Times Digital, which said on January 7 it was cutting 69 positions throughout the company, about 17 percent of its workforce. Company spokeswoman Catherine Mathis blamed the cuts on slow Internet advertising, which accounts for 87 percent of NYTD's revenue, at a time when the company aims to become cash-flow profitable in 2002.
  News Corp., parent of the Fox Entertainment Group, which on January 4 announced the transfer of its Web sites from News Digital Media, its Internet subsidiary, to their counterpart television operations. Between 100 and 300 people out of a staff of 450 will lose their jobs, said News Corp. spokesman Nicholas Weinstock. The move is expected to save several tens of millions of dollars over the next year or so.
  Salon.com, which on December 20 said it was cutting 25 jobs, about 20 percent of its workforce. Its news staff remained largely intact, but the layoffs came just six months after 13 people were let go. Since then, two editorial sections closed and other expenses have been curtailed.
  KnightRidder.com, which said on December 4 that it would lay off 68 people but create 34 new sales positions to take advantage of one healthy area of Internet advertising: online recruiting, which makes up 42 percent of its total revenue. Though the Internet Advertising Bureau does not compile figures for online job ads, spokesman Stu Ginsburg said Web classifieds have been growing, and anecdotal evidence indicates that recruitment is a significant part of that growth.
 Tribune Co. eliminated 80 positions at Tribune Interactive back in October. A significant number of those jobs were no longer needed because of the merger with Times Mirror, company officials said, though some positions were dropped to bring expenses in line with profits.
 TheStreet.com dropped 40 employees, closed its newsroom partnership with the New York Times and shut down its United Kingdom operation in November. The following month, technology business magazine and Web site owner Red Herring Communications closed 32 positions, and in January, Standard Media International, publisher of business news magazine The Industry Standard and TheStandard.com, cut 36 jobs.
 It's a tough ad environment regardless of the medium, says Prudential Securities online media analyst Bill Lerner, made tougher for online operations because so many of their advertisers are dotcoms, which have been failing left and right. Besides, a few established portal sites like Yahoo!, MSN and AOL draw 40 to 45 percent of all online ad dollars, Lerner says, making it that much harder for anyone else to get a healthy share of the pie.
 Analysts and company officials agree that Internet news operations with the best chance for success are big, wide and deep like the major portals, or narrow and deep, like CNET. CNN and News Corp. seem to be aiming for a variation on the former. KnightRidder. com is banking on creating wide and deep sites in the local markets where it owns newspapers. The depth draws the kind of highly targeted audiences that advertisers desire.
 While most newspapers are struggling to make money online, one seems to be an exception. USAToday. com, though it is feeling the downturn in advertising, not only isn't contemplating layoffs but launched a new look for its site the Sunday after CNN and NBCi announced their cutbacks. Jeff Webber, USAToday.com publisher, says his company got a head start on working leaner than some other companies by adding staff more slowly and working closely with the newspaper operation.
 One e-commerce theoretician sees changes in advertising delivery as a key to online success. Andrew Whinston, director of the Center for Research in Electronic Commerce at the University of Texas, envisions companies like AOL Time Warner going heavily into wireless. Users who pay a higher fee can get ad-free content, while those who prefer cheap or free access will have to look at ads, he says.
 Another knowledgeable observer thinks stand-alone may be the way to go. Barry Parr, director of e-commerce research for IDC, says a half-crazy visionary with a lot of money could win big in the online news market by creating a Web-only operation on the scale of USA Today or CNN. Newspaper publishers, Parr says, should realize that "the only way we're going to organically grow online news organizations is as completely separate companies whose mission is to grow their own audiences."

###