AJR  The Beat
From AJR,   July/August 2000

Red Ink Blues   

Red ink catches up with a few online news organizations.

By Lori Robertson
Lori Robertson (robertson.lori@gmail.com), a former AJR managing editor, is a senior contributing writer for the magazine.      

Red ink catches up with a few online news organizations, prompting the question: Can news sites, particularly the independent ones, make it? Crime and justice site APBNews.com runs out of money and announces it will close shop; Salon.com lays off 13 staffers as part of a budget-trimming effort.
The 20-month-old APBNews.com was known for its hard-hitting journalism, but its finances were another matter. APBNews Chairman and CEO Marshall Davidson told the 142 employees June 5 that last-minute financial negotiations had failed and the site, which boasted about 1.3 million unique visitors in its last month, would close.
APBNews did continue to operate, thanks to staffers who volunteered their services. In mid-June, the site began paying a small staff as it doggedly hunted for an investor, but its future is uncertain.
"I think [Web sites] putting out traditional information...particularly news sites...are going to have a hard time," says Sydney H. Schanberg , editor of APBNews.com's investigative team. The New York Times and Newsday veteran says he's not sure a stand-alone journalism site can survive on the Web. "People would hope for some sort of partnership with a larger journalism entity," he says. "But then you have to ask yourself, 'Would the personality of the Web site stay the same?' "
Vice President of Communications Joe Krakoviak said he could not confirm reports that the company had $50,000 on hand and $7 million in debt when it announced the layoffs. Of its funding, he says, "We have raised $27.1 million through two completed rounds of financing and an uncompleted third round.... That money has virtually all been spent in a period of just about two years."
The business plan, says Krakoviak, concentrated on building quality content. That approach--content first, revenue later--applies to the vast majority of news sites. And the dependency on the investment mood of venture capitalists is clear; APBNews' financing hopes suffered when stock market valuations of dotcoms tumbled this spring.
APBNews Vice President and Executive Editor Hoag Levins doesn't think the site's monetary collapse spells pending disaster for other news sites. "Everything I've seen since I've been involved in the Internet...tells me that the Internet is the future of the news industry," he says, adding that it will take time for profits to come to the Net.
Rich Jaroslovsky , managing editor of the Wall Street Journal 's online edition and president of the Online News Association, agrees. "I kind of look at it as growing pains in the medium," he says. "We're still at a point where the ability and the ambition to cover the news in interesting and innovative ways on the Web has outstripped the ability to figure out a business model that works."
It's beneficial to have a deep-pocketed parent, he says, that understands Web sites need "to be in investment mode right now and not necessarily profitability mode."
Salon.com's managing editor, Scott Rosenberg , knows the struggle facing independent sites. Five-year online veteran Salon laid off 13 staffers, seven of them in editorial, to help trim its fiscal year 2001 budget by 20 percent. (The staff now totals about 135.) The site expects a $6 million shortfall in the $35 million fiscal 2000 budget, and content, including media, books and travel coverage, took a substantial hit.
Rosenberg says it was "depressing" to see the personal essay-filled travel page go. The section didn't bring in the revenue Salon had hoped for, and now travel pieces, more oriented toward business travelers, will reside in the business section, he says.
Profitable newspapers or magazines, Rosenberg says, are in positions to say of their publications, " 'Well, there are certain things that we are going to do that are losing money.'... When you're not making money, you have to be tougher."
Salon views what happened to APBNews as a "cautionary tale," he says.
The apparent demise of that site is bittersweet to Schanberg. He's sad that the site may not continue, he says. "But it's hard to be sad about something that was so fundamentally based on quality and so much fun."

--Lori Robertson