From Gutenberg To Glutted Blurb:

An Examination of the Online Content Industry

by Binhtri Huynh

Winter 2001

IS 246 – Social and Cultural Impact of New Information



The concept of online information content is simple enough – any articles of work which can be read, heard, and viewed online. Those who are involved in supporting these actives are called online content provider. In and of itself, online information is not a new idea. Establishments such as Dialog and Lexis-Nexis have provided access to online databases for years. However, unlike today’s online content provider where the information is "free", these organizations derive most of their revenue from complex pricing models that include fee-based searches, hit charges, and usage time (Basch 2000). Additionally, whereas the Dialog and Lexis-Nexis are more considered content aggregators – archiving and disseminating information from a multitude of sources - today’s online content provider are more likely to publish original and timely articles. At present, there are three identifiable models of online content provider: news/information, search engine/portal, and peer-to-peer.

News and Information

Some major establishments in this segment include Salon, iVillage, Drkoop, and MarketWatch. Each represents a niche segment of the online content market. Salon is a nationally recognized news and investigative journalism agency. Salon is what has been called a pure-play organization - publishing exclusively for the online market rather than offshoots from print or broadcast journalism. iVilliage caters to a female audience by publishing original content pertaining to career, health, and family. DrKoop is a health and medical reference site. The site is named after the former Surgeon General Dr. C. Everett Koop, who also is on its board of director. MarketWatch is one of many growing concerns catering to the recent explosion of online trading. They provide financial and industry market analyst content.

Search Engine and Portal

One of the first and most prominent establishment in this segment remains Yahoo!. Other includes AltaVista, Networks (a Disney subsidiary), MSN Networks, and AOL. Other smaller and recent startups include,, and The basic premise behind all of these sites is that they provide an entry point to the Internet. All feature an internet search functionality using some sort of unique algorithm. Certain sites also provide services such as news, email, discussion group, or online auction.


With the recent rash of unfavorable court rulings against some these establishments, the future of the peer-to-peer exchange model of online content providers remain in doubt. One the most notable establishment in this segment is Napster. Its services allows users to swap MP3 (digitally recorded and compressed music). Unlike the aforementioned models, the peer-to-peer model does not produce original content. It is simply a facilitator for the sharing and exchanging of files. Questions of legality arise because these services have not implemented any mechanism for providing financial reparations to the artists and their recording labels (i.e. copyright holders).

The focus of this paper centers on the first two models of the industry. It examines the promise of online publishing and provides case analysis of several establishments, analyzing how successful – or unsuccessful - some of these organizations have been. Business models will be identified. It concludes by providing an outlook on the future of online content industry.

The Promises of Online

The online world has taken the publication industry by storm. Similar to the hoopla surrounding the "Old Economy" and "New Economy", which references the economic shift from industry stalwarts such as steel and automobile to faster growing industries such as technology and biomedical, those in the publishing industry must now confront the shift from "Old Media" to "New Media." And in less than five years, New Media has already been successful at attracting readers and advertisers from the Old Media. Example:, an online content provider, attracts more than 1.9 million visitors per month than the 1.8 million circulation of the printed Wall Street Journal.

What exactly differentiates the two media world? Old Media is considered those affiliated with traditional outlets including print and television. They are giants such as the Wall Street Journal, BusinessWeek, and National Broadcasting Company (NBC). New Media, on the other hand, references those who have taken advantage of the growing numbers of internet users by publishing or developing online content. Startups such as and are just two of the industry leaders in their respective fields.

Advantage of Online

Why the sudden rush to go online? Many factors play into the equation and no single one stands apart from the rest. Two factors frequently mentioned are the ease and economical characteristics of distribution. This is especially applicable to the publishing sector. In terms of ease, internet publication will reach a wider audience with little effort. Economically, distribution can be achieved without the need for paper, postage, or sophisticated broadcasting mediums. In fact, the internet epitomizes the idea that anyone can be his or her own publisher.

New Rules of the Games

Online publishing represents a dramatic shift in the way readers and content interact. The traditional view of publication is that the readers come to the content (Posnock 2000). For example, publishers would print their periodic content with the intention that it will eventually be purchase by the reader. With online publication, however, the role has been reverse. Because the internet has facilitated an information glut, it has increasing become the responsibility of the publishers to reach their intended audience. Other factors that have contributed to this role reversal have been a wider audience base and the plethora of choices available to them. This change has often been referred to as the pull versus push model of publication, with former signifying pulling in readership, while the latter representing pushing content out to find their audience (Posnock).

Convergence of Worlds

Recognizing the emergence of the online world, most of the Old Media guards have not been sitting idly as control is slowly wrest from them. Some have devised some innovative business models that reflect their embrace of the online world. Two widely used approach is content redistribution and business alliance and investment with online content provider. Both approaches represent how Old Media and New Media are more likely to be partners then adversaries.

Content Repurposing

Most publishers have taken to the practice of selling and redistributing their content online to a growing number of content distributor – a practice call "content repurposing" (Posnock 2000). The advantages of this practice are numerous. First, content repurposing requires none or very little effort and expense. Secondly, repurposing allows publisher to garner greater brand exposure and customer acquisition (Posnock). Publishers are able to target their audience with content based upon the site’s focus. Finally, revenues generated from content repurposing are significant. Publishers are discovering that online content redistribution can add up to "5 percent in incremental, and highly lucrative, revenue" (Posnock) – an amount almost comparable to list rentals.

The drawbacks to content distribution are two folds. First, too much distribution may dilute the significance of the content. Secondly, publishers must be wary about their content usage and copyright infringements. Most content distributors give publishers the right to withhold their content from objectionable sites. The importance of content repurposing, as stated by Posnock, is for publisher to "maximize the opportunities through a cautious approach."

For online content provider, particularly in the search engine/portal segment, the use of content repurposing has been a win-win situation. For starter, while most are infused with venture capitalist investment, they also lack significant amount of content to generate the needed. Redistribution enables them with the opportunity to acquire the needed content, at a reasonably lower cost than producing original content. The acquired content can then be used to generate traffic needed for consumer awareness and brand equity.

Several examples of content redistribution include Screaming Media, Themestream, and TV Guide. The former two represents the growing number of online content distributors, while the latter serves as an example of Old Media publication reinventing itself in an effort to regain its readership.

Screaming Media/Themestream - Screaming Media maintains a network of over 900 sites including, NBC, and Telemundo (Posnock). Screaming Media pays publishers a fee for their contents and in turn charges sites the rights to publish these contents. Currently, Screaming Media has over 1,000 publishers on its roster, with about 30 percent of them magazine companies (Posnock). While also in the content redistribution business, Themestream business model is very much different from Screaming Media. Themestream focuses on generating revenue through guiding consumers to e-commerce providers. Publisher can use Themestream as a means of reaching a specific audience base. For example, Sunset Publishing, uses Themestream to redistribute their content. As stated by Steve Seabolt, president of Sunset Publishing:

"We are allowing them to publish our content … [the publication] gives the consumer – who has preselected his or her interest in this particular type of vertical content – the opportunity to come back to Sunset’s site to deep his or her relationship with the magazine." (Posnock)

TV Guide – Having maintained a successful print circulation for years, TV Guide recently found itself with a 6 percent circulation drop in the first quarter of 1999 (Joss 1999). Although the exact reasons for this drop were not specified (ubiquity of online TV listing most likely culprit), the management team at TV Guide opted to redistribute their print content through various online ventures as a means of recuperating loss advertising revenue and audience share. These ventures include a TV Guide Web site, a digital interactive channel called TV Guide Interactive, and an e-commerce initiative called TV Guide Direct (Joss).

Alliance and Investment

The practice of alliances and investments are particularly emphasized between the broadcast networks and online content providers. Two reasons justify this approach. First, the networks do not want miss the boat on the "next big thing" – this being of course the internet. Thus, to gain footing into the online world, most networks have partnered themselves with online content provider with financial support or prime promotional airtime. In return they receive a percentage of stakes in equity. For online content provider, the deal is almost too good to refuse. They get a much needed infuse of capital and access to a mass market that they could not otherwise afford.

Disney/InfoSeek – In an effort to penetrate the online market, Disney acquires InfoSeek, a search engine/portal, and Starwave Media in a complex purchasing agreement. Infoseek gets repackaged as and is operated under the Disney online umbrella, that includes its ABC broadcasting unit,, and various cable operations such as ESPN. Unfortunately, in the race for search engine/portal traffic, GO was unable to compete with the likes of Yahoo! and AOL. After many unfruitful attempts at revamping GO’s mission and identifty its niche’ market, Disney decided to fold its operation.

CBS and Promotional Tie-Ins – CBS, much like other broadcast network, made several investments with some notable online content providers. However, unlike Disney, the management at CBS opted to provide promotional and adversarial support for stakes in these fledging sites. Some the most notable arrangements included a $150 million promotional deal with Medscape Inc., a health and medicine site, for a 35 percent stake in the company. Others promotional deals netted stakes in MarketWatch and SportsLine. For CBS, these deals represent a reasonably inexpensive route in gaining a foothold into the online world. On the hand, in return for stakes in equity, online content providers get an opportunity to hawk their services to a wider audience that includes television, radio, and cable.

Business and Revenue Models

Despite the sudden proliferation of online content providers, an outpouring of venture capitalists backing, and continuous bombardment of marketing hype, one fact that have until recently been overlooked – the majority of these online content providers have yet to turn of profit. Most sites were conceived with the intent of establishing a niche market and amassing a user base.

Establishing a niche requires targeting a specific audience and publishing information that caters to their needs. DrKoop, WebMD, and Medscape all are orientated in providing medical advice. Both TheStreet and MarketWatch are examples of sites that provide timely and accurate financial market analyst. Thus, similar to the cable television industry, the online content industry has offerings that are broad in scope, yet narrowly defined.

Amassing a user base is slightly more involved and involves two strategies: devoloping a site that both generates and retains traffic. Generating traffic – "eyeballs" – is a measurement of how many people visit a particular site. Since profitable was understandably unobtainable for the immediate time, a site’s success was based on this measurement of performance. Retaining traffic – stickiness – was a measurement of how long a site could maintain users’ attention once they are on the site. As stated in a recent article:

"The ultimate goal is to create sites worthy [of being] ‘sticky,’ commanding Web surfers’ attention for minutes, even hours, in a medium where people jump from site to site in seconds."

The premise behind both strategies is that once users are at the site they represent the perfect opportunity to be sold something - be it directly from the site operator or click through on revenue-generating ads. Unfortunately, however, both traffic and retention have not contributed significantly to revenue.

Pricing Content

With most content provider siphoning the majority of their revenue from advertising, the issue now becomes how will these sites can ever achieve profitability if advertisers suddenly realize that their marketing dollars are more effective elsewhere? Additionally, the escalating proliferation of content providers will only result in greater competition for a slice of a much smaller market for online advertising. Can these sites continue to be operational? Will content remain "free?"

In her article, "Going, going -- Pricing Information," Reva Basch believes that the establishment of pricing model for online content can easily be achieved in the current scheme of things. Much like the Dialog and Lexis-Nexis of the pre-internet years, today’s online content providers could be successful in implementing a pricing model if the information they provide is view to be of value by their audience. As she states:

"[the Net] has matured beyond ‘it’s all free for the taking’; given the right combination of sources, pricing, convenience, and ease of use, business and professional users are willing to pay commodity prices for the informaiton they need." (Basch)

Stephen Arnold, in his article "The Joy of Six Internet Content Revenue Models," reinforces the pricing model concept, by identifying six types of models: subscription fees, per-use fees, license fee, Web site usage fees, upfront or activation fees, and advertier fees (2000).

Subscription fees. The premise behind this model is to get customers to pay upfront for access to certain services or content (Arnold). The use of this model has had mixed results. On one side of the equation there is AOL with its phenomenal revenue and a continuing increasing user base. Despite its reputation for being an "Internet service with training wheels", AOL remains one of the few profitable content provider. Yet on the other side, there is TheStreet, which recently abandon its subscription model in favor of a free, advertising-supported site.

Per-use fee. This model charges the user only for information when they need it. It is a model mostly implemented by online content aggregator. Additionally, although most newspaper sites provide their current content free of charge for a certain time frame, a fee will be imposed for access to the same content once the time frame expires.

License fee. The practice of licensing fee is to create the most complex algorithm possible in order to maximize return (Arnold). From a user perspective, the advantage of licensing is that it will enable use of resources without the hassle of restrictions that may be impossible to enforce (Arnold). In the pre-internet era, licensing by establishment such as Dialog meant unlimited access to a specific database.

Invisible fees. Arnold discusses the use of invisible fees as those incur when a user clicks/follows through on an advertiser banner. The online content provider will be compensated for the user’s follow through, although this may amount too little more than perhaps a penny.

Activition fee. This is fee may only be charged once, and is associated with special activities that are required for the establishment of new accounts. The fee is more likely to be imposed by certain segment of the online industry such as internet service providers (ISP). Arnold, however, did mention that Dun & Bradstreet was "at one time a master of the activation fee." Though he failed to elaborate exactly how.

Advertiser fee. Perhaps the most practiced of the model, advertising fees represents the bulk of revenue for most online content provider. For the user of these online content providers, the fees have resulted in a barrage of banner ads. For advertiser, their advertising expenditures may enable them to tap into a market viewed as more affluent, urbane, and sophisticated. Advertising fee on search engine/portals sites might also provide the advertisers with preferential placement of their services or products on a result screen. was one of the first search engine site that readily own to the fact that its search results were based on advertising fees.

Case Analysis

With a better understanding of the revenue models, we now turn our attention to various content providers and their approach in achieving profitable, or, perhaps, for lack of a better phrase, continued survival. We examine three online content providers including Salon, TheStreet, and DrKoop, and one search engine/portal – Yahoo!.

Salon has the distinction of observing a milestone that very few online content providers have been able to observe – a celebration of its five-year existence. Launched in November 1995, Salon has been committed in producing original editorial, investigative, and entertainment articles. On its qualitative merits, Salon recently took top honors for two categories in the first Online Journalism Awards – General Excellence in Online Journalism and Enterprise Journalism Original to the Web. Quantitatively, Salon has over 2.6 million unique users and 45 million page views per month.

Yet for all the merits and accolades Salon has been able to garner, profitability has been by far the most elusive. For the most recent quarter, Salon lost $1.59 for every dollar of revenue. As dismal as this may read, it is actually quite an improvement -- obtainable only through a 20 percent reduction of its workforce (Frost 2001).

Why such an abysmal performance by Salon - an organization that once had such high hopes? For starters, 87 percent Salon revenues are derived from advertising (Frost). Almost half of the advertisers are technology and dot-com affiliated companies. The recent fallout in the financial market have seriously affected these companies, and most have opted to scale back on their marketing and advertising efforts. Compounding a dwindling revenue base is the fact that Salon must vie for sponsorship with other online content providers as well as traditional media sources.

To rectify a deteriorating situation and help expedite profitability, management at Salon has implemented several steps. First they are intent on diversifying their advertising base and demanding up front fees. Secondly, in what one can deem to be a very Old Media, Salon has begun to repurpose their content for distribution to other mediums including print. Already, Salon’s articles have been syndicated in newspapers such as the San Francisco Examiner (Frost). Additionally, Salon has published three books with focus ranging from parenthood to adventure and romance. Salon recent purchase of should also allow for it to distribute its content to internet audio devices platform. Finally, management has begun to ponder about the possibility of implementing subscription fees.

Started by the well-known hedge-fund manager James J. Cramer, TheStreet was designed to provide timely information to world financial markets. Its objective was simple and reflective of other financial online content providers: provide information that will assist investors in making intelligent and well-informed decisions about their investment. As such, TheStreet strategy was aimed at attracting a subscription paying user base with a median age of 44, a household income above $130,000 a year, and a portfolio above $250,000. The subscription rate was $9.95 per month, or $99.95 a year.

Yet something happened to TheStreet as it made its way from IPO market darling to yet another fledging startup. Its objective in providing financial and market information was nothing new. Investors, particularly those TheStreet were targeting, already had access to this information through their online brokerage firm such as E*Trade and Charles Schwab. Charles Schwab, for example, had gigabytes of information in real time, archives, and open forums (Arnold). Additionally, all of this information was free to investors since their brokerage firm could recuperate the cost through trading fees. Even still, MarketWatch, a close rival, provided most of their content for free and derived their revenue through by advertising fees. Thus, in the end, TheStreet attempted to sell a product that could virtually be obtained for free.

Eventually, the subscription model was scrapped in favor of an advertising supported model. Management felt that this would broaden TheStreet audience base and attract even the most casual investor. As stated:

" … [subscription based] campaign was limiting their growth because it really did place at the fron of consumer’s minds that there was a subscription fee atached. The need to communicate clearly that is there for everyone to use."

Conceived with little more than the blessing of a well known Surgeon General, the fact that "health" was the second most researched internet word, and a half-baked business plan, DrKoop was doomed from its inception and typified the greed of the dot-com revolution. Unlike the aforementioned content-provider where a business plan was planned out from the start, DrKoop was literally hatched with the intention of jumping on the hot IPO bandwagon before it cooled down.

The company was initially conceived to develop software application that would assist patients in maintain their own medical histories. However, upon seeing how consumer-orientated sites were becoming such booming success stories, its founder banked the company’s future on this trend with the hope that the doctor’s sterling name will be good for business. In a way, they were correct. On the day of its IPO, stock price nearly doubled from shares initially priced at $9 to $16.44. It would eventually reach a stratospheric high of $45.75 before tanking to its current low.

Unfortunately, throughout this roller coaster of a ride, DrKoop’s management team has been unable to execute a game plan. Allegations of insider trading by upper management impaired operations from the start. Marketing and advertising deals were signed without proper foresight and ultimately sapped the company of most of its capital and revenue. Finally, the business-to-consumer mission of the site never took off. However good the contents may have been, they were never really able to get visitors to buy the recommended bandage, hemorrhage cream, and etc.


What was once a perennial darling of the New Media crowd, Yahoo has recently taken a fall from grace. Its stock is down almost 90 percent from its all time high of $205, and it is suddenly faced with the departure of many key executives including CEO Tim Koogle. So exactly what happened to this search engine, turned portal, turned online media powerhouse? To put it mildly - nothing. Yahoo has just simply fallen prey to the sudden dot-com phobia spooking investors.

In terms of execution and management, Yahoo shines. In fact, it is one of the few subscription-free online concerns that have been profitable. It is estimated to attract 27.4 million views to its site, or 48.2 percent of the total audience. In terms of revenues, Yahoo recognizes the need to wean itself from advertising, which at one time accounted for 90 percent of its total revenue. As a result, management attempted to diversify Yahoo’s service offerings. From what was once a basic search engine, Yahoo transformed itself into an all-purpose one-stop portal. It now offers email, online content, fee-based auction listings, and e-commerce. Its acquisition of Geo-Cities, a home-page service, is an attempt to tap the site’s user and advertising possibilities. Yahoo also began offering its expertise in building portals to other organizations.

Yahoo’s frugal management is the ideal team to weather it through this turbulent market. As other portals begin to burn through their funding, Yahoo should have enough capital to survive through this storm intact. In fact, most analysts believed that Yahoo would be even more successful since it will face a less competitive market.


As with any issue, there are two sides to this coin. On the one side there are the pessimists who have sited recent downturn in the marketplace as strong evidence that online content, web journalism, and the dot-com phenomenon will fade away. As stated in recent article:

" … [some] writers saw the new Web-affiliated print magazies as additional evidence that Internet journalism was spiraling. Kathleen Quinn of Interactive Week, wrote that journalism on the Web ‘has no future.’"

Yet on the other side of the coin, there are those like Brad DeLong, a professor of economics at UC Berkeley, who steadfastly believes that the Web will dramatically change the journalism landscape. He notes that with so many free contents on the Web, users may be reluctant to pay for anything. He points out the popularity of downloading free music and the limited success of subscription based content provider. As for the journalist, DeLong hypothesizes that they must participate in the lecture circuit to earn a living. As he puts it:

"Charles Dickens and Mark Twain did it. They made a lot of money lecturing, and used their books as something of a loss leader."

Somewhere between the two extremes lies the future of online content. Contrary to Quinn’s viewpoint, web journalism and online content will not wither away anytime soon. Its advantages --mass reach, inexpensive distribution, and selective audience focus -- makes it an ideal publishing and broadcasting medium. Old Media guards have come to recognize these advantages and have made some notable investment in these startups. And as much as online content provider would like to think of otherwise, they cannot succeed without the backing of traditional media outlets. In the media business, "there is not a single publication or single media outlet that is successful … economies of scale are very important."

To contradict DeLong’s view, one can easily argue that content is never free and has been subsidized - be it through advertising, subscription fees, or licensing. As sites mature, their business models are continually being developed and experimented. The failure of one site does not necessary mark the failure of an entire industry. Arnold perhaps stated it best:

"No one expects content from Dow Jones, the Gartner Group, or any other commercial information entity to be with charge. In fact, no information is provided without a cost to some. ‘Free’ to the user is not ‘free’ to the creator." (Arnold)

In the end just as television was a threat to radio, the Web pose an equal threat to print. However, radio is still very much with us, especially when traffic on the 405 is moving at slug pace. Likewise, print will be here to stay for very long time. The Web just represents another medium for distribution; it is as much as an opportunity as it is a threat. (Joss)


Works Cited

Basch, Reva. 2000. "Going, going – pricing online information." Online 24(May/June) 3: 96.

Josh, Molly W. 1999. "The Internet and What It’s Doing to Publisher & Content Providers." Graphic Arts Monthly 71 (November) 11: 22.

Posnok, Susan T. 2000. "Cashing in on Content." Folio: The Magazine for Magazine Management 29 (July) 29: 39-41.