USC Annenberg Online Journalism ReviewUSC





Avoiding the Fall From Grace
MediaLife dodges horizontal hazards that sank Inside.com by pursuing vertical niche

In May 2000, the debut of Inside.com attracted the sort of media attention generally reserved for Hollywood blockbusters. Newsweek detailed the publication's Beverly Hills launch party, where enterprising media reporters apparently spent the evening crafting mission-critical, market-moving analysis of Wolfgang Puck's tuna tartare in waffle cones. The Washington Post's Howard Kurtz penned a plucky, 2000-word profile on the start-up, complete with notes on the staff's edgy newsroom couture ('Yankee caps and the occasional earring...') and plenty of fawning skepticism ('Can their modest staff beat the big media goliaths with real-time scoops?').

A year earlier, the debut of Media Life Magazine, a Web-only publication that publishes six bylined stories and approximately 12 - 14 unbylined shorts every weekday, attracted no media attention. Unlike Inside.com, it didn't have millions of dollars in venture capital. It didn't have a staff of all-star journalists from publications like The Wall Street Journal, USA Today, and Vanity Fair. Its headquarters were a private home in Hackensack, New Jersey, where tuna tartare in waffle cones is probably illegal. Its founder, Gene Ely, a 30-year journalism veteran who has worked as a writer, editor, and publisher of a variety of publications, bankrolled Media Life the old-fashioned way, by collecting money from advertisers upfront and using that to launch the publication.

And as it turns out, Media Life's limited resources were actually something of a blessing in the age of irrational entrepreneurism. Instead of trying to conceptually supersize his business to dimensions that would seduce venture capitalists and lay the groundwork for an eventual IPO, Ely had more modest, and pressing, concerns. 'We were profitable from the very beginning,' Ely explains. 'We made money because we had no choice. We had no cash reserves, so we had to run in the black.'

Media Life's range of coverage, which includes TV, magazines, newspapers, online, and radio, isn't quite as vast as Inside.com's, which also includes book publishing, the movie industry, and the music business. In general, it's also a less accomplished publication - its editorial can be somewhat uneven, and its stories are driven less by investigation than by scheduled events, media research releases, and other instances of what the more enterprising Inside.com dismisses as 'commodity information' in its FAQ.

Still, Media Life has established itself as a useful, credible source of media news over its two-year existence, and from a business perspective, it may even be more functional, on an admittedly much smaller scale, than Inside.com. Why? Target audience.

Like Brill's Content before it, Inside.com tried to broaden media journalism beyond its usual niche status. It defined its primary audience as 'entertainment and media professionals and others affected by digital technology,' and its secondary audience as 'pop-culture enthusiasts.' At one point, even a tertiary audience was thought to exist. As Deanna Brown, CEO of Inside.com's parent company Powerful Media, put it to Howard Kurtz in May 2000, 'The notion of being inside is very sexy to an insurance broker in Kansas...'

Unfortunately, Kansas' insurance brokers didn't respond as anticipated. In April 2001, Inside.com's parent company, Powerful Media, was acquired by Steve Brill's company, Brill Media Holdings. In the wake of that deal, Inside.com's print spin-off, Inside magazine, was scuttled after just seven issues, and much of the company's staff was laid off as well. While the site continues to publish new stories on a daily basis, the original Inside.com dream seems as dead as the XFL -- and the obituaries marking its passing have already started to appear.

In contrast to Inside.com's once-grandiose plans, Media Life Magazine never showed any interest in Midwestern policy pushers. In fact, Media Life is not even interested in reaching every entertainment and media professional out there. Instead, it targets media planners and media buyers - the people who determine which ads run in which media outlets. So while Media Life covers similar terrain as Inside.com, there's also a definite angle to much of its editorial content. 'A lot of our core stories are about media research - spot buying versus national buying, things like that,' says Ely.

On the one hand, this gives Media Life a well-defined, highly desirable audience to sell to advertisers. On the other hand, it puts definite limits on Media Life's speculative upside. According to Ely, the U.S. population of media planners and media buyers is generally pegged at around 15,000 to 20,000 people. And, ultimately, there's no way to get from a number as small as that to Beverly Hills launch parties with tuna tartare in waffle cones.

Indeed, even if every one of those 20,000 potential readers came to Media Life every weekday of the year, and even if they generated an unrealistically optimistic five impressions per visit, and even if the resulting 26 million annual impressions were sold at an unrealistically optimistic $100 per thousand, the grand total would be a paltry $2.6 million.

What happens when you ask a venture capitalist to fund a business that maybe, possibly, has a shot at generating revenues of $2.6 million if it dominates its market and everything goes right? No one knows the answer to this question, because no one has ever been deluded enough to ask it ... which is presumably why Inside.com's founders decided to think in grander terms.

To fulfill its destiny as a horizontal Superbrand, Inside.com launched with around 30 editorial employees, according to Michael Hirschorn, Inside.com co-founder and editor-in-chief. With the addition of the print magazine in December 2000, that number eventually grew to 53. (Numerous freelancers, including myself, also regularly contributed to the Web site and/or the magazine. And of course, there were dozens of additional staffers devoted to design, advertising sales, marketing, engineering, and other corporate endeavors.) Sources familiar with the company said its monthly burn rate topped $1.2 million at one point.

A costly infrastructure was not the only consequence of Inside.com's horizontal approach. Each week, it features a few solid stories about various facets of the media world, but even in its heyday, when it was publishing much more content than it is now, its wide angle approach meant it was not nearly as comprehensive as Variety, or Billboard, or Publishers Weekly. So while it may have been the best read in the world of business-oriented media journalism, it was never anybody's only read.

In a recent issue of Variety, advertisers included upcoming film festivals, movie studios, industry trade shows, and a couple dozen companies offering congratulations to Sony Picture Classics on its tenth anniversary. And at Inside.com? There are ads for Lexus and IBM. The only media industry ads are for Kagan World Media, a media research firm that's one of Inside.com's new corporate siblings, and Plastic.com, one of Inside.com's content partners.

The Lexus and IBM ads are a nice coup, of course - most trade magazines would love to land these or any other consumer-oriented brand. (Variety features ads from American Airlines and a hair-transplant doctor, for example, and Billboard is sodden with liquor ads.) In addition, sources at Inside.com say the publication has landed more advertising than expected, and point toward the number of 'for your consideration' movie industry ads that Inside.com's Oscars coverage attracted in March.

But as it continues to compete against established publications that are more vertical in nature, it will always face a challenge in attracting industry-related ads. Indeed, if you're a Hollywood production company and you want to run your ad in the one place where the most people who might impact your livelihood will read it, where do you run that ad - Variety or Inside.com?

The main virtue of any trade magazine is not that it reaches affluent consumers who might be good candidates for a new Lexus, but that it reaches the people who matter most in the industry the magazine covers. Inside.com undoubtedly reaches (or reached) many of the world's most important media professionals, but if you're an advertiser who wants to reach only a certain slice of that audience, there's always a more vertical, more established publication you can turn to.

Media Life competes against more established print competitors too, like MediaWeek and Electronic Media, but with its low overhead it can offer very competitive ad rates. 'In print, you hire two-thirds of your sales staff just to pay for the cost of the printer,' says Ely. 'Of course, we can do it cheaper than that.'

When Media Life launched in May 1999, its charter advertisers included Time, Fortune, Forbes, Money, and a few others. Instead of selling by impressions, Ely sold advertising on a monthly basis, and still does. 'We say to advertisers, 'If you come in now and lock it, your cost per thousand will go down over time as our audience grows,'' Ely explains. 'This is such a small operation that we didn't even know how to figure out unique visitors until a couple months ago.'

Currently, Media Life charges advertisers $10,000 a month to appear on the site, or $2000 a month for those whose ads only appear on the site one day per week. According to Ely, Media Life now attracts around 5,000 daily unique visitors, and around 11,000 unique visitors over the course of a week.

And for the moment, at least, the publication has managed to weather the online advertising downturn; its current advertisers include Time, The Economist, and The Discovery Network, amongst others. 'The ad climate now is extremely grim,' says Ely. 'But we've survived for two years now, so I'm pretty confident we're going to pull it off.'

Meanwhile, Inside.com has also begun to embrace the vertical ethos that has driven Media Life from its inception. While Powerful Media was purchased by Brill Media Holdings, Brill Media Holdings is in turn owned by Primedia, a multibillion-dollar media company which owns hundreds of specialty consumer and trade publications, including around 170 related specifically to the media industry.

For several years, Primedia has aggregated media-related news under the MediaCentral.com banner; now, when you visit MediaCentral.com, you are taken to Inside.com's home page, which also now features content from and links to some of Primedia's more vertically oriented media titles, like CableWorld and Circulation Management.

Inside.com has also siphoned several of its key editors and reporters to other Primedia titles, and according to Michael Hirschorn, Inside.com's new association with MediaCentral.com, Brill Media Holdings, and Primedia will allow Inside.com to fulfill a long-standing goal to 'marry horizontal and vertical.' Hirschorn adds that the details of how this will work as an advertising, circulation, and technology strategy will be made public in the next month or two.

For true believers, however, a marriage of horizontal and vertical would probably be a lot happier without the horizontal component. 'The most important thing about the Web is that it's vertical,' Gene Ely exclaims. 'That's the reality people have to come to terms with - you can create any kind of publication you like, as long as it serves one niche very well.'

In a way, Media Life is a throwback to the days of the mid-'90s, when the dream of online publishing simply consisted of lower barriers to entry and the potential for independent, smaller-scaled publishers to operate with reduced costs.

That dream has never entirely disappeared, of course, as sites like The Drudge Report, Jim Romenesko's Media News, and the latest generation of blogs and me-zines attest. But a second dream quickly overshadowed it - the dream that every Webzine could spawn an empire and every journalist could become a millionaire.

Now, online journalism feels polarized. At one end, there are the ambitious, would-be empires that are having trouble surviving as their venture capital runs out. At the other end, there are tiny, often one-person operations that rely mostly on links, opinion, summary, and reader-generated material to fulfill their daily content needs, rather than original reporting.

Media Life stands somewhere in the middle: it now lists 20 contributors on the masthead, and every weekday it publishes roughly 6,000 to 7,000 words of new editorial. And while it's never going to make anyone a billionaire or spawn a print magazine, it has created a foundation for itself upon which it seems possible to build an independent, self-sustaining business. These days, that's a significant accomplishment; perhaps it's time to break out the tuna tartare.