BHG.com Sow the Seeds Of Profitability

Folio: The Magazine for Magazine Management, April, 2001 by Jillian S. Ambroz

Six years ago, Meredith launched BHG.com, its Web site for megabrand Better Homes and Gardens, as an "extension of the service journalism philosophy of the magazine." It has evolved into one of the most popular magazine sites, attracting on average nearly one million unique visitors per months--50 percent of which are not Meredith customers--and typically ranking among the top 10, according to Media Metrix.

Stephen Lacy, president, Meredith Publishing Group, which includes Meredith Interactive and Integrated Marketing Group, is the driving force behind the site, which has more than one million registered users. He joined Meredith in 1998 as president and CFO and assumed his current position in March 2000. In the last six months, BHG.com's revenue has increased 100 percent, compared to 2000. Though Lacy would not provide specific revenue information for BHG.com, Meredith Interactive, which includes all of the company's 26 Web sites, increased its overall revenue by 136 percent to $2.6 million, for the first half of fiscal year 2001, according to company reports. "Within the next 12-18 months, without question, [BHG.com] will be profitable," he says.

In the first half of fiscal year 2001, BHG.com sold as many subscriptions online as it did in all of 2000. Though Lacy would not provide specific numbers, Meredith is on target to sell 1.5 million subscriptions online over the next three years, he says. Site traffic has also increased--up 35 percent--due to high-profile partnerships with AOL Time Warner and Microsoft HomeAdvisor.com.

"The magazine is inspiration and aspiration and the Web site is action-oriented, to help you execute those inspirations," says Lacy. "If that vision is in place, the rest falls in line very nicely."

This July, Meredith will unveil its multi-million-dollar technology upgrade, which will provide users with individually targeted content. With a "bullish" Internet investment ($100 million for the entire Interactive group), Lacy is changing all of the mechanisms of Meredith's e-marketing to be more sophisticated and targeted, to broaden its e-mail offerings and allow it to have real-time online access from the Web sites to Meredith's consumer database, he says.

FOLIOMAG.COM recently spoke with Lacy about building the BHG.com business model.

Q: What are the most significant changes to the site since its launch in 1995?

A: Our understanding that when you have a large magazine Web site that is part of a megabrand like Better Homes, the user comes to the Web site for different reasons than it does to the magazine. At the early stage, there was a lot of flat content. About 35 percent of the site traffic is driven from the interactive applications. In a recent redesign, we launched a new and broader recipe center. We're in the process of building a decorating center. We have a lot of home-plan and home-improvement interactive applications. There are gardening areas where you can plan your garden and the site helps you pick products based on your locale.

The whole vision of it is that you get excited about doing a project in the magazine or in one of our special interest publications and come to the Web site to take action. You can find a recipe in the magazine, but the Web site has thousands of recipes that can help you build the whole event or dinner. It's a lot deeper content and it has the ability to sort for it and search for it in a real-time environment, as opposed to digging through a number of back issues of any magazine. They are complementary and to have a full-blown brand in this environment, you really do need both.

Q: What is the revenue model for the site and have the revenue streams changed?

A: There's an advertising and sponsorship model on the site that does well because it has such a tremendous amount of traffic. In addition to that, there is also a circulation model. We're selling more and more of our own subscriptions and Meredith products online and that has a very favorable economic model to it, compared to traditional direct-mail solicitation. Both of those have really ramped up dramatically and changed the economics of the site.

We're also in the midst of a large technology upgrade that will give us a much more automated content-management system, allowing us to serve content to the user based on their interests. It will also help us with our content syndication with our partnerships with AOL and Microsoft HomeAdvisor.com. If you go to the site today, you'll get a popup for a Better Homes and Gardens subscription, that's what everybody gets. But, what we need to know is whether you need a renewal or maybe your subscription runs for another year and we should offer you a gardening magazine or something in line with your interests, which are all resident in our consumer database.

Q: What are your arrangements with AOL Time Warner and Microsoft's HomeAdvisor.com?

A: Our new arrangement with AOL Time Warner provides much more content than we did in the past, in a variety of areas. [In the initial content syndication arrangement, BHG.com provided only recipes to AOL Time Warner.] For us, it provides a much higher level of guaranteed traffic from AOL and many more opportunities to sell subscription and Meredith products and services, not only on the AOL site, but also through the links back to our site. It gives us a nice traffic flow and a lot more impressions. With Microsoft's HomeAdvisor.com, it's the same economic relationship. We also have a relationship with HomePortfolio.com, which includes content and subscriptions. Alliances are a key part of our strategy.