Low-Risk Revenue Streams

Folio: The Magazine for Magazine Management, June 15, 2001 by Susan Thea Posnock

WITH POSTAL HIKES AND AN AD RECESSION THREATENING THE BOTTOM LINE, THE PRESSURE IS ON TO FIND ADDED SOURCES OF INCOME. HERE'S A COLLECTION OF LOW-AND NO-RISK MONEYMAKERS THAT CAN HELP PUBLISHERS BEAT THE BAD ECONOMY

Elle has a nice little sideline that earns owner Hachette Filipacchi Magazines some extra cash, with very little extra effort. The magazine lends its name to manufacturers that emblazon the Elle logo on everything from shoes to sunglasses. No surprises there; after all, plenty of publishers are in the product-licensing business. What is unexpected is the size of the paycheck. In 1999, the wholesale value of Elle merchandising was $520 million worldwide. Its annual U.S. merchandising revenues are "well into the seven figures range," says David Fishman, senior vice president of brand development at HFM. And this year the magazine is expanding into the handbag and jewelry businesses.

At a time when traditional revenue streams are coming up short, publishers like HFM are more determined than ever to eke out earnings from less conventional sources. The catch is, they're not really interested in partnerships, ventures or new ideas that require too much, if any, upfront capital. Still reeling from failed dot-com initiatives and anxious about a stumbling economy, publishers are locking in on low-risk revenue generators--deals that require very little work, worry or investment, but promise incremental profits that build up the bottom line.

"It's vital to try as many things as you can, and the low-cost and no-cost opportunities are important," says Jeff Julian, president and publisher of IDG.net. The urgency to string together a list of ancillary businesses has intensified, he says. "The pressure has always been there, but was lessened because the ad market was doing so well. In lock step with the advertising slowdown, the pressure has increased."

Now is the time for action, says Fishman. "It's no longer a novel notion to go after this revenue--it's more a matter of, how much did you make this year?" he says. And so attitudes are shifting. "Traditionally, publishers were very concerned about stepping on the toes of their major advertisers," Fishman says. "Now, however, everything is about brands and having a powerful brand."

And the spectrum of low-risk ventures goes way beyond the types of licensing arrangements that brought the world Playboy air fresheners and the Marie Claire clothing line. Publishers are testing everything from licensed audio formats to in-mall television networks in the anticipation that these incremental profits will help defray the hits they're taking on the advertising and circulation fronts.

CONTEXTUAL COMMERCE

A lot of companies spent big on e-commerce, only to walk away without a proven way of directing shoppers to their virtual stores. But new technology that can "read" content and match it to relevant products may be the weapon publishers have been searching for in their e-commerce wars.

InformationWeek.com, for example, is using what's called contextual commerce to sell in-house and third-party research reports much the same way that Amazon.com tries to sell you another self-help book once you add Who Moved My Cheese? to your virtual shopping cart. When a visitor on the InformationWeek.com site calls up an article on the Nasdaq, for instance, a link to a $99 Forrester Research brief on the same topic pops up. The sales pitch comes across on a just-in-times basis, "at the moment when a reader has indicated that they're interested in that topic," says Rusty Weston, editor of Information Week Research and InformationWeek.com.

Weston wouldn't say how much the company is paying, but vendor Yellow-Brix charges clients an annual subscription fee of $15,000. That fee includes the processing of up to 5,000 products and 5,000 articles per month. (Additional charges are incurred on a sliding-scale basis, depending on how many products and articles are matched beyond that.) Because InformationWeek.com began using the technology in late March, it's too soon to tell how many additional research products will be sold this way. But Weston says, "We think that when we fully implement the system, it could double sales."

DIRECT MAIL/E-MAIL COMBO RENTALS

For decades, list rental sales have topped the chart of ancillary-revenue generators. And now that publishers are warming up to the idea of marketing their e-mail lists as well, the sales potential has doubled. But magazines that go one step further and rent the two in combination stand the best chance of maximizing this revenue source, says Deb Goldstein, president of IDG List Services.

Until recently, mailers had to rent a postal address for a direct mail effort and rent an e-mail address for an e-mail promotion. Because addresses were never cross-matched, there was no way for a mailer to hit the same subscriber on and offline. But service bureaus now have the technology to directly match the two addresses, enabling a mailer to target a reader with a direct mail piece and then follow up with an e-mail message.