You can make money on the Internet

Folio: The Magazine for Magazine Management, May 15, 1995 by Wes Kussmaul

Among publishers, a persistent myth about interactive media is that it doesn't make money. Yet according to CompuServe's parent, H&R Block, Compuserve's pretax earnings have risen steadily. In 1989 they were $30.6 million; in 1993, they were $74 million. As for America Online, 76 cents was earned per share in fiscal 1994; predicted earnings for the next three years are 85 cents, 95 cents and $1.40, respectively.

In any business it's a neat trick to earn anything while growing at the rate of America Online. Must be gold in them thar services. Yet there are plenty of publishers who don't make a dime from their interactive efforts. The secret is "account control." Consumer online services receive $10 to $30 a month, on ave per subscriber. Basic monthly fees account for about 75 percent; the balance comes from overtime and premium services. That's where the money is. And it should belong to the party who worked so hard to develop the relationship with the audience member.

Why accept a raw deal?

Imagine that your print shop proposed putting your magazine on pages 14,200 to 14,300 of their 20,000-page magazine, Acme Printing Company Journal. Your advertisers would go in a separate section, sold and controlled by the printer. Preposterous, no? But that's basically the deal the large online companies offer the audience owners upon whom they so utterly depend.

Mind you, it's not your editorial content they want: It's your reader. The more time your readers spend in the online area "branded" to your magazine, the more money the online provider makes. You make money too, but the arrangement is far from 50:50.

All the commercial services are guilty of obfuscating what publishers bring to the table. Each is as active as the other in promoting the myth that publishers can't own their own online services. But if you compare the value of your relationship with your reader to the value provided by the party who happens to know how to run a big computer, it's no contest: You win.

As publishers, you know about running a subscription-based business and have experience servicing companies that sell products and services to your subscribers. You bring much more to the table than anyone whose skills are primarily technical. You should own that $10 to $30 a month, plus the advertiser revenue stream.

Farm out responsibility

You can direct an online services company to build and manage an "Internet community" for you just as you direct your printing company to get your magazine into print and out the door. An online fulfillment company can manage your monthly annuity just as a traditional fulfillment company manages your subscriber base. A consultant can design the whole thing. (Check the listings under Interactive Media in magazines like this one for information on providers of such services.) You don't have to know one iota about the Internet, the World Wide Web, or any of the myriad protocols and languages. How much printing technology must you know to publish your magazine? Some helps, but it's not essential.

Should all this sound costly, consider: $10 to $30 times 10,000 equals $100,000 to $300,000 a month. That's if a magazine with 200,000 circulation signs up 5 percent of its readers. Really, they should be able to do better.

Now, you don't have to know the details of Internet technology to use it effectively to make money. You do need to know the value of what you bring to the table. Be confident: You bring more, not less, than online service companies. Let them know who's boss. Claim your annuity. It is yours, after all.