June 1996

Still Running In The Red

Despite millions of eyeballs and large corporate advertising support, even the mega sites are finding it difficult to balance their books. According to Marc Gunther's report in the the March 4 issue of Fortune Magazine, ESPN's site, ESPNET, which gets support from both advertising and subcriptions, is not now profitable. Site administrators predict, however, that ESPNET will turn a profit in 1997."We could be making money now, but we're building for the future," says Mike Slade, Starwave's president. (Starwave is the company that created ESPNET Sport Zone.)

Things are equally ambivalent at the huge Pathfinder site. "I know brand gives us a tremendous advantage, but it's not necessarily a winning advantage. There are hundreds of millions of dollars invested and we're still struggling to find a way to make money," says Paul Sagan, president and editor of Time, Inc. New Media. An innovative new partnership with CompuServe that promises both revenue and audience has Pathfinder in the green for now. @NY, an industry newsletter, reported on April 12 that CompuServe is paying Time Warner to provide its users with a special, personalized version of its Web site. The new service is called Pathfinder Personal Edition and it will feature constantly updated content from Time Warner publications.

These financially challenging times call for patience, vision, and innovation. Facing the financial realities of developing and maintaining a Web site are part of a larger trend that finds Webmasters evaluating both their efforts and their investments. According to CMC Magazine publisher and Internet author John December, many are now asking, "Now that my web is up, what is it doing for me?" And some experts outside the industry (yes, those with paychecks independent of hit rates) question the whole vending machine approach to Web development--cash in, cash out--and wonder if it's realistic for anyone to expect to make money now.

Watts Wacker, in an interview in the January/February'96 issue of Marketing Tools Magazine, says the basic problems is that many people just don't understand why they're online in the first place. "Most people are not recognizing that this is a medium that begs to do it differently," says Wacker, a resident futurist at the Standford Research Institute. "Homepages are designed around the old paradigm and as a result, some are banal or trite." According to Wacker, many still treat the Internet as a broadcast medium, where they put out a message and hope that someone catches it. He predicts (that's what futurists do!!!) that companies will edit their Web sites even as customers browse, deleting information they don't want and adding to what they do want.

Bob O'Keefe, an Associate Professor in the Lally School of Management and Technology at Rensselaer Polytechnic Institute, takes Waker's argument one step further. "90 percent of the people online now are throwing their money out," he says. Instead of using a Web site as a revenue source, O'Keefe believes that building and maintaining a Web site should be part of a company's overall business and marketing strategy. According to O'Keefe, who maintains the Net Value site, companies should get online to stay abreast of new technology and to help them work out where they want to go in the future. ^

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