By Cheryl Woodard; Published Mar 1, 2000 in Folio Magazine
[PRINT VERSION]

Streamline Media CEO Eric Rhoads remembers the lesson of his first Web site ad sale: The usual rules definitely don't apply. An advertiser had just seen the brand new site for the radio-industry magazine Radio Ink and called to inquire about a sponsorship deal. Rhoads had no idea how much to charge. "I was thinking maybe $600 for a three-month commitment, but he spoke first and offered me $20,000! Now I ask, 'What's your budget?' before we start to negotiate."

All magazine companies face the challenge of adapting to the Internet. But the challenge is even greater for smaller magazine companies like Streamline Media, which have less money, fewer staffers, less expertise, less time and, in the eyes of some, less need to be online. Numerous questions-from how much to invest and how to finance, to questions regarding staffing, outsourcing and determining ROI-have to be answered in the transition to e-business.

The good news is that small magazines can create revenue-generating Web sites that effectively extend their businesses to the Internet without a six-figure investment and an office full of stock-option-addled new employees. In fact, by making a minimal investment and doing some strategic, out-of-the-box thinking, many smaller publishers are effectively experimenting with new ways to make money from current readers and advertisers; harnessing customer feedback to improve print products; defending against Web-based interlopers; and exploring new partnerships.An investmen t in a Web operation can cost as little as $6,000 and take up less than a full-time share of one staffer's time. The key, observers say, is vision and energy at the executive level. Someone or some group of people must set the ball in motion and keep it moving forward. For small publishers who want to build out their Web sites, here are three broad guidelines.

Build a site that fit your mission: Vermont Life Online started out modestly and, by most standards, is still modest. In fact, says Andrew Jackson, publisher of Vermont Life, the total investment for three years on the Web has been about $6,000. None of the 11-person staff at the Montpelier, Vermont-based magazine is dedicated exclusively to the Web. The site is updated quarterly, like the print magazine.

" Web sites are like fax machines," Jackson says. "If you're in business, you need one." But in his view, it doesn't have to include the bells and whistles-it doesn't need to be a storefront, doesn't need to have as-it-happens breaking news. All his Web site must do, Jackson says, is provide real value to its visitors and accurately represent a magazine's editorial quality.

But that's changing. A growing amount of content, combined with higher visitor expectations, is pushing costs up. Now VLO uses an outside vendor to manage the site. And plans include an e-commerce version of the magazine's ancillary products catalog. Jackson estimates the site will require a $10,000 budget in 2000, but still, the investment is paying off handsomely: The magazine gets 40 to 50 new subscriptions-at $14.95 each-from the site every week, with a 40 percent pay-up rate. Jackson says his only reservation involves the steadily growing need for staff time to manage the site. Still, he feels that smaller magazines can do a lot on the Web, and even make money, with a low-cost, keep-it-simple approach. Today the VLO site generates $6,000 annually from advertising and $16,000 from subscription sales.

The Internet approach of Air Age Publishing is the antithesis of Vermont Life Online, although still very much in the realm of the small publisher. The 70-year-old, family-owned company, based in Ridgefield, Connecticut, publishes one magazine for full-scale aviation buffs, Flight Journal, and three magazines for radio-controlled modeling enthusiasts-Radio Control Car Action, Model Airplane News and Radio Control Boat Modeler. It also sells books, newsletters, model-building plans and other ancillaries, and has 60 employees. "Our strategy is to engage in evolving technologies so that we don't get swamped by Web upstarts who see our niche as just another dot.com opportunity," says Thomas Atwood, associate publisher.

For Air Age, keeping up with online competitors means offering all the newest and hottest Web technologies: chat rooms, e-commerce, video and audio clips, daily news updates, and hybrid newsletters that are both printed and backed up at password-protected, multimedia Web sites. The company began launching Web sites in 1997 and now has several of them. The main question has been how much to invest and when. " Based on our experience, we would project that, in today's market, it would cost between $20,000 and $40,000 to build an array of four sites using talented in-house staff," Atwood says."This assumes the sites would offer some magazine content. This would include an online store to sell subscriptions, books and any ancillaries, a chat room and at least two sites supporting magazine properties. To accomplish this using outside consultants, we would project a cost of $50,000 to $100,000."

Like any good entrepreneur in an experimental situation, Atwood pays close attention to each of his sites, changing direction if a given idea doesn't pan out and speeding up when the news looks good. For example, by monitoring e-mail and online book sales, Atwood learned that the Air Age sites bring in a younger audience than the company's print publications, especially for the model car title. So he advanced his plans to publish new books about model cars and delayed titles on less popular topics. Then he institutionalized the creation of Web content and expanded the Web staff from one to four. He bought affordable and easy-to-use digital video cameras and created 15-second videos of models-in-motion. Later, as bandwidth increases, the plan is to create longer videos.

Atwood is also investing in chat-room technologies, so visitors can have live conversations with experts in their niches. "I'm talking about the senior engineers from Boeing and Northrop-Grumman who designed the airplanes," Atwood says. "These guys are heroes to both our modelers and full-scale aviation buffs. We can monitor all of that chat-room activity. We never had this kind of instant feedback before."

Regarding effectiveness, Atwood says that, "Although we are early in our efforts, we are getting good results." Total traffic is up by 50 percent across the company's sites over the past six months. While he declined to state actual traffic numbers for the Air Age sites, Atwood says that by combining strong content with maximum search-engine visibility, an established enthusiast magazine's site can generate up to 10,000 unique users per day. Some of the big dot.com companies that would not even talk to him a year ago have recently come back looking for partnership deals. "Now we've got some bargaining power when we sit down to negotiate with these guys," Atwood says.

Leverage assets without increasing costs: Web space is a lot cheaper than printed pages. Consequently, the cost of adding a story or photograph is practically zero. Many smaller publishers are using that lower-cost Web space to great advantage.

Air Age, for example, got a 25 percent increase in sales at its online bookstore by adding just one extra page per book, enough to post a photograph, a paragraph of text and a table of contents for each book. The store offers 30-plus titles. It also offers more than 300 model-airplane plans for sale at the store. And the pay-off from a virtual bookstore can be significant. Says Atwood, "An e-commerce store that sells subscriptions, books and ancillaries can be expected to generate between $15,000 to $25,000 a month."

Vermont Life, meanwhile, creates enhanced Web ads for advertisers who also buy space in the print magazine. "People who are running black-and-white or two-color sixth-page ads in our print version can get a whole Web page, in full color, for very little cost on our part and a lot more impact on theirs," says publisher Jackson. Advertisers pay about $4,000 per year to run a sixth-page ad in all four quarterly issues of the print magazine.

Print advertisers who have their own Web pages can get a link from the Vermont Life Online site for an extra $100 per year. For another $100 fee, VLO will create a simple Web page for print advertisers derived from their print ad. The site currently has over 60 advertisers, which even at these low rates yields over $6,000 in revenue per year. "The inns, restaurants and resorts that advertise with us online can see the payoff in their parking lots," Jackson says. That value boosts and sustains advertiser relationships for the magazine.

At Opera News, a 120,000-circulation monthly published by the New York City-based Metropolitan Opera Guild, associate publisher Jeffrey Hildt uses the Web's low-cost digital storage capacity to list a year's worth of information about upcoming performances for opera companies all over the world. "The worldwide performances database is our in-house editorial tool," Hildt says. "We're constantly updating it, but we can fit only one month at a time into the monthly magazine. It costs us nothing to post the whole database on the Web site, and it's tremendously popular with our audience."

Since its launch in 1996, the Opera News site has brought in an average of 61 new subscriptions to the print magazine per month-at $21.95 each. Only print subscribers receive a password giving them access to restricted areas of the site, such as the calendar. "These are unique subscriptions that we wouldn't have without the Web site," Hildt says.

Farm out (at least some of) the work: Many smaller magazine companies use outside vendors to design, build, host, maintain and even sell advertising for their Web operations. West Palm Beach, Florida-based Streamline Press is one example. With 25 employees and two titles (its other title is E-Radio), the company is growing rapidly. "The market is booming," says CEO Rhoads. "The radio stations are swimming in dot.com ad revenues, and they've got a lot of cash to spend. Vendors are eager to get a share and want more opportunities to advertise." Rhoads sees the Internet as a means to grab some marketshare. His concern: finding the right vendor.

Rhoads hired one and then another outside vendor, wasting a bundle of money each time-largely because of difficulties in communicating. "I didn't know what I wanted," he says. "I kept asking them for changes to the site, but did not realize how hard it was for them to make changes-not until they presented me with the bills. Ouch!" During this trial and error with the Web vendor, Rhoads estimates that he lost between $5,000 and $6,000 in actual dollars, and between $10,000 and $20,000 in ad space trades.

His current vendor offers a more flexible Web hosting service, First Media Works, that was designed specifically for radio stations. The vendor supplies a structured format, and Rhoads pours his content into a pre-designed container. "As long as we are happy to work within their structure, and we are, we pay almost nothing for a site that I can update any time, from anywhere, through any Web browser," Rhoads says. Now that he has the right vendor, Rhoads is finding the Web profitable: Spending less than $500 per month for his sites, he's projecting $200,000 gross revenues for the first year. "So far, we're on track and may even exceed our projections," says Rhoads.

Opera News outsources ad sales as well as maintenance of its bulletin board, which generates 80 percent of the site's roughly 16,000 total monthly visits. The result, says publisher Hildt, is that Opera News has a robust Web presence without having added a single person to the staff. "After a very short time, the rep firm is bringing in some very classy advertisers and break-even revenues," Hildt says. "We've got excellent content, some of it contributed by experts who simply presented themselves to us-out of the woodwork, so to speak. And best of all, the site is furthering our mission, which is to encourage the appreciation of opera in ways the print magazine could never have done."

Of all the publishers included in this report, Hildt has spent the most money-$60,000-on his Web site. But the only dedicated Web staff position at Opera News Online will be an editorial assistant (yet to be hired), who will handle customer-service e-mail, monitor the bulletin board listings, and spend a couple of days per month converting Quark files to HTML pages. Everything else will continue to be handled by the magazine's regular 20-person staff. "Our running cost is just a few hundred dollars a month. And since we made almost $800 in ad income last month, we're technically profitable, at least on a month-to-month basis," says Hildt.

Just a start, to be sure, but not bad for a small-magazine Web site.

Cheryl Woodard is the author of Starting and Running a Successful Newsletter or Magazine, and also (with co-author Lucia Hwang) Every Nonprofit's Guide to Publishing, both from Nolo Press. Woodard is a co-founder of PC Magazine, PC World, Macworld magazine, and the Macworld Expos who consults with magazine entrepreneurs about growth strategies and operations. You can find her books in libraries or retail bookstores -- or order them right now from Amazon.com by clicking on the covers.

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