Salon makes a go of premium service.
February 3, 2002 12:16 AM   Subscribe

Salon makes a go of premium service. 'When Salon announced almost a year ago that it would introduce fee-based content, web pundits dismissed it as a futile gesture that was bound to fail. It appears the critics were wrong' It is funny what passes as a success nowadays. Salon has closed off 30-35% of its content, including all news and political coverage, and even after these draconian measures only 0.8% of its readership have subscribed. In this fluffy bunny critique Salon’s marketing director Patrick Hurley explain how they achieve this extraordinary success. (more inside)
posted by RobertLoch (18 comments total)
I find it perplexing that Salon still gets such easy press. There is no evidence to suggest that their business model is working, but everyone seems more than happy to believe their spin. Take this quote for instance from the posted article.

According to the traffic estimates just released by the company for the quarter ending in December 2001, Salon received 121 million page views, down from the 127 million for the previous term, and 3.8 million unique visitors.

The company claims to have had no decrease in unique visitors and to have seen only a 5 percent drop in page views, even after significantly reducing Salon’s free-access content.

Does it make sense that after closing off such a large portion of their content in October, that the number of pages viewed on Salon would only have decreased by 5%? I would also suggest that it is somewhat unlikely that this content massacre didn’t cost Salon the loss of even one reader, as they claim.

In fact it appears that these traffic figures are actually a rehash of a July 2001 audited report (see bottom paragraph). Salon conveniently didn’t bother to mention this. Worse still, no one bothered to ask them what their traffic estimates were based on.

Obviously the downside of introducing subscription is that you may loose advertising revenue due to a fall in overall traffic. So surely before announcing what a ‘success’ Salon’s latest subscription numbers are, it would make sense for this reporter to have first tried to find out what the true cost of this ‘success’ was.

Isn't this an obvious example of shoddy ‘press release’ journalism? Or am I missing something?
posted by RobertLoch at 12:20 AM on February 3, 2002

"Does it make sense that after closing off such a large portion of their content in October, that the number of pages viewed on Salon would only have decreased by 5%? "

I think it does make sense due to habit. For example, I enjoy MeFi greatly. If I wanted to I could get the same info from Fark, BoingBoing, /., or any number of others.

Now pretend that MeFi went to a pay system. Would I pay? Hell yes. I might be able to get simlar links and discussions on other sites, but I'm rather attached to how things work around here. I've grown accustomed to the users (authors) and the interface itself.

I've tried all the above sites and more, but MeFi is the only one I come to regularly. Maybe the news isn't brand new. Maybe not all posts are insightful (mine are most certainly not), but it has grown on me.

Once people get used to a certain place, its characters, and its interface it becomes pure habit. I judge all similar pages against the mighty MeFi. Nothing ever comes close because this is the firts of its type that I gott hooked on and participated in.
posted by ttrendel at 12:36 AM on February 3, 2002

Sorry ttrendel I may not have made that clear enough. 30-35% of the content was made unavailable for viewing to non subscribers - over 99% of the total readership. Therefore if everything else remained constant pages viewed would have decreased naturally by around 30-35%.

Habit or not, news and politics were a main part of the attraction to Salon. With both these sections closed off to all but 30,000 people the majority were suddenly left with a very much reduced publication. My guess is that a significant % of the remaining 3,770,000 readers (July figures) had visited Salon mainly to read content from the news and politics sections and therefore when those sections were closed they either stopped visiting or visited less.

It seems suspicious to me that Salon is not releasing current traffic figures but is instead referring back to July 2001 figures and calling them present day estimates.

I hope that is clearer.
posted by RobertLoch at 1:09 AM on February 3, 2002

It's good form that he hasn't self-linked, but Robert here wrote a pretty good takedown of this Salon fluff. I don't think they're going to see 2003. Way too much money spent on God knows what.
posted by owillis at 1:19 AM on February 3, 2002

Sorry for that Robert. That's what I get for not reading the link. My bad.
posted by ttrendel at 1:25 AM on February 3, 2002

No surprise that Salon's media director would try to squeeze some lemonade out of this lemon. Bear in mind that the linked article is from a marketing service, not a bonafide news outlet.
posted by MrBaliHai at 7:23 AM on February 3, 2002

Scalzi also looked at this back last spring {googlecached because the page moved}. He thought 100,000 subscribers would be "phenomenally successful", but that would only mean $3M/year revenue -- when their burn rate is close to $1M/month.
posted by dhartung at 9:35 AM on February 3, 2002

dhartung that's basically the size of it. They have reduced their costs a touch since then, but even so their quarterly operating costs are still $2,442,000 - or almost $10 millon per year on a pro rata basic.

If advertising revenue remains at the presently level of $0.7 million last quarter, to breakeven they would need to get around 260,000 people to subscribe.

If they doubled present advertising revenue then this figure would be approximately 140,000.

They claim that they can reach profitability within a year or so. I'd be fascinated to hear what this prediction is based on.

To help make an assessment of their potential what I want to know is how damaging the introduction of subscription was to their audience levels so that a proper cost/benefit analysis of their decision to introduce subscription can be done. However they are deliberately preventing anyone getting the information required to do this. I mean it is not complicated, they just need to release up to date traffic figures.

Easy press like the above doesn't help anyone, well except Salon. Was nothing learnt from the dotcom bubble fiasco. Industry media, such as that magazine, has an obligation to nail a company down, not hype their spin.
posted by RobertLoch at 10:59 AM on February 3, 2002

Robert, as I noted to you in an email (but I thought it might be good to raise the issue here as well), I agree with your concern over using the July numbers and counting them as current. I used to syndicate Salon content on my website but after they started to pull most of their content behind closed doors, they kept syndicating the headlines out to other websites. So, you click on a link, you see 2 or 3 sentences from the story and then you're asked to become a premium member if you want to read the rest of the story. First off, I feel that was very deceptive to website owners who were syndicating the content since it turned the headlines into marketing / advertising for their premium services. If someone on MeFi or most other websites posts a link to the NY Times, there's usually a mention that a free subscription is required. Salon did nothing to let users know before they clicked that the content was only available to members which brings up my second little problem with this . . . on some of the stories they also would throw up full page ads that you had to sit through before being asked to pony up for the premium services. Not an ad for the premium services, mind you, but a full blown, full page ad for some other product or service only to be sent to a page informing you that you need to be a premium subscriber to get that content.

I think they're driving people away. In one way it makes sense. A good chunk of their costs have to come from hosting and bandwidth which cannot be covered by the advertising revenue they generate (which anyone who runs a traditional advertising based website might agree with and is articulated very well in this Kuro5in piece). If they only had to service the 30,000 or so subscribers they could cut costs substantially. But, I still don't think they could make money. Besides the CEO I'm sure they're are more than a handful of executives making six figure salaries that (in aggregate) exceed the revenue generated by the site. I don't mean this to be a ding against paying people well but what you have is a business that cannot generate enough revenue to cover costs. Even if you disagree with Yahoo's moves you have to give them credit for trying to find creative ways to get paid for providing their services. Instead, Salon just attempts increasingly pathetic tactics to charge a higher than average CPM via annoying advertising techniques. It's obvious that they have no respect or concern about their users and only seek to squeeze every last ounce of juice from thier readers. And in reality, it's this same f-ck 'em attitude towards readers that opens the door for pop-up/under advertising, browser bugs, full page ads, spam, etc., etc. It's this mentality, that getting a higher CPM rate is more important than offending or frustrating users, that leads many to their own destruction.

I'm not bitter at Salon, though it might sound that way, I'm just relating what my feelings are as an outsider looking in. They are doomed and probably won't last another 18 months. I wish it were different because I really enjoy some of their content but . . . they are what they are.
posted by billman at 1:01 PM on February 3, 2002

Billman - I generally agree but do note that the K5 article you linked uses numbers for bandwidth costs which are off by something like a factor of 30 for managed hosting and somewhat more than that for dedicated connections at very high bandwidth levels.

I do think that a site like Salon could easily be profitable if they kept costs down. It's a common dot-com problem - probably would be profitable if it was, say, an editor, designer, general manager and 20-30 writers, all of whom are paid good but not exorbitant salaries.

Instead they have something like a hundred employees doing god knows what and the executive pay alone is over a third of that $3 million a year in subscriptions.
posted by adamsc at 1:30 PM on February 3, 2002

One thing Robert Loch touched on in his Dotcom Scoop piece, but that I think deserves much more attention, is subscriber churn: the number of people that subscribe but then don't renew when the time comes. In the magazine business, the churn rate is generally pretty high anyway, which is why they never stop their wacky "get this free piece of crap alarm clock/radio/paper-thin windbreaker with a one-year subscription"-style offers; it's often the only way they can pull in enough new subscribers to replace the tons and tons of people that never renew after that first one-year sub.

I think this problem is going to be even more pronounced for Salon. While Robert noted that a lot of those one-month Salon subscribers were just testing the waters for the hell of it and will certainly not renew (just like anyone who picks up a single issue of a magazine on a newsstand and decides he hates it), it's still going to be another 90 days or so until we start to find out what percentage of the original full one-year, $30-a-pop subscribers will be renewing ... and they're far more important right now than the one-month-at-a-time crowd.

My guess is that the churn on these subscribers is going to quite severe, for reasons unique to Salon. A LOT of people originally signed up for Premium subs for ideological reasons more than anything else: They wanted to show support for their favorite liberal publication in a politically-charged time right after the election mess; they wanted to show support for a web-based publication period; etc ... too many were signing up for reasons other than the one that usually matters: Whether they want to read the damn thing. These sorts of people were going to be very hard sells at renewal time anyway, and the way events have panned out over the last year, I think it's going to be even harder for them. Some of these subscribers are going to simply feel they made their political point already and don't need to do it again. Some are going to think their worse off economically now and can't afford a renewal. Some are going to be turned off by the many, MANY editorial changes Salon has undergone in the last year (far fewer of the name writers they loved, etc). Some are going to not feel Salon represents their own changed political feelings after 9/11. On and on and on, above and beyond the usual "I just never really got into it" churners.

To make matters even worse, the reality is that most people that wanted to subscribe to Salon Premium already have. The growth in the number of new Internet users is now zero; Salon's own advertising and free press last year made sure that every human being who might be inclined to sign up sure as hell knew the offer existed. They don't have any more doors left to knock on; that's why they started offering monthly subs in the first place, to get the remaining people that wanted to join but weren't willing to lay out $30 at one time.

In short, they're screwed as it is, as everyone has noted above, but they're REALLY gonna be screwed once the yearly subscribers start churning. I don't see how they're going to survive 2002. At best, they'll end up in some sort of messy buyout where someone grabs the name and the archives and maybe a couple writers and editors, and turns it into some sort of portal. And then that'll eventually fail too, just like it did at Inside.

posted by aaron at 4:06 PM on February 3, 2002

Good comments billman. As for the pay of their executives, let me illustrate it this way. To cover the salaries of David Talbot, Michael O’Donnel, Robert O'Callahan, and Patrick Hurley, which are over $900,000 combined, through selling subscription, they would need get 30,000 full subscribers of they Premium content service. Presently they probably have around 22,000 yearly subscribers and 8,000 monthly ones. - (those are estimates that may be out by a couple of thousand either way.)

aaron I agree with you that it will be very interesting to see what happens when it comes time for people to renew subscriptions.

Adding to what you have said, there is also the factor of whether people will be willing to take out a years subscription come reknewal time if it looks like Salon's is on the verge of going out of business.

Personally I think that they will do very well to get 75% repeat, and that 50% is a more realistic target. Of course the fgure may be much lower as you imply.

It seems obvious to me that the thing that's behind all this distorting is that they are desperate for investment. They have $2.1 million in the bank, which gives them to about the early summer to live if they don't improve results. If this is the case then it is even more important for reporters to examine salon's business viability closely. Rose tinted glasses assessments just arn't good enough.

My hope is that that some big gun pins Michael O'Donnell down and asks him why it is that he won't produce present traffic figures. I think that the true answers it that the figures would show that more has been lost from the introduction of subscription, in terms of the viability of Salon properties as a marketing medium, than has been gained financially.
posted by RobertLoch at 5:48 PM on February 3, 2002

Salon has changed editorially since they went Premium? How so?
Ah well, isn't it true that most of the more influential opinion magazines can't make a profit anyway?
posted by Charmian at 5:57 PM on February 3, 2002

Charmian I can't see what/who your question is aimed at.

It depends exactly what you mean by editorially. For the 99% of people that haven't subscribed there is now no news or politics on view.

From that perspective the publication is now has a very different editorial feel for those that haven't subscribed.

The general amount of content produced appears to be in decline. Also some have suggested that the editorial slant has shift in the last 6 months further towards the left - whatever that means in reality. That I can't comment on as I don't subscribe or read in regularly enough to make an informed judgement.
posted by RobertLoch at 6:20 PM on February 3, 2002

Charmian - the writing is overall of lower quality and not just because they lost some of the big name writers. A lot of it is just lame - straight out of the "trendy-liberalism-to-impress-your-college-friends" Cliff Notes. Every so often there's some interesting articles - Wagner Au's "We Were Wrong" recent was a decent attempt at the sort of reconsidering dogma that party-line liberals should be doing more of (wasn't being a liberal supposed to involve more thought?) - but those articles are a rare exception these days.
posted by adamsc at 9:36 PM on February 3, 2002

The Au essay, and some other recent items of note such as the Chomsky interview, are perfect examples of items that are being discussed and passed around surreptitiously, and would be perfect draws for advertising impressions by the thousands if they were slyly opened up. But they're locked being the Premium door, and the stuff that isn't is not even worth checking for on a regular basis anymore, so they're falling off even the passingly small and uninfluential radar screen of the webloggers.

As to churn, the New Yorker went through a period where it was contracting out a promotional PR blitz including borderline tacky television ads. After Tina Brown left, this contract was terminated (note: it had begun before her, around the time that Newhouse bought in), which saved the PR blitz fee, reduced the light-interest readers, and allowed the magazine to fall back to more natural and recurring subscription levels.
posted by dhartung at 10:23 PM on February 3, 2002

That's probably the best sign that Salon is failing - how frequently are they being blogged about now?
posted by adamsc at 10:59 PM on February 3, 2002

I know they lost at least one reader, because I stopped reading them when they went "premium."
posted by Sidhedevil at 8:24 AM on February 4, 2002

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