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At the hip New York City club Lot 61 on Apr. 13, online-content syndicator iSyndicate hosted a soiree marking the opening of its New York office. The mood was festive as twentysomethings munched lamb kebabs and quaffed Cosmopolitans. But this was, after all, a business event. So when Richard Delin of Net-design firm Iconixx spotted iSyndicate salesman Brian Trapp's name tag across the room, he made a beeline for him. "Our clients are begging for content," Delin told Trapp. "They're saying it's one of their top priorities.
"What Delin wants, iSyndicate can probably deliver. With more than 800 content providers under contract, iSyndicate hopes to cash in on the seemingly unquenchable thirst of thousands of Web sites for online content. The company, which wholesales material to 430 customers such as Netscape and Fidelity Investments, recently opened an office in London, too. And on Apr. 26, iSyndicate plans to announce a $50 million round of funding from heavy hitters such as Microsoft, Rupert Murdoch's News Corp., and NBC-- some of whose $15 million contribution will be on-air promotion for iSyndicate. In return, iSyndicate will add CNBC.com and News Corp.'s Fox News to its roster of content providers. Software companies Vignette and InfoSpace, which invested in the previous round, will also be back again. The new cash will put iSyndicate toe-to-toe with archrival ScreamingMedia, which is planning to raise $54 million in an initial public offering that will help it expand its list of 800 paying clients by beefing up technology, marketing, and its overseas operations.
That budding competition is the clearest sign yet that the Net is breathing life into the stodgy Old Economy pursuit of syndicating the written word. Traditionally, that has been a solid but not spectacular business, featuring such publishers as The New York Times, the Los Angeles Times, Reuters, and the Associated Press. The Web has brought more customers into the game -- and more suppliers as well. Research firm Jupiter Communications predicts that total revenues from syndicated material will grow from $126 million two years ago -- the vast majority of that gathered by traditional syndicators -- to $1.5 billion by 2004. Dot-coms such as iSyndicate and ScreamingMedia are going against their bigger, better-funded, and mostly profitable competitors in hopes of grabbing a share of the expanding market.
AMBUSH MARKETING. It won't be easy: The two companies combined only had revenues of $8 million last year, and ScreamingMedia lost $13.2 million on revenues of $3 million. (iSyndicate won't reveal its loss.) If there's hope for the newcomers, it lies in the expanded capabilities of the Web. For instance, part of iSyndicate's new stash will pay to install broadband and wireless systems that will deliver not only the printed word but also audio and video clips to any device that receives digital content. Says iSyndicate CEO Joel Maske, echoing his competitor's goals as well: "We don't want to syndicate to just Web sites. We want to be the infrastructure component to businesses that provide content, no matter what the device.
"In fact, iSyndicate already redistributes audio and video content from 30 providers -- a service not yet offered by ScreamingMedia. Moreover, it's expanding its definition of syndicated material to include not only news but just about any information anyone puts on a Web site, including calendars and stock quotes. And it's doing deals with strategic partners such as iVendor to help buyers of syndicated material embed e-commerce links in the content they feature on their sites -- a form of ambush marketing that could become controversial for both readers and suppliers of information. It's all part of a furious effort to find a viable economic model both for Web syndicators and their suppliers, who on average make little, if any, money off the material the syndicators distribute.
iSyndicate and ScreamingMedia sell a similar roster of services: One is pre-edited packages of material organized by category (such as entertainment, technology, and finance). Another is customized material that buyers pay more for in order to gain additional control over the material's presentation, plus data on what their readers do with the content. iSyndicate offers a third service, called Express, which it says is used by 194,570 more Web sites, no doubt because it's free: Sites can grab lists of headlines and photos linked to iSyndicate's content companies, which then pay iSyndicate from a penny to 10 cents for each reader who clicks through to the content site's material.
HOW THE SYNDICATORS STACK UP
Company
SCREAMINGMEDIA
iSYNDICATE
Customers
800 (paid)
430 (paid), 194,570 (free)
Content providers
239
806
Service plans
a) Paid service includes customized content and tracking data
a) Paid service includes customized content and tracking data
b) Lower-cost, pre-edited topical content packages
b) Lower-cost, pre-edited topical content packages
c) Free service: headlines, photos, graphics (providers pay 1¢-10¢ for clickthroughs)
Rich-media providers
None
30
Strategic partners
Concentric Networks, Proxicom, B2Bworks
T3 Media, iVendor, MyEvents.com, Agency.com
1999 Revenues
$3 million
$4 million to $5 million
1999 Losses
$13.2 million
N/A
DEGREE OF SAMENESS. For each company, success or failure is going to hinge on its ability to quickly become bigger -- and less dependent on a few key customers. According to Maske, 70% of iSyndicate's revenues come from its 430 paying customers, most of them large corporate Web sites. Likewise, he says, most of those sales involve material from the top 100 of its 800 content suppliers. Maske says he hopes to have well over 1,000 paying customers by yearend. If he does -- and if he collects from each of them the average $3,500 per month he thinks he will -- then iSyndicate's revenues will explode this year.
The prospectus for ScreamingMedia's public offer makes its situation sound somewhat more precarious. Just two content providers -- Comtex and Newsletters.com -- delivered 26% of the material it redistributed last year. And one customer -- About.com -- accounted for 12% of its revenue (though ScreamingMedia says it doesn't expect any one customer to account for more than 10% this year). By contrast, Maske says that no iSyndicate provider accounts for more than 5% of his company's content offerings.
Even as they expand, both syndicators will face the challenge of sameness -- as in the degree of that they confer on customer sites. "If you go to two different sports sites, they often have the exact same stories," says Steve Outing, a columnist with trade magazine Editor & Publisher and co-founder of Content-Exchange.com, a specialized syndicator. "As this evolves, I think there will be more need for more original content.
"Maske agrees. He says that iSyndicate has added more than 200 content sources since January, and he expects his total number of providers to double by yearend to more than 1,600. The company also features lots of smaller providers of original content, he says, including 200 columnists who self-syndicate through the company.
SMALL SLICE. Trouble is, these small providers may not be around long. Some, who asked not to be named, claim to make next to nothing from iSyndicate. The company says it pays content providers 25% to 50% of licensing fees. But with the majority of its sales generated by its top 100 content providers, the slice per head that's left over for the remaining 700 or so is pretty small. Moreover, iSyndicate's system of charging for clickthroughs under its Express plan means that many of those content providers could end up paying iSyndicate in excess of 50% of their net advertising revenues -- in some cases, well in excess. Add it up, and both sites may remain dependent on a few suppliers and a few customers for some time to come.
That problem could be heightened by the increased competition that may soon come from gorillas such as Reuters, as well as from startups such as YellowBrix.com and Correspondent.com, which are trying to become the middlemen between niche-content providers and specialized Web sites.
And even more entrants are likely to emerge, despite the lack of a proven financial model for the business. "Syndication is a Web-friendly model," says Dan O'Brien, an analyst with Forrester Research. "I'm surprised there aren't more players." Chances are, there will be soon.
By Stefani Eads, with Alex Salkever, in New York
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