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Salon and Slate: A Tale of Two Webzines While both are high-minded, their plot lines are diverging. But if they succeed, it could prove that content can pay the bills It almost sounds like one of those 1970s pulp novels that follows the parallel lives of two protagonists -- one raised in wealth, the other clawing his way up from the streets. Slate and Salon, the Webzines, aren't related by blood. But they've always been linked in the minds of cyber-watchers, if for no other reason than they're the two principal Web-only content sites with high-minded literary aspirations. And even though their names are often confused, there's no love lost between them. Their bosses are not above the occasional swipe at each other. Now, these two protagonists appear to be moving from adolescence into early adulthood. Both grew older and wiser this year. Slate abandoned its subscription model in February and (no surprise) saw its audience soar. Salon had a lousy debut as an Internet IPO this summer -- but that only masks the fact that it's developing into a savvy Web news service. And for all the growing pains, both services could be on the way to converting their unique content into a viable business model that's free to readers. If they succeed, they'll debunk the notion that e-commerce -- and e-commerce only -- will drive Web media. But first, more about the rich boy/poor boy analogy. Slate was born with a silver spoon in its table of contents in the form of Microsoft, which sponsored its creation and brought in esteemed political journo Michael Kinsley as editor. Salon was more of an "out of the garage" project. Started in San Fransisco in 1995 with $60,000 in seed money, it attracted some media and Wall Street luminaires (producer Norman Lear and investment bank Wasserstein, Perella, to name two) as backers, and eventually raised $42 million in its IPO.
Michael O'Donnell, Salon's president and CEO, argues that his company has the "metrics" -- that is, the growth in users and multiples of revenue -- of a company worth $400 million to $500 milllion. Yet Salon languishes at a market cap of around $70 million, even as it has $30 million in cash. WHO DAT? Its biggest problem, O'Donnell freely admits, may be its identity. The company recently did a brand-recognition survey and found that only 13% of the literate, upscale audience it wanted to reach was aware of Salon -- including the investment community. "When you go outside the media brethren, no one knows us," O'Donnell sighs. That's why Salon recently launched a $4 million ad campaign nationwide. And it received a unexpected free-publicity windfall recently when CNN, part of the Time-Warner empire, refused to air its promos, citing a policy of not giving airtime to competitors. "That was actually kind of gratifying," says O'Donnell, "because that's how we see ourselves." Actually, Slate and Salon don't even mention each other when you ask them to name their competitors. Slate publisher Scott M. Moore cites the Web sites of Wired or The New York Times and Washington Post, while O'Donnell has grand aspirations of Salon becoming a full-fledged news service akin to CNN. O'Donnell dropped the old media title of "publisher" for himself and says Salon is considering renaming its editors "producers" to convey more of a broadcast/cable channel image. CALL-GIRL COLUMN. As they target their audiences, Slate and Salon are evolving along different paths. Slate has shortened its articles. It's taking what Moore calls a "meta-approach" to the news, trying to give the reader a quick "story behind the story." As Slate has taken a more political bent, Salon has focused on entertainment and culture. One of its sleeper hits this year has been a serial-fiction column about a Manhattan call girl written by a real-life Manhattan call girl -- which was recently picked up to become a real-world book. But both sites' biggest challenge is to give readers reasons to log onto them regularly as a primary news source. That'll be tough with so many established media giants stomping about the Internet with their own news and information services. Small wonder Salon now devotes a big chunk of its main page to running Associated Press headlines. On one level, being more timely may be starting to work. From June to September, Salon says its visitors increased from 1.3 million to 1.9 million monthly, and the company's quarterly revenues increased 123% from the same period a year earlier. Because of startup costs, though, the $3.8 million loss is nearly triple what it was a year earlier. Media Metrix counted 686,000 visitors in September.
Both services are staking their future on capturing a piece of an Internet advertising market that could reach more than $20 billion by 2003, according to Forrester Research. The strategy is simple: If they can corner even a small piece of this rapidly expanding market, profits will follow. "I think there's going to be a swing back to a recognition that content plays a key role," says Moore. "Our gross margins on selling advertising would make Jeff Bezos jealous." Certainly, the potential beauty of operations like Slate and Salon is their scale. Their costs are nearly completely fixed, unlike a print publication that has to worry about paper prices and the frequency of its issues. Moore says Slate spent only $15,000 on adding a server since going free. The big question mark, however, is how these sites will fare as the likes of The New York Times and Time Warner extend their brands into the realm. Moore says that -- aside from that Bill Gates fellow's deep pockets behind it -- Slate has the advantage of being part of the Microsoft Network, which handles its technology and advertising sales functions. SALATE OR SLATON? He thinks Salon has a rougher time by not being part of a bigger media group, but O'Donnell counters that he believes his single-minded sales staff of 20 is one of Salon's biggest advantages. Here's a novel idea: The Web is a consolidating medium, so why don't these sites merge? Asked separately, both Moore and O'Donnell think not. "There are no plans to that effect -- I don't think so," laughs Moore. "I like where we're at, and I like our prospects." O'Donnell isn't interested either. "I think being hungry and surviving on our own makes us have to work smart," says the Salon CEO. "I didn't want to come here to be part of a small, literary Webzine. I wanted to build something worth hundreds of millions of dollars." O.K., a Slate-Salon merger may not be in the cards. But it would make a neat ending to the tale of two Webzines. By Richard Siklos in New York
EDITED BY DOUGLAS HARBRECHT
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