The Online Experiments That Could Help Newspapers

A venture by The Bakersfield Californian is one of many ways newspapers are trying to generate new revenue

By Olga Kharif

The Bakersfield Californian is an anomaly in the newspaper business. While other papers are shutting their doors and filing for bankruptcy, it's expanding. The reason is the paper's 2005 launch of an online social network, called Bakotopia.com, aimed at reaching nonreaders, especially the young people in this city of nearly 329,000.

The Web site has caught on to the point where Bakersfield Californian now publishes 20,000 copies of a free magazine with content from Bakotopia twice a month. The articles range from reviews of the local theater scene to goings-on at various hot spots. Because the magazine's audience is young, hip, and hard to reach, "advertisers do pay full rates," says Dan Pacheco, senior manager of digital products at the company. The magazine even turns a profit.

These are dark days for the newspaper business. Advertising is plummeting, and papers are going under with alarming regularity. In December, Tribune Co., which owns the Los Angeles Times and Chicago Tribune, filed for bankruptcy. This year, Hearst said it might sell or shut down the San Francisco Chronicle, and Philadelphia Newspapers, which owns The Philadelphia Inquirer, filed for bankruptcy. Just a week ago, the Rocky Mountain News in Denver published its last edition. Even the New York Times Co. (NYT), which owns one of the country's strongest papers, has suspended its dividend. The Zacks publishing stocks index is down 80% from its 52-week high.

Your Own Digital Magazine, Anyone?

Newspapers had hoped that their Web sites would help them replace evaporating print revenue. But an online ad typically garners one-tenth of the revenue of a print ad, estimates Rick Edmonds, media business analyst at the Poynter Institute. "The phrase in the industry is, 'You are trading dollars for dimes,'" he says.

But in the middle of it all, the independent, family-owned Californian is preparing to take the idea of Web-created niche magazines national. Using an $837,000 grant from the Knight News Challenge and about $200,000 of its own money, it's launching a site called Printcasting.com later in March. The site will allow individuals, schools, homeowners' associations, wine clubs, and the like to create their own digital magazines. "If we see a magazine that really has potential, we'll print it, place additional ads in there, and distribute it, [first in Bakersfield, then in five other cities as early as this summer]," Pacheco says. The Californian will get a cut of ad sales while spending little on the product itself. "This is cheap and targeted," Pacheco explains. "Even though there's an ad recession, it doesn't mean there're no more ads."

This is one of a slew of ideas—including micropayments, hyperlocal Web sites, and publications designed for e-readers—that publishers are trying in an attempt to stop their world from crashing down. "Publishers for the longest time were really in denial," says Alan Mutter, a managing partner at venture capital firm Tapit Partners, which makes tech-related investments. "In the last six months, their sales are so bad, they realize they need to do things differently."