THINK!: Here's a man who might dig Newspaper 2.0

Friday, 3 October 2008

Here's a man who might dig Newspaper 2.0

Kevin Ryan

If you want to cut to the (unpleasant) chase, scroll to bottom and read his answer to last question.

Forbes: Online News

Up Ryan's Alley

James Erik Abels 10.02.08, 6:30 PM ET

Kevin Ryan was CEO of DoubleClick when a private equity firm bought it for $1.1 billion in 2005 (Microsoft bought it for $3.1 billion two years later). What'd he do with his winnings? Among other things, he joined a new wave of publishers building Web news businesses.
So far, so good. Last month, Quantcast reports Ryan's one-year-old Silicon Alley Insider had roughly 630,000 unique visitors. A big part of the attraction: Editor-in-Chief Henry Blodgett, one of the highest-flying analysts of the 1990s before he crashed amid an ethics scandal that left him banned for life from the securities industry.

Today, Blodgett runs three sites--with more on the way--under the banner of Ryan's Alley Corp., a New York-based incubator for six digital businesses, which Ryan says have combined annual revenues of $50 million.
Forbes.com checked in with him for his take on the market ahead and the opportunity for digital media.

Forbes.com: How do you expect advertising to hold up in the short term?
Ryan: It's going to be terrible. I'm only hearing bad things. I just had lunch with one of the top luxury-goods providers; he runs the U.S. for them. He said, starting September: catastrophe.
How does that affect your building digital news business?
We're so small that--although that is a factor--when you're tiny and you have a tiny market share, what's important is: Are you doubling in size?
How well has that strategy worked to date?
Revenues have doubled for us since June. Small numbers, but … if you have 10 people [as does Silicon Alley Media], roughly you're spending a million dollars a year.
Does that equal profitability?
Not yet--however, if we weren't launching other publications then we'd be awfully close right now. When we start a new one, you have two new people on it, you have no traffic, you're eating all those costs.
How long are you willing to eat those costs?
In the first year, we focused almost 100% on just establishing our brand name, getting people to read it, getting people to care about that. In the second year, we start now to focus on monetization and aspects like that. It's pointless to work on monetization when you have very little traffic.
If a goal is just a couple million dollars, that's still paltry next to what print brings in--even as the entire traditional media sector declines.
Online is more scalable, it's not easy to make money. The challenge in online publishing is [that] the market's not enormous right now. It's not. Your goal has to be that you're going to build a business that requires very little capital, but could be a good business that's worth $50 million.
Then where does digital media live within the news industry? Does it become a supplement to leaner but more financially valuable print publications?
I'm saying print goes away, I'm saying the industry shrinks [and earns less money]. I don't think it [ever] matches print revenues. It has lower costs--I do think there's a net transformation here.
So in the future, there's just less money in news and other forms of publishing?
The revenues are smaller. You don't have capital costs, you just have people writing and collecting [aggregating content on a single Web site]. Think of the music business. They were extorting monopoly profits because they had monopoly distribution.
Then the Internet doesn't shift existing media businesses online, it guts them?
Here we have open distribution.
That puts a lot of pressure on a start-up's small staff to generate a content volume that sells enough advertising to earn the small returns you're talking about.
I think that is a real challenge for people. You just have to manage it as best you can. It's not easy. I don't think we have an innovative great solution for that other than to be thinking about it and trying to manage it as best we can because you do want productivity.
Traditional media companies have tended toward being overstaffed but do a better job with this issue.

If the economy cools off, don't you think that gives the industry some time to begin incorporating more digital media into a business that scales?
Big media is irrelevant, really, in what happens, because they're not the driver of anything. They buy some companies and they adopt what's out there a little bit late. Look at the top 50 Web sites online: Tell me if big media created any of them.