Wednesday, March 25, 2009

SeattlePI.Com, starting up from behind

The closely watched online incarnation of the Seattle Post-Intelligencer is starting its new life with a number of disadvantages – and almost certainly well in the red.

Crisp and rapid execution, including an aggressive sales effort abetted by an uptick in the economy, will be required to enable SeattlePI.Com to reach its full potential. At best, that would seem to be about $7 million a year in sales, according to the projection detailed below.

Because initial sales will be nowhere near that theoretical number, the Hearst Corp. almost certainly will face multimillion-dollar losses in the early days of an experiment being monitored by publishers eager to learn if life after print will be worth living.

There are too many variables to try to guess how deep the losses might run at the P-I or how long it would take to overcome them. So, we won’t try.

But we do know Hearst has elected to limit its exposure by staffing the site with 20 journalists and 20 advertising sales people who probably represent a total of $4 million a year in operating expenses. In the unlikely event the site generated zero sales, the maximum potential hit of $4 million would be better than the $14 million the company lost on publishing the print product in 2008.

The new site is being watched widely in the newspaper industry because it represents the first major metro to go paperless. Publishers thinking about trimming or eliminating their print production schedules will want to see the sort of audience and advertising the P-I attracts.

As valuable as feedback from the Seattle experiment will be, it is worth noting that it is a decidedly atypical situation.

Because the P-I is exiting from a joint operating agreement managed by the Seattle Times, it is starting its newly single life without an ongoing classified advertising business.

With the Times in possession of the existing classified business, the P-I hastily affiliated with Kaango for free ads, Kelley Blue Book for cars and HotJobs for employment. There is nothing more than a link to Zillow on the real estate tab of its site. These relationships suggest few P-I visitors actually are placing or consulting many classified ads.

Classified advertising matters because it historically generated a significant portion of newspaper web sales. Given the collapse in the three primary classified verticals in recent years, this disadvantage may be less disadvantageous than it would have been in an earlier era.

A far bigger issue is that the P-I is starting with no ad sales operation, because the newspaper agency handled ad sales for the P-I prior to shutdown of the print paper last week. Hearst is in the process of hiring a sales staff.

Meantime, the site is heavily populated with the cheap banner ads that publications run in lieu of empty space, including pitches from a Google AdSense wannabe called Pulse360 that features tummy tighteners, teeth whiteners and colon cleansers.

It also is not clear the P-I is starting with all the web traffic to which it otherwise might be entitled. Because the Seattle JOA operated an umbrella website for both papers called NWSource.Com, it is entirely possible that some readers over the years became accustomed to going to NWSource and then clicking through to the P-I. If you go NWSource today, there is no route to the P-I.

Add these factors together and it is clear that the P-I is beginning life as more of a struggling start-up than a typical, standalone newspaper would be.

In trying to assess the potential of the business under these circumstances, the toughest part is figuring out the size of its audience.

Until the “About Us” page on the P-I site was removed last week, the publisher claimed 4 million unique visitors per month, a figure that is impossible to believe because it represents more than twice the adult population of the Seattle-Bellevue-Everett metropolitan area. Nielsen Online credited the site with 1.8 million unique visitors last month, but even this figure is hard to swallow because it is equal to the entire adult population of the metro area.

By contrast, SeattlePI.Com barely registered a pulse prior to the shutdown of the print paper on such popular online traffic-measuring services as Alexa, Compete and Quantcast.

So, I asked Greg Harmon of Belden Interactive, a marketing research service specializing in newspapers, to give me a realistic estimate of the potential audience for the new P-I. Here’s the result:

After studying the web traffic at hundreds of newspaper sites for years, Harmon says he generally has found that a paper will attract about 20% of the adults in its market. Out-of-market visitors, he says, boost the traffic of a typical site by 30% beyond the local audience. In the case of Seattle, this translates into potential traffic of about 732,000 visitors per month.

As the second paper in a two-paper town whose identity is confused by the former affiliation, Harmon says the 20% figure likely would be the best imaginable share of the local market for the P-I.

Harmon says the typical visitor at a metro site generates an average of 26.5 page views per month, which would put what he calls the “best-case” potential for the P-I at a bit less than 19.5 million views per month.

Assuming each of three ad positions on every page were sold at an average net rate of $10 per thousand visits per ad, annual revenue would come to a bit less than $7 million. (Classified advertising was not taken into consideration because its immediate contribution would be insignificant.)

If the expense of operating the site were $4 million, then Hearst would reap a profit of $3 million if the site achieved its full revenue potential. But the revenue number is distinctly theoretical.

Although the above analysis assumes every available ad will be sold, this seldom happens in real life – especially during the sort of difficult economic times we are experiencing today. The true percentage of the inventory likely to be sold will depend on the success of the P-I’s audience-building effort, its sales force and the future health of the economy.

Suggesting that scant time was allocated to planning the site before the presses were stopped in perpetuity, the P-I had a less than auspicious launch from an editorial point of view. It remains to be seen whether the comparatively small staff running the site can come up with an effective formula for efficiently producing compelling and viral content.

The average $10 ad rate may prove to be too generous because of the enormous amount of unsold advertising inventory all over the web. Online ad rates dropped by almost half last year as the result of the glut of unsold inventory, according to Pubmatic.Com, a company that specializes in online ad placements.

Pubmatic reported that the average cost per thousand for the sort of backfill banner ads appearing at the P-I was less than 40 cents in the final quarter of 2008. Once the P-I organizes its own, dedicated sales force, it should be able to do better than that.

Other Hearst newspapers have been having considerable success selling targeted advertising on Yahoo as members of the consortium of nearly 800 publishers who have partnered with the web portal. Assuming the P-I participates in the program, its share of those sales will help to enrich its revenue stream.

If traffic, ad volume and ad rates fulfill or surpass the above estimates, then Hearst would move from losing $14 million a year in Seattle to making a respectable, but modest, annual profit of a few million dollars.

If the economy doesn’t cooperate or the citizens and merchants of Seattle fail to embrace the site, the publisher will be faced with the choices of trimming the staff, funding another hefty operating loss or shutting down the experiment that many observers hope will show the way to the future.


Blogger Benjamin Lukoff said...

Great points all, but I do wonder how many people accessed the Seattle P-I online via rather than simply typing in "," which used to redirect to, and is now just ( now redirects to

I don't think people like to click that much.

9:30 PM  
Blogger tom said...

One critical omission from this analysis: where the content comes from.

Previously, the PI had a newsroom of over 100 people providing free content to the site.

Now they have 20 to do everything -- write, report, edit, photograph, do graphics. Two shifts a day equals 14 shifts a week. 20 people working five-day weeks equals 100 shifts. 100 divided by 14 is seven people a day, or 3.5 per shift. You're going to dive into a 24-hour news cycle with 3.5 people on board? Good luck with that.

If you put your 20 people to work developing highly targeted content of interest to readily definable niches in the Seattle region, targeting your content to high-value keywords to maximize your CPMs from contextual ads (since banner ads are worthless); use every SEO and content monetization trick in the book; you might make your $7 million a year target.

But what you end up with will not resemble a newspaper, online or otherwise.

Then again, if it works, it means it will, oddly enough, provide something of value to the good citizens of Seattle because it'll be utilizing Web technologies to generate content that pays for itself, and gives people information they're looking for.

Might be fun to try, now that I think of it.

10:31 PM  
Blogger Tim Windsor said...

I agree they'll be interesting to watch.

Two points: I think the path to success is not on the back of traditional banner ads, but on more collaborative sponsorship agreements that feature a mix of a retainer payment and pay-for-performance.

Second, I'm not at all sure about Seattle, but in Baltimore, we had well over 3 million monthly uniques, more than twice the size of our metro market. So I'd question some of the Belden assumptions. True, a lot of those visitors were transient, but the audience numbers were verified, and grew consistently year over year.

3:59 AM  
Anonymous Anonymous said...

Benjamin is right -- speaking as an avid PI reader (and contributor to its Soundoffs on a host of public topics), the PI brand *far* eclipsed any of, which I always considered to be an irritant and never my intended destination.

While I appreciate Alan's back of the envelope analysis, the reliance solely on averages in a multiple-variable equation promises only to lead one down a rat-hole of little or no significance. Prognostications based on such algebra -and $3.00- might buy you a latte.

The PI has excelled in covering *Seattle* news and there is no doubt that the Seattle scene offers a vast treasure house of important news stories of significant public import and interest. (Indeed, now that I have safely removed myself from any approaching salt storms, I would suggest Seattle offers all the stories of latter-year Sodom and Gomorrah.) ;-)

That said, the new PI's on-line effort will yield some very valuable research results. I wish it well.

7:35 AM  
Anonymous Anonymous said...

$10 CPM is a fantasy for a site like They'd be lucky to get $5, with a 50% sellthrough rate. Using the rest of your assumptions, that gives the site annual revenue of less than $2 million.

Also, the site design is terrible.

8:33 AM  
Anonymous Anonymous said...

But what you end up with will not resemble a newspaper, online or otherwise.

Then again, if it works, it means it will, oddly enough, provide something of value to the good citizens of Seattle...

You've inadvertently spilled the secret.

Something like a newspaper is no longer of any value. What is of value is nothing like a newspaper.

That's the thought that many newspaper fans would like to avoid.

2:29 PM  
Blogger blahbry said...

Alan, you are right to point out that they are starting way behind where they could be.

That's their traffic compared to according to Compete.

Gothamist pays one editor about $30k to run that blog, the rest of the writers are all working for free.

If the SeattlePI's traffic doesn't shoot through the roof soon...well, it'll be tough to hit those numbers for a while.

What about the Google Sandbox effect? It takes a new domain as long as a year for Google to take it seriously.

9:57 PM  
Blogger MvB said...

@blahbry--as the editor of Seattlest I would love it if you would make your source cough up that money for us. Even half would be a substantial improvement. is a better source for traffic info, because we both use them, so it's apples to apples. You can see that even with a short month, traffic is about 850K US unique visitors. Only about 30% of those are regular visitors, and they supply about 50% of the site traffic. I find Quantcast's numbers conservative, by the way, compared to Google Analytics.

Seattlest is playing in a different ballpark, with about 50K US visitors--which may be relevant to Alan's point about the true size of the regularly reading local audience, given our city-of-Seattle focus.

9:42 AM  
Anonymous Anonymous said...

The P-I web site showed every promise of being crapola when, in the print P-I's last days, the new "executive producer" heaved her bodice breathlessly about the fabulous innovations to come, like taking feeds from Vogue and Popular Mechanics.

Woo frikkin hoo.

Like you, I started out with hot type. Like you, I spent time in Silicon Valley and I also was in SF and the East Bay. Unlike you apparently I got out.

In my first years in publishing I reported for the chain of newspapers reviled (properly) at the end of the documentary "Manufacturing Consent." I figured out early in life where journalism was headed, I thought being a media activist might be more useful, I was wrong, but it took me 26 years to figure that out.

The complete remaking of the American psyche by corporate media--its domestication for profit--is the tragedy of our age. I thought I saw a little light in 1990, with the internet, and again in 1992 with the Web...then came AOL.

I'd call myself a Fifth Estate atavism rather than newsosaur, though I like your connotation of time devolving everything. I hardly read news anymore, despite perusing hundreds of portals and print sources each week. The quality of the people producing this Content is lower than I ever remember. Stories are framed without regard to anything other than themselves, a sort of in situ autism--very profitable, completely pointless as communication of a transformational sort. Language and reasoning are dumbassified to the point of stupor. Reporters? Typing monkeys. With careers. And the people drawn to these careers apparently have no experience of real life, just of career-humping.

Related to Tom's comment, as for the matter of number of staff, it isn't just that more is better. A news ORGANIZATION becomes greater than the sum of its parts. Out of those parts evolves a higher group intelligence, culture, and skepticism, with the proper leadership, of course. The best journalists worked within the beast, but never let themselves get digested. I'd argue that 6 or 10 or 20 people simply cannot create a complex enough meta-organism to account sufficiently the activities of complex human societies.

Today? Think about how many journalism schools are NOT located within marketing, communications, or marketing communications departments. I.e., few. Do I recall correctly that of the major j-schools, only U MD has stayed independent?

The best of what we knew as "news" was a function of complex thinking and discourse, and of a discursive space which is supposed to exist apart from the realm of the paycheck.

In other words, Erasmus wasn't an ass-kicking editor because he was Erasmus, but because for the first time there existed a community of scholars, interacting, against whose intelligence his could thrive, evolve, and eventually shine. There have always been hacks, careerists, and ideologues, but now it seems that's all we have.

Today the focus is more on pitching fat slow balls to the thick part of the bell curve. You make more money grabbing eyeballs, and engineering manic clicking-through, than engaging people and evolving or challenging their sensibilities.

I'm now in Pugetopolis, supposedly the most literate part of the US. I know a lot of people who are constantly, avidly, compulsively reading. But their reasoning skills, their awareness of something outside of their own blue-state presentist liberal Democrat PC biases, is very narrow. And often very proud of its ignorance. As for the "liberal arts"--all that means in WA State is you go to the Evergreen State College, occupy a seat for 4-8 years, and you get a degree. They come out of there with zero knowledge of anything other than how to be political.

In grad school (U of PA, Annenberg School) I taught various undergrad courses. I used to ask them their reaction to a recent (early 1980s) survey which had an open-ended methodology. The sample was high school students. One question was, "What do you want to be in your adult life?"

Some huge percentage--memory says 50+--replied, "On TV." It was an eye opener for me. My eyes were additionally opened by other things, just as jobs with CNN, CBS, and other big organizations, which I turned down. I was a news junkie; they wanted me to be Willy Lomax.


2:30 PM  
Blogger tom said...

In hell there will be a special place for all the people who think "why am I the only smart person in this room?"

It will be undistinguishable from their earthly existence and it will be exactly what they deserve.

10:44 PM  
Blogger Benjamin Lukoff said...

"Anonymous" said:
Something like a newspaper is no longer of any value. What is of value is nothing like a newspaper. That's the thought that many newspaper fans would like to avoid.

If there are still fans of newspapers out there--and, last time I looked, there are--there is by definition value in newspapers.

The problem for them is there is not as much value for others in newspapers as there used to be, hence falling subscriptions and ad rates, etc.

But how can you say there's no value in something that many people still are buying?

(And don't forget about the surprisingly high number of people without Internet access.)

11:40 AM  
Blogger Dave said...

As always, I enjoy your analysis. However, there is one key item missing that would be very difficult for you to calculate but is a central part of the P-I plan. If you read their announcement when they went online-only, they talk about being a quasi ad agency. Parts of that plan include reselling Paid Search as well as placement in their directory. The former has nothing to do with with site traffic and everything to do with whether they can develop a successful sales and delivery model.

The sales and delivery model will be most difficult to observe from outside. For the foreseeable future, their site content will just have to be good enough to maintain some pretty hefty numbers so I think they can support the traffic you mention. Their brand is well established and has a solid but neutral reputation. Most people's navigation is done via Google so I doubt people will have trouble finding them. To the extent they do really creative content work, they have the ability to grow. No doubt, a meaningful portion of their traffic are readers interested in companies in their region that have national significance (Amazon, Microsoft, Boeing, Starbucks, Nordstroms, etc.). Monetizing that national traffic will be a much different challenge for them than the quasi ad agency.

Full disclosure: I just started blogging for the P-I but have no insight on the P-I's internal machinations. As an outsider and one who has my own local site that's managed to eke out a profit, I shared my view on mistakes for them to avoid that are primarily on the sales & delivery model side of the business which is what my consulting business focuses on. Read for my perspective.

11:58 AM  
Anonymous T Heller said...

metsa -- great post. I feel your pain.

P.S. Condolences to hear you're in Pugetopolis. I fled that area in '04 (after 27 years of adult experience.) I'm also a UPenn grad, but not Annenberg.

1:12 PM  
Anonymous Anonymous said...

The Seattlest is not even close to being in the PI's league. Huge brand name for the PI versus zero brand name for the Seattlest.

The compete numbers don't reflect reality. This is closer:

That puts the PI at about 1.5 million per month. They use to state that they got over 2.2 million visitors per month. Yes, they will lose a bit of traffic from the domain switch, but they will lose more from the drop in content. Even then they will crush any local Seattle blogs out there. Or all of them put together.

8:14 AM  
Anonymous Anonymous said...

Doomed to failure. Period. is a messy glob of links and banners to other sites so the moron in charge can claim "hits" - - like the acid she obviously took too much.
The absence of critical news judgement is extremely dangerous. The editors that had the fortitude to make real journalistic calls in critical situations are gone. Geeez, USA Today will look more hard-hitting than the wimpy fluff on the site now. Bottom line - - the site will mirror the person in charge who is obviously socially damaged and clueless news-wise.
This isn't a total slam on the reporters who are trying to put the site together nearly as much as the idiots in charge. Funny, right now my provider homepage has as much info as ha.


9:58 AM  

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