Lyons, Daniel, Newsweek
Byline: Daniel Lyons
The Huffington Post may have figured out the future of journalism. But it's going to be a very difficult future.
If you had to declare a winner among Internet media companies today, the victor easily would be Arianna Huffington. Her site, The Huffington Post, attracted 24.3 million unique visitors last month, five times as much traffic as many new-media rivals, more than The Washington Post and USA Today, and nearly as many as The New York Times. HuffPo's revenue this year will be about $30 million--peanuts compared with the old-media dinosaurs, but way better than most digital competitors. And HuffPo has finally started to eke out a profit.
Those numbers, however, don't fully convey the site's place in this new-media world. What began five years ago as a spot for Huffington and her lefty celebrity friends to vent about the Bush administration has become one of the most important news sites on the Web, covering politics, sports, entertainment, business--along with plenty of tabloidy stuff to drive clicks, like photos of "Jennifer Aniston's topless perfume ad." HuffPo's mission, Huffington says, is "to provide a platform for a really important national conversation."
It's a humid July afternoon in New York--Huffington's 60th birthday--and she's sipping San Pellegrino water and nibbling on apple slices in her tiny office on the third floor of a building in New York's SoHo. Minions rush in and out, bringing chocolates, messages, and a BlackBerry, with her ex-husband, former Republican congressman Michael Huffington, on the line. Arianna has just come from speaking at an advertising conference--she gives more than 100 speeches a year, addressing techies and publishing types, who view her as the patron saint of new media, the queen of bloggers, the one person who's figured out the future of journalism.
But a closer look at HuffPo's financials shows just how tough that future is turning out to be. HuffPo has a big audience, but like most Web sites, it can't monetize it very well. Right now, HuffPo generates just over $1 per reader per year. That's nothing compared with the mainstream-media outlets that HuffPo hopes to displace. Cable-TV networks and print newspapers collect hundreds of dollars per year from each subscriber, and then generate hundreds of millions in ad revenue on top of that. The comparison isn't perfect--TV and newspapers have higher fixed costs than Web sites--but it gives you a sense of how radically things are changing.
Yes, money is gushing out of old media--nobody knows this better than NEWSWEEK, which is struggling financially and has been put up for sale by its parent, The Washington Post Company--and some of that money is flowing onto the Internet. But something strange happens to those ad dollars as they make the journey from old media to the Web--somehow, by some weird, bad voodoo, those dollars turn into dimes. Or nickels. Or even pennies. A recent report by eMarketer, a leading researcher of Internet media, says online ad spending will grow more than 10 percent per year over the next few years, approaching $100 billion by 2014. That will still represent only 17 percent of all advertising spending.
The hard truth is that advertisers want to put messages on Web sites, but they just don't want to pay very much for that privilege. And perhaps for good reason. When was the last time you clicked on an Internet ad? Or even noticed one? "Maybe it's time that someone says the unsayable--that online advertising just doesn't work. A Web site turns out to be a not very good advertising vehicle," says Michael Wolff, the Vanity Fair columnist who also runs Newser, an ad-supported news-aggregation Web site that attracts 2 million unique visitors a month and will generate a few million in revenue this year. Online advertising rates have been dropping for a decade. Wolff says his average CPM (what he can charge for delivering 1,000 impressions of an ad) fell 20 percent in the past two years, from $10 to $8. …