Why online journals haven’t made a dint … yet

In the ’20s in Brisbane my dad was fiddling around with crystal sets. Eighty years later, I’m fiddling with the Internet. Just as then we have the technology, but we are not really sure what to do. That hasn’t deterred thousands of enthusiastic amateurs and professionals from throwing time, money and effort at it in a way that sometimes makes it difficult to decide who is professional and who is amateur. Certainly no-one has yet developed the "killer application" of online journals. But in the ’20s, no-one had thought of talk radio, the killer application of wireless – that was 50 years in the future.

Since first publishing On Line Opinion almost exactly 3 years ago, I have become acutely aware of the virtues and vices, strengths and shortcomings of online journals.

When I first stumbled across the Internet I felt a little like William Caxton must have felt stubbing his toe on his first printing press in 1470s Cologne. I had found this wonderful new medium which reduced the cost of publishing and distributing material to virtually nothing. Without the need for large capital investment and sales and distribution networks anyone could become a publisher, potentially ending the virtual monopoly of in-depth news by the major metropolitan dailies.

It meant that lone writers could become publishers, without the need to belong to an organisation, and therefore without the politics of organisations – constraints on what you can and cannot say and who you can and cannot offend. It also meant leverage so that someone standing somewhere so utterly remote as Brisbane could possibly move the world.

Other things that I quickly grasped were that it was interactive and as a result deconstructed the settled relationships within a news media organisation. Newspapers, magazines and the broadcast media are really vertical and horizontal communities. Every journalist and producer has their own select vertical circle of informants that provides them with material and which allows them to dig down for information. Likewise journalists and editors have horizontal relationships with each other which dictate the shape and form of the product.

A successful web journal needs to be more obviously a community – it is something that the medium demands. Readers want to be part of the vertical community and will interact with and support those web publications that allow them to do so. By interacting vertically they also pass judgement on the horizontal community. Because you "buy" an online publication page by page, it is obvious, looking at the web statistics, which writers and articles are not earning their keep day by day.

The other thing that I came to quickly appreciate and enjoy was how interconnected the web is. There is no need for a reader to be more than one click away from any piece of information. As a result you could fill in the gaps for less knowledgeable readers without insulting the intelligence of the more erudite. You could literally paste an encyclopaedia to the back of every page. When one of my contributors used the adjective "hanseatic" I could provide a link which explained it without recourse to dictionaries or parenthetical excursions.

So I set up On Line Opinion. It was, and still is, an experiment in what is possible. If I had been alive in Tudor England I would have been publishing English language Bibles as an act of free expression. But as I live in early 21^st Century Australia I publish a site which hosts an intelligent multi-partisan conversation - in its own terms and time, an equally radical act of free expression.

So much for the romance. What is the reality? To date: drudgery and despair, but with success in sight. Instead of the thousands of blooms we early adopters optimistically anticipated there have been very few Internet-only news publications, and most have been financial disasters. In my view there are only three major current affairs publishing successes on the web – Slate, Salon and TheStreet.com – with none of them financially successful yet. Salon, a public company, lost $19.15 Million last year on revenues of $7.2 M. TheStreet.com, also public, lost $29.2 Million in the same year. There is no reason to think that Microsoft subsidiary Slate would be in a different position.

Australia has its own pioneers. Zeitgeist Gazette, published by well known journalists Richard Walsh and David Salter, ran for seven months before folding for lack of capital. Crikey!, the brainchild of Stephen Mayne, is still standing after two years and one month, albeit only just. Mayne only last week had his net wealth wiped out by a defamation settlement with radio jock Steve Price. While unfortunate for Mayne, it is useful for me because the court documents provided a snapshot of the economics of Mayne’s enterprise. He is taking around $9,000 per month and doesn’t have to pay most of his contributors. As a result he is more profitable than the large overseas concerns, albeit precariously so, given the number of defamation actions he attracts.

What are the problems with pure online journals? The first, and most pressing, is the lack of a proven economic model. No-one wants to pay for anything on the net, so to date most Internet sites have used the "free-to-air" model, trying to cover costs by selling advertising. But while that works for television, so far it hasn’t worked for the Internet. One of the problems can be illustrated using the Australian market. Free-to-air television is limited to 3 commercial players and is seen by most of the population at some time during the day. So there is a limited number of suppliers and a huge market. By contrast only around 50% of Australians are on the Internet, and maybe half of those are regular users, many surfing only at work. They have literally millions of sites to choose from, many of them overseas. The laws of supply and demand say that in a system like this advertising will be plentiful, and cheap. The free-to-air model is therefore not a viable option for most.

As a result publishers have combined online advertising with other models, like the subscription model. Mayne shows that it is possible to ratchet the number of subscribers up to a point where you can be viable, so long as you have very lean overheads. Slate tried the subscription model and abandoned it. Salon and TheStreet.com are persisting. Here, despite last year’s huge losses the news is a little more encouraging. In its last filings Salon says that it hopes to "achieve cashflow profitability in 2002". This is largely due to the growth in its subscriber base, up 12,000 subscribers in the December quarter to a total of 35,000.

Financial models aren’t the only problems for online publishing. Marshall McLuhan divided media into hot and cold – the more attention the medium demanded from its user, the hotter it was. TV was hot, radio cold. Of all the media, Internet is hottest. Not only do you have to sit down to read it, but unlike radio or TV, it is interactive. Also unlike radio or TV it is a one-on-one experience: one user per screen. The intensity of the experience implies that fewer people will use it for smaller period of time than other media, meaning a smaller audience measured in hours per person per day.

There is another limiting factor for ’net-based publications – their lack of portability. You can’t take them on the train or read them in bed. Again, maybe Salon is showing the way here. As part of their subscriber service (only $30 US per year) you are given the right to download and print-off a version of Salon that you can take with you. One future for the internet based publication may be as a hard copy publication distributed via telephone wires.

However, while independent overseas Internet journals are starting to make it, the future is much less certain in Australia. The first problem is the size of the market. Let us assume that Salon’s 35,000 subscribers come solely from the US and then multiply it by 19 million (the population of Australia) and divide by 280 million (the population of the US). That yields an Australian equivalent figure of 2,375 subscribers, just less than the number of subscribers Stephen Mayne claims for Crikey!. But Mayne’s $108,000 a year is not enough to sustain his one-man show, let alone pay his contributors and produce a return on capital. Salon, on the other hand, with similar market penetration, has the funds to hire columnists and commentators like Camille Paglia, Arianna Huffington and David Horowitz. What market penetration would an Aussie eJournal have to achieve to be able to afford to hire talent like that, and make a profit?

Another problem is the lack of an entrepreneurial culture in Australia or entrepreneurs with significantly deep pockets. Who is going to throw millions of dollars into an Internet product that may rack up tens of millions of losses for years before becoming profitable? Perhaps Kerry Packer at the height of the tech boom might have been prepared, but then that would just be surrender to the old media.

There will be solutions to the economic puzzle of Internet publishing and in some ways the experiences of Crikey!, Zeitgeist Gazette and OLO are more significant than that of Salon or TheStreet.com because there are many more national markets with populations of 20 million than there are with populations of 280 million. The steeper challengers that we face are therefore more typical for the world. The internet is a beautiful, supple medium for news, current affairs and opinion. By paying closer attention to readers’ needs independent North American publications are starting to make it. Australian ones must do the same.