Content Sites Test Their Strength

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March 14, 2001 (2:12 PM EST)

By Noah Schachtman,

It's easy to be skeptical about Internet content sites.

Commercialization of the Web is in its sixth year, and, despite recent shortfalls, there are a few consistently profitable media and information sites.

But despite layoffs, aborted IPOs, and snickers from skeptics who warned that the business model for selling online content wouldn't work, other Internet media and content sites are trying to build profitable ventures.

The strategies these companies are developing might offer insights for e-commerce managers at other types of companies.

Content sites will succeed by identifying the value of every customer, personalizing content, and partnering with advertising clients, Forrester Research says.

By deploying such strategies, content sites will take in $27 billion in total online advertising revenue by 2005—up from $7 billion today, the firm says.

Content sites won't achieve these gains without pain, however.

"This year is going to be tough for everyone in businesses based on advertising—either online or offline," warned Bill Lerner, senior online media analyst at Prudential Securities in New York. "There's still a lot of consolidation left to go. Only a select few will be lucky enough to go at it alone."

Jason Young, vice president for advertising sales at TheStreet.com, agreed that market conditions are tough. Despite a loss of $5.6 million in the fourth quarter, the New York financial site expects to have a positive cash flow in the second half of 2001.

"There's a huge opportunity ahead for top-quality sites," Young said.

The sites that succeed won't do it by cramming more ads onto a page, said Forrester analyst Eric Scheirer. The money will come from delivering highly targeted content accompanied by ads that will command a premium from marketers.

Companies that operate content sites will succeed by building detailed profiles of their audiences—information that will tell them which customers are the most valuable.

For example, a visitor who's checking his or her stock portfolio online three times a day—and viewing high-priced, targeted banner ads in the process—is much more valuable to a portal than a visitor who spends a few minutes in a chat room once a week, looking at only low-cost, general ads for products in which he or she may not be interested.
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