By Zachary D. Roberts
By Anna Merlan
By Jon Campbell and Laura Shunk
By Albert Samaha
By Amanda Dingyuan
By Anna Merlan
By Anna Merlan
By Albert Samaha
Chaos reigned last week, as the media spewed confused messages about the state of the high-tech world. The e-future looks peachy, if you're talking to Microsoft executives or reading the June 11 New York Times Magazine, which introduced all the fabulous things technology will do for us next ("the gun that won't kill anybody," "the elevator you never have to wait for"). But last week, every hour of every day, came the fresh footprints of a grim reaper, stalking the Web for new victims.
It's a dark time for the electronic profiteers, no matter how they spin it. Case in point: Days after a judge ordered Microsoft-the-monopoly to break up into two companies, The Wall Street Journal declared that monopoly isn't a bad thing anymore; it's the business model for the 21st century! But even before the grim reaper came for Bill Gates, he was making an appearance in the office of APBNews, the Web site that raised crime reporting to the level of art.
On June 5, APB announced it was laying off its entire staff of 140 full-timers and 130 freelancers. The cause of death: the editor-businessmen who run the site were too busy producing quality content to realize they had spent all but about $50,000 of their $27.1 million in venture capital. And despite APB's passionate belief that "credibility sells," all the editorial quality in the world couldn't squeeze a penny more from investors still wounded by the recent crash.
The fall of APB seemed especially poignant to me, because in early March executive editor Hoag Levins gave me a personal tour of APB's Wall Street office, which felt at once ink stained and high wired. The company had just invested in a video production studio, which was making two to three "video news poems" a day. They had also installed a sound booth where reporters could tape their stories for distribution to a radio syndicate. By summer, Levins boasted, they would unveil their new baby: a state-of-the-art broadcast newsroom whose gleaming surfaces would occupy an entire floor. (At press time, APB was still posting content and seeking potential investors.)
Salon and APB have one big thing in common: an uncontrollable burn rate.
The problem, according to one APB staffer: The company was overextended. The bosses had bought all that equipment, allowed reporters to undertake large projects, and paid freelancers a handsome $150 a day. While staffers had received a few e-mails about financing, there had been no sign of cutbacks until a few weeks ago. "Usually when a company has problems, they cut back slowly," said the staffer. "But in this case, there was no belt-tightening."
The king of belt-tightening is Salon founder David Talbot, who has adopted a wise-and-jaded, seen-it-all persona these days, as if to say, "Baby, don't fear the reaper." But don't be fooled by his jive. The death prophet paid Talbot a personal visit last month, in the form of projections by W.R. Hambrecht, the company that underwrote Salon's IPO. Judging by Salon's slow performance in the first quarter, Hambrecht slashed its projected revenues for the site by about $7 million. The reaper knocked again a few weeks ago, when Salon introduced a redesign and readers stampeded onto Jim Romenesko's Web site to trash it. Intended to attract more traffic, not less, the redesign was suddenly, um, redesigned.
Talbot uses euphemisms to cover up his financial straits. Thus, on the day APB died, Talbot held forth to the Daily News about the difference between the late crime site and Salon: Unlike APB, Salon had gone public, producing a "war chest" that "will see us through the bumps in the road." His words rang hollow two days later, when Salon announced it was laying off 13 staffers, as part of a plan to cut next year's operating budget by 20 percent. It also strained credulity when a Salon statement claimed the layoffs were necessary to achieve the "goal of profitability," but "will in no way affect the quality" of the content.
Along with editorial quality, Salon and APB have one big thing in common: an uncontrollable burn rate. According to published estimates, APB spent $1 million to $2 million a month, and Salon is spending $5 million per quarter. In both cases, investors have dumped millions into the hands of editor-businessmen who squandered it quickly; in both cases, content providers with impeccable credentials have paid the price.
Specifically, the word "impeccable" applies to three New Yorkers who got laid off by Salon: Sean Elder, who covered media, Craig Offman, who covered the book industry and beyond, and books editor Craig Seligman. These three cut their teeth at glossy magazines, and they produced the kind of thoughtful pieces that give Salon its prestige in Manhattan. While the victims were assured that the layoffs had nothing to do with "performance," they were also told they had been singled out because their work did not attract enough traffic.
Excuse me, but isn't that specious? It's pretty clear that in the dotcom world these days, investors and advertisers rate performance based entirely on traffic. Indeed, the Times ran an article last November riffing on the fact that Salon distributed everyone's traffic counts to the entire staff every day, and that employees "joked about having page views connected to cubicle sizes." The article went on to reveal winners and losers: Salon got a lot of hits for pundit columns and stories about sex and technology, but not so many for book reviews, foreign news, or political reportage.
The Times ended with a nice bit of doublespeak from Salon executive editor Gary Kamiya. Despite all the jokes about traffic, Kamiya denied that page hits would affect editorial decisions, saying, "Advertising doesn't dictate any of our editorial policy." Rightand no writer is going to lose his job because he didn't generate enough hits. But I hear there's a job opening for a guy who wears a hood and carries a scythe!
As part of the new "belt-tightening," Salon appears to have adopted a selective policy of dicking over content providers. In the past week, two freelancers who contribute to the site told me they've been paid on time; two others said they have not. One of the latter waited three months to be paid $1000. Another, Ted Rall, was thrilled last fall when he sold Salon the exclusive first-time Web rights to his syndicated cartoon.
But as of May, Salon had neither run the cartoon nor made a single payment, which Rall learned when the Universal Press Syndicate deducted $2500 from his paycheck last month. Talbot has told Rall he hopes to run the cartoon next year. Rall also hopes that will happen, because Salon is "a really good showcase for comics." But, he says, "Talbot can't seem to commit to either running my cartoon or paying for it." Salon has since paid its debt.
So has Darth Vader put a curse on original Web content? Not so, says Inside founder Kurt Andersen, who posted a Jim Cramer-style analysis of his superior business model on Monday. But if Inside can't rig the game any better than APB or Salon has, six months or a year from now, the only pertinent question about Inside will be, "What's the burn rate, Kurt?"