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Salon clings to dot-com swagger

Struggling online magazine plans to require subscriptions to stay afloat.

January 21, 2003|Michael J. Ybarra | Special to The Times

SAN FRANCISCO — The parties at have been rather lean lately.

Late last year, the pioneering online magazine celebrated its seventh anniversary with a small gathering in its downtown office here. In 1999 Salon had leased two floors in a new office tower just off Market Street. With bare concrete underfoot and exposed ducts and wiring overhead, the office was all dot-com swagger with stunning city views to match Salon's ambition as a public company that would leverage its brand into spinoff businesses in everything from television to software.

Those grand visions never came to pass. Instead, the greatly shrunken Salon staff in November was lifting margaritas in toast to its unlikely survival. "Almost from the beginning," Salon founder David Talbot wrote in a note posted online, "our little magazine has carried on its back a host of doomsayers, idly kicking our sides with their heels as they enumerated the reasons our days were numbered. No one wanted to read serious articles online, much less pay for them. Only sites that specialized in finance or tech coverage would survive. We were too literary, too edgy...."

Talbot wasn't at the party; he was on the road trying to raise money to keep the lights on.

Salon is perhaps the last great independent experiment in online journalism. Once the Web was crowded with nervy upstarts such as Suck and Feed, new media sites that disparaged their traditional rivals as dinosaurs but were actually the first to disappear. Salon was one of the most celebrated -- and, with 30 million page views a month, one of the most popular -- but the online magazine has been struggling for years to reach profitability and recently has been teetering on the edge of insolvency.

Now in what may be a last-ditch effort to stay alive, Salon is about to dramatically change its business model. The company is expected to announce this week that it will require all readers to either buy a subscription for full access to stories or agree to click through several screens of advertising to gain limited access. (Salon instituted a limited-subscription option a couple years ago that made some content available to subscribers only.)

"There's no free lunch on the Web anymore," Talbot says. "There's no viable media without developing a base of revenue."

Salon has been trying like crazy to keep the business afloat. A few days after Talbot's editor's note, Salon released its quarterly 10-Q financial report to the Securities and Exchange Commission, which disclosed that the company would run out of cash in several weeks. A board member came through with a $200,000 loan.

The company Christmas party, which was held at the house of Chief Executive Michael O'Donnell's in-laws, was yet another spartan affair. "There's been an incredible amount of stress, coming to work and not knowing if we're going to be here for another month," Talbot says. "There was a lot of tears and fears, especially on my part since I've invested so much of my heart and soul."

Then on New Year's Eve, Salon reported to the SEC that it had raised an additional $200,000 -- the first installment, Talbot says, of a major round of financing from private investors that will carry the company to profitability in the fall. Although it should be noted that Talbot has been claiming that profitability is just around the corner since 1995.

"We're inches away," Talbot says. "Salon is on the verge of closing a round of financing that will secure not only Salon's survival but our long-term profitability. We're so close."

A chorus of skeptics, however, remains doubtful that any strategy can save Salon.

Paul Grabowicz, the director of the new media program at the UC Berkeley school of journalism, says Salon is essentially an online version of a general interest magazine, a dying genre in the real world.

"If they're going to be viable long term, I don't think they'll do it by turning a profit," Grabowicz says. "They'll have to subsidize it somehow. It's just very hard to see how a publication like that can have revenue that exceeds expenses."

Magazines with Salon's financials, he says, typically survive on foundation grants (such as Mother Jones or the Nation) or depend on the largess of rich patrons (Microsoft's, the New Republic, the Weekly Standard).

Part of Salon's problem, as well as its appeal, is that the publication covers so many things. Under Salon's umbrella are 10 frequently updated Web sites on politics, technology, arts, books and sex, among others.

"There are so many things that look like Salon and there are so many other things that have a piece of what they do," Grabowicz says. "Even if the economy were going gangbusters you're still going to have a tough time as a general-interest publication trying to turn a profit."

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